E6-20740. Railroad Track Maintenance Credit; Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correction to temporary regulations.

SUMMARY:

This document contains corrections to temporary regulations (TD 9286) that were published in the Federal Register on Friday, September 8, 2006 (71 FR 53009) providing rules for claiming the railroad track maintenance credit under section 45G of the Internal Revenue Code for qualified railroad track maintenance expenditures paid or incurred by a Class II railroad or Class III railroad and other eligible taxpayers during the taxable year.

DATES:

This correction is effective September 8, 2006.

FOR FURTHER INFORMATION CONTACT:

Winston H. Douglas, [phone] (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The correction notice that is the subject of this document is under section 45G of the Internal Revenue Code.

Need for Correction

As published, temporary regulations (TD 9286) contain errors that may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the publication of the temporary regulations (TD 9286), which was the subject of FR Doc. E6-14858, is corrected as follows:

1. On page 53010, column 1, in the preamble, under the paragraph heading “General Overview”, first and second lines from the bottom of the second paragraph, the language “assigned to such person by such a railroad.” is corrected to read “assigned to such person by a Class II railroad or a Class III railroad.”.

2. On page 53010, column 2, in the preamble, under the paragraph heading “Scope”, first paragraph of the column, last line of the paragraph, the language “of controlled groups under section 45G.” is corrected to read “of controlled groups under section 45G with respect to the RTMC.”.

3. On page 53010, column 2, in the preamble, under the paragraph heading “Eligible Taxpayer”, fourth line of the first paragraph, the language “defined in the temporary regulations as:” is corrected to read “defined as:”.

4. On page 53010, column 2, in the preamble, under the paragraph heading “Eligible Taxpayer”, third line from the bottom of the first paragraph, the language “railroad track assigned to the person for” is corrected to read “railroad track assigned to the taxpayer for”.

5. On page 53010, column 2, in the preamble, under the paragraph heading “Eligible Taxpayer”, second through the sixth line from the bottom of the second paragraph, the language “Price Index)). 49 CFR part 1201, subpart A, § 1-1(a). In general, Class III railroads have annual carrier operating revenues of $20 million or less after applying the railroad revenue deflator formula. 49” is corrected to read “Price Index)). See 49 CFR part 1201, subpart A, § 1-1(a). In general, Class III railroads have annual carrier operating revenues of $20 million or less after applying the railroad revenue deflator formula. See 49”.

6. On page 53010, column 3, in the preamble, under the paragraph heading “Eligible Taxpayer”, second paragraph of the column, tenth to seventeenth lines, the language “services are the transport of freight by rail, the loading and unloading of freight transported by rail, locomotive leasing or rental, and maintenance of a railroad's right-of-way (including vegetation control). Examples of services that are not railroad-related services are general business services,” is corrected to read “services include the transport of freight by rail, the loading and unloading of freight transported by rail, locomotive leasing or rental, and maintenance of a railroad's right-of-way (including vegetation control). Examples of services that are not railroad-related services include general business services,”.

7. On page 53011, column 1, in the preamble, under the paragraph heading “Determination of QRTME Paid or Incurred”, second paragraph, third and fourth lines, the language “to a taxpayer using an accrual method of accounting. In this case, paid or” is corrected to read “to taxpayers using an accrual method of accounting. For such taxpayers, paid or”.

8. On page 53011, column 1, in the preamble, under the paragraph heading “Determination of QRTME Paid or Incurred”, second paragraph, fifteenth to twentieth lines, the language “any such expenditures. The temporary regulations provide that reimbursements may consist of amounts paid either directly or indirectly to the taxpayer. Examples of indirect reimbursements are discounted freight shipping rates,” is corrected to read “any expenditures that would otherwise qualify as QRTME. The temporary regulations provide that reimbursements may consist of amounts paid either directly or indirectly to the taxpayer. Examples of indirect reimbursements include discounted freight shipping rates,”.

9. On page 53011, column 1, in the preamble, under the paragraph heading “Determination of QRTME Paid or Incurred”, third paragraph, first line, the language “If an eligible taxpayer (assignee) pays” is corrected to read “The IRS and Treasury believe that the statute is intended to allow suppliers and shippers to claim the credit for providing the funding for the QRTME performed on railroad track owned by, or leased to, a Class II railroad or Class III railroad. However, the suppliers and shippers may not have the necessary expertise to perform the repairs and improvements. The IRS and Treasury believe that these eligible taxpayers should be able to claim the credit for providing the funding to the extent that the Class II railroads and Class III railroads use such funding to perform the repairs and improvements to the track. Therefore, if an eligible taxpayer (assignee) pays”.

10. On page 53011, column 1, in the preamble, under the paragraph heading “Determination of QRTME Paid or Incurred”, third paragraph, fifth line from the bottom of the column, the language “paragraph, this QRTME would be” is corrected to read “paragraph, QRTME would be”.

11. On page 53011, column 2, in the preamble, under the paragraph heading “Assignment of Railroad Track Miles”, first paragraph, first through fifth lines, the language “For purposes of section 45G, the temporary regulations provide that an assignment of a mile of railroad track is not a legal transfer of title, but merely a designation. This designation must be” is corrected to read “The temporary regulations provide that an assignment of a mile of railroad track is not a legal transfer of title, but merely a designation made solely for purposes of section 45G. This designation must be”.

12. On page 53011, column 2, in the preamble, under the paragraph heading “Assignment of Railroad Track Miles”, second paragraph, fifth line, the language “track. Thus, if a Class II railroad or Class” is corrected to read “track. If a Class II railroad or Class”.

13. On page 53011, column 2, in the preamble, under the paragraph heading “Assignment of Railroad Track Miles”, fourth paragraph, second line, the language “that a taxpayer must file Form 8900,” is corrected to read “that a taxpayer file Form 8900,”.

14. On page 53011, column 3, in the preamble, last paragraph of the column, first line, the language “The temporary regulations also” is corrected to read “The temporary regulations”.

15. On page 53012, column 1, in the preamble, first paragraph of the column, first line, the language “assignment is properly reported.” is corrected to read “assignment is reported.”.

16. On page 53012, column 1, in the preamble, under the paragraph heading “Special Rules”, first paragraph, second through fourth lines from the bottom of the paragraph, the language “structure (railroad track, roadbed, bridges, and related track structures) and intangible assets to which the” is corrected to read “structure and intangible assets to which the”.

17. On page 53012, column 1, in the preamble, under the paragraph heading “Special Rules”, second paragraph, sixth line, the language “of the RTMC allowable. This reduction” is corrected to read “of the RTMC allowable. The basis reduction”.

18. On page 53012, column 1, in the preamble, under the paragraph heading “Special Rules”, third paragraph, first line, the language “The temporary regulations also” is corrected to read “The temporary regulations do not”.

19. On page 53012, column 2, in the preamble, under the paragraph heading “Special Rules”, first paragraph of the column, fourth line to the last of the paragraph, the language “legislative history does not refer to, any exception to this rule. Accordingly, pursuant to section 61 and the regulations under section 61, the owner of the tangible assets (for example, railroad track and roadbed) with respect to which the QRTME is paid or incurred by another person that does not have a depreciable interest in those assets has gross income in the amount of that QRTME. However, the application of section 61 to QRTME paid or incurred with respect to eligible railroad track that is leased by a Class II railroad or Class III railroad raises a question as to under what circumstances the owner or lessee should recognize gross income with respect to QRTME. The IRS and Treasury Department request comments on this issue.” is replaced to read “legislative history does not refer to, any exception to this rule for an owner of tangible assets (for example, railroad track and roadbed) for the value of the repairs or improvements to such assets with respect to which QRTME is paid or incurred by another person that does not have a depreciable interest in such assets.”

LaNita Van Dyke,

Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration).