CERTAIN PROVISIONS RELATING TO RAILROADS.

SEC. 1701. CERTAIN PROVISIONS RELATING TO RAILROADS. (a) Treatment of Certain Railroad Tees.— Section 263 (relating to capital expenditures) is amended by adding at the end thereof the following new subsection: “(g) Railroad Ties.— In the case of a domestic common carrier by rail (including a railroad switching or terminal company) which uses the retirement-replacement method of accounting for depreciation of its railroad track, expenditures for acquiring and installing replacement ties of any material (and fastenings related to such ties) shall be accorded the same tax accounting treatment as expenditures for replacement ties of wood (and fastenings related to such ties).” (b) Increase in 50-Percent Limitation.— Subsection (a) of section 46 (relating to determination of amount of investment credit) is amended by adding at the end thereof the following new paragraph: “(8) Alternative limitation in the case of certain railroads.— “(A) In general.— If, for a taxable year ending after calendar year 1976, and before calendar year 1983, the amount of the qualified investment of the taxpayer which is attributable to railroad property is 25 percent or more of his aggregate qualified investment, then subparagraph (C) of paragraph (3) of this subsection shall be applied by substituting for 50 percent his applicable percentage for such year. “(B) Applicable percentage.— The applicable percentage of any taxpayer for any taxable year under this paragraph is— “(i) 50 percent, plus “(ii) that portion of the tentative percentage for the taxable year which the taxpayer’s amount of qualified investment which is railroad property bears to his aggregate qualified investment. If the proportion referred to m clause (ii) is 75 percent or more, the applicable percentage of the taxpayer for the year shall be 50 percent plus the tentative percentage for such year. “(C) Tentative percentage.— For purposes of subparagraph (B), the tentative percentage shall be determined under the following table: “If the taxable year ends in:— The tentative percentage is: 1977 or 1978 50 1979 40 1980 30 1981 20 1982 10 “(D) Railroad property defined.— For purposes of this paragraph, the term ‘railroad property’ means section 38 property used by the taxpayer directly in connection with the trade or business carried on by the taxpayer of operating a railroad (including a railroad switching or terminal company),”