US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 281

Terminal railroad corporations and their shareholders

(a)

Computation of taxable income of terminal railroad corporations

(1)

In general

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)

Limitation

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)

Computation of taxable income of shareholders

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)

Agreement required

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)

Definitions

For purposes of this section—
(1)

Terminal railroad corporation

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)

Related terminal income

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.
For purposes of subparagraph (B), a substantial addition, constructed after the date of the enactment of this section, to a facility shall be treated as a separate facility.
(3)

Related terminal services

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

(e)

Regulations

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

Pub. L. 87–870, § 1(a)76 Stat. 1158Pub. L. 94–455, title XIX90 Stat. 1771Pub. L. 95–473, § 2(a)(2)(D)92 Stat. 1464Pub. L. 104–88, title III, § 304(b)109 Stat. 943(Added , , ; amended , §§ 1901(a)(40), 1906(b)(13)(A), , , 1834; , (E), , ; , , .)

Editorial Notes

References in Text

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

Amendments

Pub. L. 104–881995—Subsec. (d)(1)(A), (B). substituted “rail carriers subject to part A of subtitle IV” for “domestic railroad corporations providing transportation subject to subchapter I of chapter 105”.

Pub. L. 95–473, § 2(a)(2)(D)49 U.S.C. 11978—Subsec. (d)(1)(A). , substituted “providing transportation subject to subchapter I of chapter 105 of title 49” for “subject to part I of the Interstate Commerce Act ( and following)”.

Pub. L. 95–473, § 2(a)(2)(E)Subsec. (d)(1)(B). , substituted “providing transportation subject to subchapter I of chapter 105 of title 49” for “subject to part I of the Interstate Commerce Act”.

Pub. L. 94–455, § 1901(a)49 U.S.C. 11976—Subsec. (d)(1)(A). (40)(A), inserted “( and following)” after “Interstate Commerce Act”.

Pub. L. 94–455Subsecs. (e), (f). , §§ 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 , was struck out.

Statutory Notes and Related Subsidiaries

Effective Date of 1995 Amendment

Pub. L. 104–88section 2 of Pub. L. 104–88section 1301 of Title 49Amendment by effective , see , set out as an Effective Date note under , Transportation.

Effective Date of 1976 Amendment

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

Effective Date

Pub. L. 87–870, § 2(a)76 Stat. 1160

“The amendments made by the first section of this Act [enacting this section] shall apply with respect to taxable years beginning after , and ending after .”
, , , provided that:

Internal Revenue Code of 1939; Inclusion of Terminal Railroad Corporations and Their Shareholders Provision

Pub. L. 87–870, § 2(b)76 Stat. 1160Pub. L. 99–514, § 2100 Stat. 2095

“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.”
, , , as amended by , , , provided that: