§281 — Title 26 Internal Revenue Code | U.S. Code

Summary

A terminal railroad corporation is a domestic railroad company owned entirely by rail carriers, whose main business is running terminal and switching facilities for railroads and their shippers and passengers. These companies often earn outside income (like renting space in a rail facility or handling mail for the government) and use it to lower the bills they charge their railroad owners. Under this rule, the terminal company does not count that benefit as income. If it wipes out part of a railroad owner's bill by crediting it with related terminal income, or simply charges less because of that income, neither the terminal company nor its shareholder railroads are treated as receiving or paying anything, and no deductions are lost. The break can't be used to create or increase a net operating loss for the terminal company, and it only works if all the shareholders signed a written agreement setting it up before the tax year began.

Title 26, §281

Internal Revenue Code — Source: USLM XML via OLRC

(a)(1)In computing the taxable income of a terminal railroad corporation—

(A)such corporation shall not be considered to have received or accrued—

(i)the portion of any liability of any railroad corporation, with respect to related terminal services provided by such corporation, which is discharged by crediting such liability with an amount of related terminal income, or

(ii)the portion of any charge which would be made by such corporation for related terminal services provided by it, but which is not made as a result of taking related terminal income into account in computing such charge; and

(B)no deduction otherwise allowable under this chapter shall be disallowed as a result of any discharge of liability described in subparagraph (A)(i) or as a result of any computation of charges in the manner described in subparagraph (A)(ii).

(2)In the case of any taxable year ending after the date of the enactment of this section, paragraph (1) shall not apply to the extent that it would (but for this paragraph) operate to create (or increase) a net operating loss for the terminal railroad corporation for the taxable year.

(b)Subject to the limitation in subsection (a)(2), in computing the taxable income of any shareholder of a terminal railroad corporation, no amount shall be considered to have been received or accrued or paid or incurred by such shareholder as a result of any discharge of liability described in subsection (a)(1)(A)(i) or as a result of any computation of charges in the manner described in subsection (a)(1)(A)(ii).

(c)In the case of any taxable year, subsections (a) and (b) shall apply with respect to any discharge of liability described in subsection (a)(1)(A)(i), and to any computation of charges in the manner described in subsection (a)(1)(A)(ii), only if such discharge or computation (as the case may be) was provided for in a written agreement, to which all of the shareholders of the terminal railroad corporation were parties, entered into before the beginning of such taxable year.

(d)For purposes of this section—

(1)The term “terminal railroad corporation” means a domestic railroad corporation which is not a member, other than as a common parent corporation, of an affiliated group (as defined in section 1504) and—

(A)all of the shareholders of which are rail carriers subject to part A of subtitle IV of title 49;

(B)the primary business of which is the providing of railroad terminal and switching facilities and services to rail carriers subject to part A of subtitle IV of title 49 and to the shippers and passengers of such railroad corporations;

(C)a substantial part of the services of which for the taxable year is rendered to one or more of its shareholders; and

(D)each shareholder of which computes its taxable income on the basis of a taxable year beginning or ending on the same day that the taxable year of the terminal railroad corporation begins or ends.

(2)The term “related terminal income” means the income (determined in accordance with regulations prescribed by the Secretary) of a terminal railroad corporation derived—

(A)from services or facilities of a character ordinarily and regularly provided by terminal railroad corporations for railroad corporations or for the employees, passengers, or shippers of railroad corporations;

(B)from the use by persons other than railroad corporations of portions of a facility, or a service, which is used primarily for railroad purposes;

(C)from any railroad corporation for services or facilities provided by such terminal railroad corporation in connection with railroad operations; and

(D)from the United States in payment for facilities or services in connection with mail handling.

(3)The term “related terminal services” includes only services, and the use of facilities, taken into account in computing related terminal income.

(e)The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The date of the enactment of this section, referred to in subsecs. (a)(2) and (d)(2), refers to the date of enactment of Pub. L. 87–870, which was approved Oct. 23, 1962.

Amendments

1995—Subsec. (d)(1)(A), (B). Pub. L. 104–88 substituted “rail carriers subject to part A of subtitle IV” for “domestic railroad corporations providing transportation subject to subchapter I of chapter 105”. 1978—Subsec. (d)(1)(A). Pub. L. 95–473, § 2(a)(2)(D), substituted “providing transportation subject to subchapter I of chapter 105 of title 49” for “subject to part I of the Interstate Commerce Act (49 U.S.C. 1 and following)”. Subsec. (d)(1)(B). Pub. L. 95–473, § 2(a)(2)(E), substituted “providing transportation subject to subchapter I of chapter 105 of title 49” for “subject to part I of the Interstate Commerce Act”. 1976—Subsec. (d)(1)(A). Pub. L. 94–455, § 1901(a) (40)(A), inserted “(49 U.S.C. 1 and following)” after “Interstate Commerce Act”. Subsecs. (e), (f). Pub. L. 94–455, §§ 1901(a)(40)(B), 1906(b)(13)(A), redesignated subsec. (f) as (e) and struck out “or his delegate” after “Secretary”. Former subsec. (e), which made special provision for the application of this section to taxable years ending before Oct. 23, 1962, was struck out.

Statutory Notes and Related Subsidiaries

Effective Date

of 1995 AmendmentAmendment by Pub. L. 104–88 effective Jan. 1, 1996, see section 2 of Pub. L. 104–88, set out as an

Effective Date

note under section 1301 of Title 49, Transportation.

Effective Date

of 1976 AmendmentAmendment by section 1901(a)(40) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date

Pub. L. 87–870, § 2(a), Oct. 23, 1962, 76 Stat. 1160, provided that: “The

Amendments

made by the first section of this Act [enacting this section] shall apply with respect to taxable years beginning after

December 31, 1953, and ending after

August 16, 1954.” Internal Revenue Code of 1939; Inclusion of Terminal Railroad Corporations and Their Shareholders Provision Pub. L. 87–870, § 2(b), Oct. 23, 1962, 76 Stat. 1160, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “Provisions having the same effect as section 281 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by the first section of this Act) shall be deemed to be included in the Internal Revenue Code of 1939, effective with respect to all taxable years to which such Code applies.”

§281 Terminal Railroad Corporations and Their Shareholders

Summary

Title 26, §281

Notes & Related Subsidiaries

Editorial Notes

References in Text

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Effective Date

Effective Date

Amendments

Citations & Metadata