JUL-AUG 2018

Crossties is published for users and producers of treated wood crossties.

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CONTACT RTA WEBSITE BECOME A MEMBER BECOME A MEMBER RTA WEBSITE CONTACT Cahaba Pressure Treated Forest Products Eagle Metal Products East Coast Railroad Gross & Janes Co. Hurdle Machine Works Koppers Inc. CROSSTIES • JULY/AUGUST 2018 10 A major portion of short line infrastructure expense is the purchase and installation of railway ties. 22 According to data provided by the Railway Tie Association (RTA), since enactment of the section 45G credit in 2004, railway tie purchases by the short line industry have grown at an annual rate of 6.3 percent over the period 2004-2016, compared to an annual rate of growth of 0.1 percent over the period 1988-2004. Purchases of ties by Class I railroads also increased but by a much smaller amount, from an annual rate of 0.2 per- cent before the credit to 1.4 percent after the credit. After controlling through statistical analysis for various factors that normally predict railway tie purchases, RTA finds that approximately 1 million railway tie purchases annually by the short line industry are attributable to the section 45G tax credit—a 23 percent increase over the average of annual purchases for the period 1988-2016. 23 Railway Ties Factor Into The Short Line Equation XXX ASLRRA REPORT tax rate of return to investors that covers their opportunity cost. 3 Kevin A. Haslett and R. Glenn Hubbard, "Tax Policy and Business Investment," in Handbook of Public Economics, Vol. 3, edited by Alan J. Auerbach and Martinn Feldstein, pp. 1293-1343, 2002. 4 Expensing under TCJA has relatively little effect on short line investment incentives because short line investors previously were permitted to expense 75 percent of track maintenance expen- ditures under a safe harbor provided by IRS Revenue Procedure 2002-65. 22 Based on data provided by the RTA on the number of ties purchased by the short line indus- try and the average cost of treated ties, the short line industry spent approximately $366 million on treated ties in 2013 and $404 million in 2016. Installation costs incurred by the industry are in addition to these expenditures. 23 Fred Norrell, "An Inquiry Into The Effect Of Tax Credits On Crosstie Purchases," RTA, March 28, 2018.

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