Tax credit would upgrade US rail freight car fleet 

Legislation reintroduced Tuesday in the House of Representatives would establish a 10% tax credit to help upgrade the U.S. freight car fleet.

The Freight Rail Assets Investment to Launch Commercial Activity Revitalization Act (Freight Railcar) Act of 2025 was reintroduced in the House by Illinois Republican Rep. Darin LaHood and Democrat Brad Schneider, with 40 original bipartisan co-sponsors.

The bill was originally introduced in 2023.

The three-year, 10% tax credit is designed to help offset the costs associated with replacing two existing railcars with a new railcar that improves fuel efficiency or capacity by at least 8%, or refurbishing or modernizing an existing railcar to improve fuel efficiency or capacity by at least 8%, or to upgrade tank cars to DOT-117 specifications.

“Illinois’ rail network is a vital economic driver that impacts agriculture, manufacturing, and our local communities,” said LaHood, in a release. “I am proud to reintroduce the Freight Railcar Act of 2025 alongside Rep. Schneider to spur job growth and strengthen the United States’ infrastructure. Not only will this legislation improve the efficiency of railcars, but it will address supply chain constraints and support American manufacturing jobs.”

“Our rail network is crucial for commuters, farmers, and manufacturers all across Illinois and any weakness in that network is not only a short-term inconvenience but has long term consequences for our supply chain,” said Schneider, also in the release. “I am proud to introduce this legislation with my colleague, Rep. LaHood, so we can bring our rail fleet into the 21st century and promote quality, well-paying jobs in the rail sector.”

LaHood is the son of Ray LaHood, who served as transportation secretary under President Barack Obama.

The tax credit expires three years after enactment of the legislation and is limited to 1,000 new freight cars per taxpayer per year. Existing railcars must have been in service during the 48 months prior to enactment.

The credit applies to privately or publicly owned cars not under control of a state-owned or -supported entity.

“We are incredibly grateful for the leadership of Representatives LaHood and Schneider in reintroducing the Freight RAILCAR Act,” said Erik Olson, executive director of the Rail Security Alliance, in a release. “This bill is key to ensuring American economic and national security. It not only supports our domestic freight railcar manufacturing and supply industry and the jobs tied to the sector, but guarantees supply chain reliability and the ability to move goods on U.S.-made rail assets.”

The RSA represents builders, suppliers and other companies in the railcar business.

Approximately 250,000 rail cars will need to be updated over the next 15 years, according to the RSA.

The current North American railcar fleet comprises more than 1.6 million railcars with approximately 321,000 of those in storage.

A number of U.S.-based railcar builders, such as Greenbrier, Trinity and FreightCar America, maintain manufacturing facilities in Mexico. It was not immediately clear if the tax credit would apply to cars built there for the North American market. A Greenbrier spokesman said the Portland, Oregon-based company had no comment on the bill.

“We anticipate both direct and indirect new jobs in the United States from this legislation,” said Olson, in an email to FreightWaves. “Modernizing or replacing a significant portion of the aging railcar fleet stimulates demand for domestic steel, components, and assembly work, boosting both railcar manufacturer and supply-chain employment. Even though some U.S.-headquartered railcar builders operate facilities in Mexico, this tax credit is designed to strengthen the entire North American supply chain.”  

The measure harks back to the Incentive Per Diem legislation of the ’70s that financed construction of 40,000 new boxcars. A loophole in the scheme helped build outsized fleets and generate returns for shortline railroads and investment firms but ultimately collapsed in the recession of the early ’80s.  

The new measure “would protect 65,000 American manufacturing jobs in the rail sector, invest in modern, more efficient railcars that will increase economic productivity, while reducing the sector’s carbon footprint; and help the rail supply industry expand and thrive in the current economic climate,” the bill states.

The bill awaits cost evaluation by the Joint Committee on Taxation, but Olson said supporters “are actively working to get the legislation into the upcoming tax legislation likely to move through Congress this year.” 

This article was updated Feb. 12 with additional comments from Erik Olson of RSA.

This article was updated Feb. 13 to correct that the Act is a renewal, but not expansion, of the U.S. freight car fleet.

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Find more articles by Stuart Chirls here.

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