Freight RAILCAR Act of 2025

This bill creates a temporary tax credit to encourage businesses to replace or modernize old, inefficient freight railcars. It also requires a report on the credit's use.

Sec. 2, Freight railcar modernization credit: This section adds a new tax credit to the Internal Revenue Code. The credit equals 10% of a taxpayer's expenses for modernizing their freight railcar fleet. A taxpayer can claim the credit for no more than 1,000 railcars per year. The credit applies to new railcars that replace two older, scrapped railcars, or to the cost of modernizing an existing railcar to significantly improve its capacity or performance. The new or modernized railcar must be built in a facility not owned by an entity ineligible for certain federal contracts. The credit cannot be claimed for expenses that also get another tax benefit, and it reduces the railcar's tax basis. Special rules apply to sale-leaseback and syndication transactions. Entities owned or controlled by state-owned enterprises ineligible for certain federal contracts cannot claim the credit. The credit expires for expenses paid or incurred after the date that is three years after the bill's enactment.

Sec. 3, Report on the freight railcar modernization credit: This section requires the Treasury Secretary to submit a report to Congress within three years of the bill's enactment. The report must include information on how many times the credit was claimed, how many railcars were scrapped, how many new railcars were contracted for, and how many new railcars were built as a result of the credit.