To amend the Internal Revenue Code of 1986 to provide a credit against income tax for expenditures for the maintenance of railroad tracks of Class II and Class III railroads.

October 2, 2003

Mr. SMITH introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to provide a credit against income tax for expenditures for the maintenance of railroad tracks of Class II and Class III railroads.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Local Railroad Rehabilitation and Investment Act of 2003'.

SEC. 2. CREDIT FOR MAINTENANCE OF RAILROAD TRACK.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business-related credits) is amended by adding at the end the following new section:

`SEC. 45G. RAILROAD TRACK MAINTENANCE CREDIT.

`(a) GENERAL RULE- For purposes of section 38, the railroad track maintenance credit determined under this section for the taxable year is the amount of qualified railroad track maintenance expenditures paid or incurred by the taxpayer during the taxable year.

`(b) LIMITATION- The credit allowed under subsection (a) shall not exceed the product of--

`(1) $10,000, and

`(2) the number of miles of railroad track owned or leased by the taxpayer as of the close of the taxable year.

`(c) QUALIFIED RAILROAD TRACK MAINTENANCE EXPENDITURES- For purposes of this section, the term `qualified railroad track maintenance expenditures' means expenditures (whether or not otherwise chargeable to capital account) for maintaining railroad track (including roadbed, bridges, and related track structures) owned or leased by the taxpayer of Class II or Class III railroads (as determined by the Surface Transportation Board).

`(d) CONTROLLED GROUPS- For purposes of subsection (b), rules similar to the rules of paragraph (1) of section 41(f) shall apply for purposes of this subsection.

`(e) BASIS ADJUSTMENT- For purposes of this subtitle, if a credit is allowed under this section with respect to any railroad track, the basis of such track shall be reduced by the amount of the credit so allowed.

`(f) APPLICATION OF SECTION- This section shall apply to qualified railroad track maintenance expenditures paid or incurred during taxable years beginning after December 31, 2003, and before January 1, 2009.

`(g) CREDIT TRANSFERABILITY-

`(1) IN GENERAL- Any credit allowable under this section may be transferred as provided in this subsection, and the determination as to whether the credit is allowable shall be made without regard to the tax-exempt status of the transferor.

`(2) TRANSFER TO ELIGIBLE TAXPAYER- Any credit transferred under paragraph (1) shall be transferred to an eligible taxpayer. Any credit so transferred shall be allowed to the transferee, but the transferee may not assign such credit to any other person.

`(3) ELIGIBLE TAXPAYER- For purposes of this subsection, the term `eligible taxpayer' means--

`(A) any person who transports property using the rail facilities of the taxpayer or who furnishes railroad-related property or services to the taxpayer, and

`(B) any Class II or Class III railroad.

`(4) MINIMUM PRICE FOR TRANSFER- No transfer shall be allowed under this subsection unless the transferor receives compensation for the credit transfer equal to at least 50 percent of the amount of credit transferred. The excess of the amount of credit transferred over the compensation received by the transferor for such transfer shall be included in the gross income of the transferee.'.

(b) LIMITATION ON CARRYBACK- Section 39(d) of the Internal Revenue Code of 1986 (relating to transition rules) is amended by adding at the end the following new paragraph:

`(11) NO CARRYBACK OF RAILROAD TRACK MAINTENANCE CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the railroad track maintenance credit determined under section 45G may be carried to a taxable year beginning before January 1, 2004.'.

(c) CONFORMING AMENDMENTS-

(1) Section 38(b) of the Internal Revenue Code of 1986 (relating to general business credit) is amended by striking `plus' at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting `, plus', and by adding at the end the following new paragraph:

`(16) the railroad track maintenance credit determined under section 45G(a).'.

(2) Subsection (a) of section 1016 of such Code is amended by striking `and' at the end of paragraph (27), by striking the period at the end of paragraph (28) and inserting `, and', and by adding at the end the following new paragraph:

`(29) in the case of railroad track with respect to which a credit was allowed under section 45G, to the extent provided in section 45G(e).'.

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 45F the following new item:

`Sec. 45G. Railroad track maintenance credit.'.

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

END