The John Snow appointment has lead to an interesting series of articles. One caught my eye as it relates to donations.

Often, when kicking around ideas of acquiring or moving equipment the idea comes up that a donor railroad might do it for a tax break. Apprently, that may not be needed.

One of the Snow articles points out that CSX rarely pays taxes.

According to the Citizens for Tax Justice, "in three of the past four years, SnowÂ’s company, CSX Corporation, paid no federal income tax at all.
In fact, instead of paying taxes, CSX supplemented its $934 million in pretax U.S. profits over the four years with a total of $164 million in tax rebate checks from the federal government."

Makes you think about what the donation of a $5,000 -$25,000 really means. Not much to the bottom line.

This underscores the need for good relationships with middle and upper management. The requests of preservationists generally don't add up any real loss or gain for a large company. The trick is to make the relationship count, and find motivated people sympathetic to the cause.

Makes you think...

Rob



Corporate Freeloader Chief is BushÂ’s Choice to Hea
trains@robertjohndavis.com

Years ago during law school when I took my first and only course on tax law the professor started the course by stating that the federal tax law was designed to encourage or discourage certain conduct and raising revenue was secondary. Not much has changed since then. As an example home ownership is encouraged by allowing deduction of interest payments and the same is true on the business side with countless credits.


tcox@parknet.pmh.org

Rob

Yes, The write off is minimal and essentially penuts in the big picture and more of a PR offering than real dollars to save. Though I can not blame any railroad for taking as full advantage of any tax doge they can as often as they can. For tens of decades they have been plundered to the point of bankruptcy by Federal , state and local taxes with the majority of their contributions going to fund other transportation projects that put them out of business or create ease for thier direct competition. At it's height in the early/mid fifties Railroads taxes funded over 60% of the highway infra structure in the Eisenhower Plan most of which is still in it's original form and providing the greatest competition to railroads. The Erie Railroads President at the time was the loudest voice in this plunder and predicted most of the mergers and bankruptcies and system scaleback that were seen in the sixties and seventies. And When railroads were in trouble the federal government offer miniscule assistance and again has turned to funding Airlines and the primary transportation mode. As recently as last year the feds passed a bill and resolution to give Chicago 3.6 Billion to build new terminals and runways at O'hare Airport out of the transportation fund all this for airlines that have cut their service across the board by 30 % and can afford the payback schedules. All this while Amtrak can't get 26 million to keep going and railroads are using maintenence defferals to keep the bottom line profitable for share holders.

I say dodge away.

Rich A Young

What is the big problem if a corporation can avoid paying taxes? I say the less taxes the better. What moral superiority does the government have that says they can demand that they be given a cut of someone else's hard work?

What I would like to know is if the conventional wisdom that corporations dont pay much in taxes, and that reality shows that 50% of wage earners pay 4% of the taxes, where exactly is all these trillions of dollars coming from?



jrowlands@neo.rr.com

Rob, be careful with organizations that advocate "fair taxes" being paid by the "wealthy", they might just mean "lots more". and "lots more" and "you".

Seriously, I see a bigger impediments to donations.

First, in the novel lawmaking that assigns blame to an organization often totally unconnected or long since removed from an object. The fact that the CP has to be concerned with the park steamer like Soo 735 40 or 50 years after they donated it-tells you a lot of risk managers will try to avoid issues like that by promulgating disposition policies based on the question: "if we get donate this, how is it going to bite us in the butt later?"

Second, unlike when steam ended, much equipment that no longer meets the TCO (Total cost of Ownership) citeria is sought by an active secondary market. Here in PA, the Reading and Northern has SD-50's from the UP. The D-L is a haven for ALCOS. Anybody thats got a 4 axle roadswitcher has a marketable item.

Nonetheless, you are dead about the need to cultivate relationships with those in charge of making disposition decisions.

superheater@beer.com

Friends,

I pointed out the Snow article as interesting insight into the tax realities of a class one.

It's not about a tax philosophy on my part. I have no intention of discussing politics on RYPN. Not the place.

Sorry if anyone took it as such.

Rob



trains@robertjohndavis.com

Until relatively recently, there were definite tax benefits in corporate donations of equipment, property and services. IIRC, the tax law changes that were made around 1986 (or was it 1993?)substantially reduced the amount a railroad (and probably other industries, too) could take as a write-off for donations of such things. Donations of cash were not affected, which is why most large railroads still have active foundations that dispense grants.

But the change in how equipment and property donations were valued, which had an effect on the amount of the write-off, was pretty drastic and the result was a reduction in the number of pieces of equipment and in properties (depots, line segments, land, track parts, etc.) that were donated. Prior to this change, the tax benefits were usually higher than what could have been obtained through sale for scrap; after the changes, the potential tax benefits were usually less (often MUCH less) than what could be obtained through sale, even after the taxes on gains from the sales were factored in.

So, telling a railroad about the tax benefits of donating something won't impress them much. They are likely to be even less impressed now that there is a 40-50 year track record of what has been done with or done to many of their past donations. Too many engines, cabooses, cars and depots donated in good faith have become derelect eyesores or the subject of auctions or demands for the railroad to repair and maintain them or have been scrapped or torn down or sold off.

Many of today's railroad execs had some involvment in those donations 20-30 years ago, and they still carry grudges about how some of the things they worked so hard internally to make into reality have actually turned out.

When you add to all of this the newly-discovered potential for large liability claims and lawsuits, it is little wonder many railroads are simply not interested in donating anything to anyone. They might sell things, but they are not as willing to give stuff away that might come back to haunt them 20 or 30 or 50 years from now.

Earl, Tax Reform Act (TRA) of 86 - Omnibus Budget Reconciliation act (OBRA) of 93. I had no involvement in corporate taxes in tose years-but I'll bet it was 1986. Much of the the 86 act was designed to "broaden" the base by reducing exemptions and deductions so more was subject to a lesser tax rate.

86 Act also revised the Code for the first time since 1954 after its initial issuance in 1938 or 1939.



superheater@beer.com