# The Freight RAILCAR Act: What It Does

This bill creates a new tax credit designed to encourage railroad companies to replace old freight cars and modernize their equipment and facilities. Essentially, the government is offering to pay back a portion of what companies spend on upgrading their freight rail operations, with the goal of getting older, less efficient railcars off the tracks and newer, better ones into service.

Here's how it works in practical terms: If a railroad company buys a new freight car to replace two old ones they're scrapping, they can claim a tax credit worth 50 percent of their modernization expenses. This means if they spend $100,000 on new equipment, they could get a $50,000 credit on their taxes. The credit also applies to modernizing existing railcars to make them more efficient, safer, or better for the environment, as well as upgrading facilities and technology used in railcar manufacturing and repair. For example, investments in smart technology that monitors railcar conditions, equipment that reduces pollution, or facilities that improve manufacturing processes would all qualify.

The bill is designed to stimulate the freight rail industry during the economic recovery period following the pandemic, which is why it has an expiration date. The credit applies to new railcars ordered or placed in service before January 1, 2025, and facility upgrades must happen by the end of 2024. This means the incentive is temporary—companies have a limited window to take advantage of it. The Treasury Department is also required to report back to Congress within three years about how many railcars were scrapped, how many new ones were built, and how many facilities were upgraded as a result of this credit, so lawmakers can evaluate whether the program actually achieved its goals.

Freight RAILCAR Act of 2021

Freight Rail Assistance and Investment to Launch Coronavirus-era Activity and Recovery Act of 2021 or the Freight RAILCAR Act of 2021 This bill provides a new tax credit for 50% of freight railcar fleet modernization expenses. The bill defines freight railcar fleet modernization expenses to include amounts for railcar replacement and modernization, railcar scrap amounts, and for railcar facility and technology modernization. The Department of the Treasury must report to Congress on the credit to provide information on the number of times the credit was claimed and the number of railcars scrapped or built as a result of the credit.