I
119THCONGRESS
1
STSESSION H. R. 1200
To amend the Internal Revenue Code of 1986 to provide a tax credit to
encourage the replacement or modernization of inefficient, outdated
freight railcars, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY11, 2025
Mr. L
AHOOD(for himself, Mr. SCHNEIDER, Mr. HUDSON, Ms. SEWELL, Mr.
M
URPHY, Ms. VANDUYNE, Mr. VALADAO, Mr. NEHLS, Mr. BOST, Mr.
H
ERNof Oklahoma, Mrs. MILLERof West Virginia, Mr. VANORDEN,
Mr. C
AREY, Mr. CARTERof Louisiana, Mr. BISHOP, Mr. BOYLEof Penn-
sylvania, Mrs. B
ICE, Mr. WEBERof Texas, Mr. BACON, Mr. CISCOMANI,
Ms. B
ONAMICI, Mr. HUNT, Mr. WESTERMAN, Mr. ELLZEY, Ms. TITUS,
Mr. P
ANETTA, Mr. MORAN, Mr. WILLIAMSof Texas, Mr. ROUZER, Mr.
C
RAWFORD, Ms. SA´NCHEZ, Mrs. MILLER-MEEKS, Ms. DAVIDSof Kansas,
Mr. G
OLDMANof Texas, Mr. ROGERSof Alabama, Mr. DIAZ-BALART,
Mr. M
ANN, Mr. TONYGONZALESof Texas, Mr. FONG, Mr. CUELLAR,
and Mr. P
FLUGER) introduced the following bill; which was referred to
the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
a tax credit to encourage the replacement or moderniza-
tion of inefficient, outdated freight railcars, and for other
purposes.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
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SECTION 1. SHORT TITLE. 1
This Act may be cited as the ‘‘Freight Rail Assets 2
Investment to Launch Commercial Activity Revitalization 3
Act of 2025’’ or the ‘‘Freight RAILCAR Act of 2025’’. 4
SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT. 5
(a) I
NGENERAL.—Subpart D of part IV of sub-6
chapter A of chapter 1 of the Internal Revenue Code of 7
1986 is amended by adding at the end the following new 8
section: 9
‘‘SEC. 45BB. FREIGHT RAILCAR MODERNIZATION CREDIT. 10
‘‘(a) I
NGENERAL.—For purposes of section 38, the 11
freight railcar modernization credit determined under this 12
section for the taxable year is an amount equal to 10 per-13
cent of the taxpayer’s freight railcar fleet modernization 14
expenses. 15
‘‘(b) L
IMITATION.—No more than 1,000 qualified 16
freight railcars per taxpayer may be taken into account 17
for purposes of determining the credit under subsection 18
(a) with respect to a taxable year. 19
‘‘(c) D
EFINITIONS.—For purposes of this section— 20
‘‘(1) F
REIGHT RAILCAR FLEET MODERNIZATION 21
EXPENSES.—The term ‘freight railcar fleet mod-22
ernization expenses’ means the sum of the qualifying 23
railcar replacement and modernization amount. 24
‘‘(2) Q
UALIFYING RAILCAR REPLACEMENT AND 25
MODERNIZATION AMOUNT .—The term ‘qualifying 26
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railcar replacement and modernization amount’ 1
means— 2
‘‘(A) the basis of any qualified newly built 3
replacement railcar placed in service by the tax-4
payer during the taxable year, plus 5
‘‘(B) the qualified railcar modernization 6
expenditures of the taxpayer for the taxable 7
year. 8
‘‘(3) Q
UALIFIED NEWLY BUILT REPLACEMENT 9
RAILCAR.—The term ‘qualified newly built replace-10
ment railcar’ means a qualified freight railcar 11
which— 12
‘‘(A) is built after the date of the enact-13
ment of this section, 14
‘‘(B) is ordered or originally placed in serv-15
ice before the date that is three years after the 16
date of the enactment of this section, and 17
‘‘(C) replaces two freight railcars owned by 18
the taxpayer that— 19
‘‘(i) were in service within the 48 20
months preceding the beginning of the tax-21
able year, and 22
‘‘(ii) which were both scrapped and 23
permanently removed from the AAR Umler 24
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System master file during such taxable 1
year. 2
‘‘(4) Q
UALIFIED FREIGHT RAILCAR .— 3
‘‘(A) I
N GENERAL.—The term ‘qualified 4
freight railcar’ means a freight railcar that— 5
‘‘(i) is either acquired or modernized 6
by the taxpayer after the date of the enact-7
ment of this section, 8
‘‘(ii) meets the significant improve-9
ment requirements for capacity, fuel effi-10
ciency, or performance of subparagraph 11
(B), 12
‘‘(iii) was built in a qualified facility, 13
and 14
‘‘(iv) with respect to which no credit 15
under this section was previously claimed 16
by any taxpayer. 17
‘‘(B) S
IGNIFICANT IMPROVEMENT .—For 18
purposes of this paragraph, an improvement in 19
capacity or fuel efficiency and performance with 20
respect to a modernized freight railcar is a sig-21
nificant improvement if— 22
‘‘(i) such capacity or fuel efficiency, as 23
the case may be, is increased by at least 8 24
percent, or 25
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‘‘(ii) in the case of performance, the 1
qualified freight railcar meets the require-2
ments of the Association of American Rail-3
roads Standard S–286 or is modernized to 4
meet the design standards set forth in final 5
rule HM–251 of the Pipeline and Haz-6
ardous Materials Safety Administration (as 7
amended by HM–251C). 8
‘‘(C) M
ODERNIZED.—The term ‘modern-9
ized’ means modified, retrofitted, converted or 10
rebuilt for the purpose of meeting the signifi-11
cant improvement criteria of subparagraph (B). 12
‘‘(5) Q
UALIFIED RAILCAR MODERNIZATION EX -13
PENDITURE.—The term ‘qualified railcar moderniza-14
tion expenditure’ means any amount paid or in-15
curred— 16
‘‘(A) in connection with the modernization 17
of a freight railcar resulting in such railcar 18
being designated a qualified freight railcar, and 19
‘‘(B) which is properly chargeable to a cap-20
ital account with respect to such freight railcar. 21
‘‘(6) Q
UALIFIED FACILITY.—The term ‘quali-22
fied facility’ means a facility that is not owned or 23
leased by an entity that would be ineligible for an 24
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award of a contract or subcontract under 49 U.S.C. 1
5323(u). 2
‘‘(d) S
PECIALRULES.— 3
‘‘(1) D
ENIAL OF DOUBLE BENEFIT .—No credit 4
shall be allowed under subsection (a) for any ex-5
pense for which a deduction or credit is allowed 6
under any other provision of this chapter. 7
‘‘(2) B
ASIS ADJUSTMENT .—For purposes of 8
this subtitle, if a credit is allowed under subsection 9
(a) with respect to any qualified freight railcar, the 10
basis of such railcar shall be reduced by the amount 11
of the credit so allowed. 12
‘‘(3) S
ALE-LEASEBACK.—For purposes of sub-13
section (a), if any qualified freight railcar is— 14
‘‘(A) originally placed in service by a per-15
son after the date of the enactment of this sec-16
tion, and 17
‘‘(B) sold and leased back by such person 18
within 3 months after such railcar is originally 19
placed in service (or, in the case of more than 20
one railcar subject to the same lease, within 3 21
months after the date the final railcar is placed 22
in service, so long as the period between the 23
time the first railcar is placed in service and the 24
time the last railcar is placed in service does 25
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not exceed 24 months), such railcar shall be 1
treated as originally placed in service not earlier 2
than the date on which such railcar is used 3
under the leaseback referred to in this para-4
graph. 5
‘‘(4) S
YNDICATION.—For purposes of sub-6
section (a), if— 7
‘‘(A) any qualified freight railcar is origi-8
nally placed in service after the date of enact-9
ment of this section by the lessor of such rail-10
car, 11
‘‘(B) such railcar is sold by such lessor or 12
any subsequent purchaser within 3 months 13
after the date such railcar was originally placed 14
in service (or, in the case of more than one rail-15
car subject to the same lease, within 3 months 16
after the date the final railcar is placed in serv-17
ice and the time the last railcar is placed in 18
service does not exceed 12 months), and 19
‘‘(C) the user of such railcar after the last 20
sale during such 3-month period remains the 21
same as when such railcar was originally placed 22
in service, such railcars shall be treated as 23
originally placed in service not earlier than the 24
date of such last sale. 25
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‘‘(5) ENTITIES OWNED OR CONTROLLED BY 1
STATE-OWNED ENTERPRISES INELIGIBLE .—No cred-2
it under subsection (a) shall be allowed to any tax-3
payer that would be ineligible for an award of a con-4
tract or subcontract under 49 U.S.C. 5323(u). 5
‘‘(e) T
ERMINATION.—This section shall not apply to 6
any qualifying railcar replacement and modernization 7
amount after the date that is three years after the date 8
of the enactment of this section.’’. 9
(b) C
REDITALLOWED ASBUSINESSCREDIT.—Sec-10
tion 38(b) of the Internal Revenue Code of 1986 (relating 11
to current year business credit) is amended by striking 12
‘‘plus’’ at the end of paragraph (40), by striking the period 13
at the end of paragraph (41) and inserting ‘‘, plus’’ and 14
by inserting at the end thereof the following new para-15
graph: 16
‘‘(42) the freight railcar modernization credit 17
determined under section 45BB.’’. 18
(c) C
OORDINATION WITHSECTION55.—Section 19
38(c)(4)(B) of the Internal Revenue Code of 1986 is 20
amended by redesignating clauses (x), (xi), and (xii) as 21
clauses (xi), (xii), and (xiii), respectively, and by inserting 22
after clause (ix) the following new clause: 23
‘‘(x) the freight railcar modernization 24
credit determined under section 45BB,’’. 25
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(d) CLERICALAMENDMENT.—The table of sections 1
for subpart D of part IV of subchapter A of chapter 1 2
of the Internal Revenue Code of 1986 is amended by in-3
serting after the item relating to section 45AA the fol-4
lowing new item: 5
‘‘Sec. 45BB. Freight railcar modernization credit.’’.
(e) EFFECTIVEDATE.—The amendments made by 6
this section shall apply to property placed in service, and 7
amounts paid or incurred, after December 31, 2024. 8
SEC. 3. REPORT ON THE FREIGHT RAILCAR MODERNIZA-9
TION CREDIT. 10
(a) I
NGENERAL.—Not later than 3 years after the 11
date of the enactment of this Act, the Secretary of the 12
Treasury (or the Secretary’s delegate), shall submit to the 13
Committee on Ways and Means of the House of Rep-14
resentatives and the Committee on Finance of the Senate 15
a report on activity with respect to the qualified freight 16
railcar credit under section 45BB of the Internal Revenue 17
Code of 1986. 18
(b) R
EPORTCONTENTS.—The report submitted 19
under subsection (a) shall contain information with re-20
spect to the following: 21
(1) The number of times the credit was 22
claimed. 23
(2) The number of railcars scrapped as a result 24
of the credit. 25
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(3) The number of new railcars entered into 1
contract as a result of the credit. 2
(4) The number of new railcars built as a result 3
of the credit. 4
Æ
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