119-s2758

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2758 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 2758

 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 encourage the replacement or modernization of inefficient, outdated 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 SENATE OF THE UNITED STATES

 September 10, 2025

 Mr. Banks (for himself and Mr. Coons) introduced the following bill; 
 which was read twice and referred to the Committee on Finance

_______________________________________________________________________

 A BILL

 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 encourage the replacement or modernization of inefficient, outdated 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.

 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 ``Freight Rail Assets Investment to 
Launch Commercial Activity Revitalization Act of 2025'' or the 
``Freight RAILCAR Act of 2025''.

SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``

SEC. 45BB. FREIGHT RAILCAR MODERNIZATION CREDIT.

 ``

    (a) In General.--For purposes of 

section 38, the freight railcar 
modernization credit determined under this section for the taxable year 
is an amount equal to 10 percent of the taxpayer's freight railcar 
fleet modernization expenses.
 ``

    (b) Limitation.--No more than 1,000 qualified freight railcars 
per taxpayer may be taken into account for purposes of determining the 
credit under subsection

    (a) with respect to a taxable year.
 ``
            (c) === Definitions. ===
-For purposes of this section--
 ``

    (1) Freight railcar fleet modernization expenses.--The 
 term `freight railcar fleet modernization expenses' means the 
 sum of the qualifying railcar replacement and modernization 
 amount.
 ``

    (2) Qualifying railcar replacement and modernization 
 amount.--The term `qualifying railcar replacement and 
 modernization amount' means--
 ``
        (A) the basis of any qualified newly built 
 replacement railcar placed in service by the taxpayer 
 during the taxable year, plus
 ``
        (B) the qualified railcar modernization 
 expenditures of the taxpayer for the taxable year.
 ``

    (3) Qualified newly built replacement railcar.--The term 
 `qualified newly built replacement railcar' means a qualified 
 freight railcar which--
 ``
        (A) is built after the date of the enactment of 
 this section,
 ``
        (B) is ordered or originally placed in service 
 before the date that is three years after the date of 
 the enactment of this section, and
 ``
            (C) replaces two freight railcars owned by the 
 taxpayer that--
 ``
            (i) were in service within the 48 months 
 preceding the beginning of the taxable year, 
 and
 ``
            (ii) which were both scrapped and 
 permanently removed from the AAR Umler System 
 master file during such taxable year.
 ``

    (4) Qualified freight railcar.--
 ``
        (A) In general.--The term `qualified freight 
 railcar' means a freight railcar that--
 ``
            (i) is either acquired or modernized by 
 the taxpayer after the date of the enactment of 
 this section,
 ``
            (ii) meets the significant improvement 
 requirements for capacity or performance of 
 subparagraph
        (B) ,
 ``
            (iii) was built in a qualified facility, 
 and
 ``
            (iv) with respect to which no credit 
 under this section was previously claimed by 
 any taxpayer.
 ``
        (B) Significant improvement.--For purposes of 
 this paragraph, an improvement in capacity and 
 performance with respect to a modernized freight 
 railcar is a significant improvement if--
 ``
            (i) such capacity, as the case may be, is 
 increased by at least 8 percent, or
 ``
            (ii) in the case of performance, the 
 qualified freight railcar meets the 
 requirements of the Association of American 
 Railroads Standard S-286 or is modernized to 
 meet the design standards set forth in final 
 rule HM-251 of the Pipeline and Hazardous 
 Materials Safety Administration (as amended by 
 HM-251C).
 ``
            (C) Modernized.--The term `modernized' means 
 modified, retrofitted, converted or rebuilt for the 
 purpose of meeting the significant improvement criteria 
 of subparagraph
        (B) .
 ``

    (5) Qualified railcar modernization expenditure.--The 
 term `qualified railcar modernization expenditure' means any 
 amount paid or incurred--
 ``
        (A) in connection with the modernization of a 
 freight railcar resulting in such railcar being 
 designated a qualified freight railcar, and
 ``
        (B) which is properly chargeable to a capital 
 account with respect to such freight railcar.
 ``

    (6) Qualified facility.--The term `qualified facility' 
 means a facility that is not owned or leased by an entity that 
 would be ineligible for an award of a contract or subcontract 
 under 49 U.S.C. 5323

    (u) .
 ``
            (d) Special Rules.--
 ``

    (1) Denial of double benefit.--No credit shall be allowed 
 under subsection

    (a) for any expense for which a deduction or 
 credit is allowed under any other provision of this chapter.
 ``

    (2) Basis adjustment.--For purposes of this subtitle, if 
 a credit is allowed under subsection

    (a) with respect to any 
 qualified freight railcar, the basis of such railcar shall be 
 reduced by the amount of the credit so allowed.
 ``

    (3) Sale-leaseback.--For purposes of subsection

    (a) , if 
 any qualified freight railcar is--
 ``
        (A) originally placed in service by a person 
 after the date of the enactment of this section, and
 ``
        (B) sold and leased back by such person within 3 
 months after such railcar is originally placed in 
 service (or, in the case of more than one railcar 
 subject to the same lease, within 3 months after the 
 date the final railcar is placed in service, so long as 
 the period between the time the first railcar is placed 
 in service and the time the last railcar is placed in 
 service does not exceed 24 months),
 such railcar shall be treated as originally placed in service 
 not earlier than the date on which such railcar is used under 
 the leaseback referred to in this paragraph.
 ``

    (4) Syndication.--For purposes of subsection

    (a) , if--
 ``
        (A) any qualified freight railcar is originally 
 placed in service after the date of enactment of this 
 section by the lessor of such railcar,
 ``
        (B) such railcar is sold by such lessor or any 
 subsequent purchaser within 3 months after the date 
 such railcar was originally placed in service (or, in 
 the case of more than one railcar subject to the same 
 lease, within 3 months after the date the final railcar 
 is placed in service and the time the last railcar is 
 placed in service does not exceed 12 months), and
 ``
            (C) the user of such railcar after the last sale 
 during such 3-month period remains the same as when 
 such railcar was originally placed in service, such 
 railcars shall be treated as originally placed in 
 service not earlier than the date of such last sale.
 ``

    (5) Entities owned or controlled by state-owned 
 enterprises ineligible.--No credit under subsection

    (a) shall 
 be allowed to any taxpayer that would be ineligible for an 
 award of a contract or subcontract under 49 U.S.C. 5323

    (u) .
 ``

    (e) Termination.--This section shall not apply to any qualifying 
railcar replacement and modernization amount after the date that is 
three years after the date of the enactment of this section.''.

    (b) Credit Allowed as Business Credit.--

Section 38

    (b) of the 
Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph

    (40) , 
by striking the period at the end of paragraph

    (41) and inserting ``, 
plus'' and by inserting at the end thereof the following new paragraph:
 ``

    (42) the freight railcar modernization credit determined 
 under 

section 45BB.''.
            (c) Coordination With 

Section 55.--

Section 38
            (c) (4)
        (B) of the 
Internal Revenue Code of 1986 is amended by redesignating clauses
            (x) ,
            (xi) , and
            (xii) as clauses
            (xi) ,
            (xii) , and
            (xiii) , respectively, and 
by inserting after clause
            (ix) the following new clause:
 ``
            (x) the freight railcar modernization 
 credit determined under 

section 45BB,''.
            (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 45AA 
the following new item:

``

Sec. 45BB. Freight railcar modernization credit.''.

    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service, and amounts paid or incurred, 
after December 31, 2024.

SEC. 3. REPORT ON THE FREIGHT RAILCAR MODERNIZATION CREDIT.

    (a) In General.--Not later than 3 years after the date of the 
enactment of this Act, the Secretary of the Treasury (or the 
Secretary's delegate), shall submit to the Committee on Ways and Means 
of the House of Representatives and the Committee on Finance of the 
Senate a report on activity with respect to the qualified freight 
railcar credit under 

section 45BB of the Internal Revenue Code of 1986.

    (b) Report Contents.--The report submitted under subsection

    (a) shall contain information with respect to the following:

    (1) The number of times the credit was claimed.

    (2) The number of railcars scrapped as a result of the 
 credit.

    (3) The number of new railcars entered into contract as a 
 result of the credit.

    (4) The number of new railcars built as a result of the 
 credit.
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