Aerial shot of a railroad between crop fields.

(Joseph L. Murphy/Iowa Soybean Association)

Short line railroad tax credit made permanent

January 12, 2021

By Mike Steenhoek, Soy Transportation Coalition

Also included in the Consolidated Appropriations Act of 2021 was the permanent extension of the short line railroad tax credit. The short line railroad tax credit (i.e. the 45G Tax Credit) is a federal income tax credit for qualified track maintenance owned by short line and regional railroads. Previously, a short line or regional railroad will receive 50 cents for every dollar of track maintenance expenses with a cap of $3,500 per mile of track. The tax credit, along with numerous others, would often be allowed to expire and have to be temporarily extended by Congress. 

With the passage of the Consolidated Appropriations Act, the short line railroad tax credit has been made permanent with no expiration date. The rate of the credit will remain at the current 50% until 2022. It will then adjust to 40% in 2023. This provides greater predictability for the nation’s short line and regional railroads as they meet the needs of their customers, including those in agriculture. 

According to the American Short Line and Regional Railroad Association, 603 short line and regional railroads operate in the United States over 47,500 miles. Short line and regional railroads often serve as the critical connection at points of origin and destination for soybeans and other agricultural products.  

  • Class I Railroad – a freight railroad with an operating revenue exceeding $504 million. Seven Class I freight railroads operate in the United States: Burlington Northern Santa Fe Railway, CSX Transportation, Kansas City Southern Railway, Norfolk Southern Combined Railroad Subsidiaries, and Union Pacific Railroad. Canadian National Railway and Canadian Pacific Railway are also considered Class I due to their significant trackage in the United States.
  • Class II Railroad – often called a “regional railroad.” Class II railroads have operating revenues between $40 million and $504 million.
  • Class III Railroad – often called a “short line railroad.” Class III railroads have operating revenues of $40 million or less.

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