US Bill Proposes Tax Credit for Short Line Railroad Upgrades

Published: 01/20/2026
Short Line Railroads Tax Credit Infrastructure
The American Short Line and Regional Railroad Association (ASLRRA) welcomes the bipartisan Senate bill aimed at updating the short line railroad tax credit. This legislation seeks to modernize short line railroad infrastructure, support regional economic growth, and improve freight fluidity by adjusting the credit cap, expanding eligibility, and introducing inflation indexing. These changes will incentivize investment in critical infrastructure upgrades, allowing short lines to better serve their customers and contribute to the overall economic health of the communities they serve. The updated tax credit is crucial for maintaining and improving the nation's short line rail network.
US Bill Proposes Tax Credit for Short Line Railroad Upgrades

While rusty tracks and aging locomotives might suggest a decline in American rail transport, short line railroads continue to play a vital role in the nation's economy. A new bipartisan Senate bill aims to support these small railroad operators by updating a crucial tax credit program, drawing praise from the American Short Line and Regional Railroad Association (ASLRRA).

Revitalizing Railroad Infrastructure

The proposed legislation focuses on modernizing the Section 45G Railroad Track Maintenance Tax Credit, originally established in 2005 to encourage infrastructure investment by short line railroads. According to ASLRRA, this tax incentive has already driven more than $8 billion in private investment into short line infrastructure, significantly improving both safety and operational efficiency.

However, the original credit limits have failed to keep pace with rising maintenance costs. The new bill addresses this through three key adjustments: raising the per-mile credit cap to reflect current cost realities, expanding eligibility to include all short line mileage, and implementing inflation indexing to protect against future cost increases.

The Critical "Last Mile" Connection

Short line railroads serve as essential connectors in America's transportation network, providing the crucial "last mile" link between major rail lines and local businesses. Supporting these smaller operators promotes regional economic growth while improving freight efficiency and reducing highway congestion.

The modernization of this tax credit could yield benefits beyond the rail industry itself. By facilitating continued infrastructure investment, the legislation may help reduce transportation-related emissions as more freight moves from trucks to more fuel-efficient rail transport.

With both economic and environmental advantages at stake, the proposed updates to the railroad tax credit represent more than just policy adjustments—they offer a potential blueprint for strengthening America's transportation infrastructure while supporting small businesses across the nation.

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