The Association of American Railroads (AAR) has praised the introduction of the Freight Rail Infrastructure Capacity Expansion Act of 2010 (S.3749) by Senators Kent Conrad (D-ND) and John Ensign (R-NV). This bipartisan measure is aimed at encouraging private capital investments that can generate tremendous public benefits through expanded rail network capacity needed for moving more people and goods by rail.

The bill provides two tax incentives for greater private investment in expanding the nation’s freight rail infrastructure capacity: a 25 percent tax credit for capacity expansion expenditures on new freight infrastructure and the ability to expense all qualifying rail infrastructure capital expenditures, thereby accelerating the availability of capital necessary to expand capacity.

“America has great expectations for our nation’s railroads – to provide not only the vital connection for U.S. business to the global marketplace, but also the underlying network for expanded intercity passenger and high-speed rail,” said AAR president and CEO Edward R. Hamberger. “This bill offers incentives for our highly capital-intensive business, and will ensure freight rail can continue to meet these expectations.”

The inherent fuel efficiency and cost-effectiveness of rail has increased the demand to move more people and goods by rail. According to a recent report from the American Association of State Highway and Transportation Officials, the demand for freight will double in the next 40 years – with the demand for rail expected to increase by 38 percent from today’s levels.

Unlike trucks, barges, and airlines, America's freight railroads operate almost exclusively over infrastructure that they build and maintain with their own private funds. From 1980 to 2009, America's freight railroads invested more than $460 billion — more than 40 cents out of every rail revenue dollar — to maintain and improve their rail network infrastructure and equipment.

Railroads will continue to reinvest heavily in the years ahead. However, more rail investment is needed to take full advantage of freight rail’s unparalleled potential to promote economic recovery, provide much-needed jobs, take trucks off the highways, save fuel, and reduce CO2 emissions. 

The incentives in the bill are available not only to railroads, but also to any taxpayer making such expenditures – including other rail network users such as shippers, trucking companies and ports. Qualifying expenditures can include track, grading, tunnels, signals, train control devices, locomotives, bridges, yards, terminals, and intermodal transfer and transload facilities.

The bill is a companion to H.R. 1806, introduced last year by U.S. Rep. Kendrick Meek (D-FL), which today has more than 100 cosponsors in the House. For more information on freight rail capacity investments, visit www.aar.org.