S. 2758: Freight Rail Assets Investment to Launch Commercial Activity Revitalization Act of 2025

This bill, titled the Freight Rail Assets Investment to Launch Commercial Activity Revitalization Act of 2025, aims to support the modernization and replacement of outdated freight railcars through a tax incentive. Here’s a breakdown of the key provisions:

Tax Credit for Modernization

The bill introduces a freight railcar modernization credit allowing taxpayers to claim a tax credit equal to 10% of their freight railcar fleet modernization expenses within a taxable year. This credit is intended for those who update or replace their freight railcar fleet.

Eligibility Criteria

To qualify for the credit, taxpayers can account for expenses related to:

• Replacement Railcars: New railcars that replace at least two older railcars which have been scrapped during the taxable year.
• Modernization Costs: Costs associated with upgrading existing railcars to improve their capacity or performance.

Limitations on Claims

There are certain limitations to the tax credit:

• A maximum of 1,000 qualified freight railcars per taxpayer can be included for claiming the credit each tax year.
• Only expenses that do not overlap with any other tax credits or deductions can be claimed.

Definitions

The bill defines several key terms, including:

• Qualified Freight Railcar: A railcar that is either newly built or modernized after the bill’s enactment and meets specific capacity or performance improvements.
• Freight Railcar Fleet Modernization Expenses: This encompasses any qualifying expenses for railcar replacement or modernization.

Special Conditions

The bill outlines special rules regarding the application of the credit, including conditions under which:

• Double benefits cannot be claimed for the same expenses.
• If the credit is claimed, the basis of the railcar will be reduced by the amount of the credit.
• Entities that are ineligible for contract or subcontract awards based on certain federal regulations cannot claim the credit.

Reporting Requirements

The bill mandates that the Secretary of the Treasury submit a report within three years after enactment. This report will cover:

• The frequency of claims made for the credit.
• The number of railcars scrapped due to the credit.
• The number of new railcars entered into contracts and built following claims for the credit.

Effective Date

If enacted, the provisions of the bill would apply to property placed in service and expenses incurred after December 31, 2024.

Summary of Impacts

The bill is focused on incentivizing improvements in freight rail infrastructure, which could support environmental goals by promoting more efficient transportation methods via railroads.

Relevant Companies

• UNP (Union Pacific Corporation): As a major freight rail operator, Union Pacific could benefit from modernization incentives enabling enhancements to their railcar fleets, potentially reducing operational costs and increasing capacity.
• CSX (CSX Corporation): Similar to Union Pacific, CSX stands to gain from tax credits aimed at accelerating the replacement and modernization of their freight rail assets.
• NSC (Norfolk Southern Corporation): Another major freight rail carrier, Norfolk Southern would likely utilize the proposed credits to modernize their operations, enhancing service efficiency and compliance with safety standards.