The R&D Tax Aspects of U.S. Passenger Rail Trains
The passenger rail industry in North
America is in need of substantial innovation investments and
technological development. America ranks seventeenth in
miles of service provided each year; barely above Iran and
well below emerging markets like China and India and well
developed markets like Russia. According to the
Organization for Economic Cooperation and Development, the
U.S. must invest $230 billion more than its current
anticipated budget between 2015 and 2030 to restore the
country’s passenger rail infrastructure to a level of global
Rail’s share of U.S.
federal transportation funding is a mere 1.02%. That is
nearly one fifth of the industry’s proportional share of
federal funding during the 1970’s. This is largely due
to America’s preference of automobiles as a method of
travel. However, as millennials grow into
positions of power and an increasing number of people migrate
to urban settings, that national preference may change.
There is no doubt that millennials express disproportionate
mass transit-friendly attitudes as cited by U.S. news, the
Atlantic and a number of other media
outlets. What’s more is that the recent
string of accidents on commuter rails have prompted widespread
media and government attention.
like positive train control (PTC) have the potential to
significantly curb these occurrences. Satellite
navigation, hybrid power trains, proximity sensors, and even
trains that can transfer passengers while moving are just a
few examples of the latest technological progress within the
Companies like Rail
Equipment Co., National Railway Equipment Co. (NRE), and
Harsco Corporation are all engaged in developing innovative
rail technologies. Innovation efforts aimed at improving
the passenger rail train industry are eligible for substantial
federal and state R&D tax credits
The Research &
Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On December 19, 2014, President Obama signed the bill
extending the R&D Tax Credit for the 2014 tax year.
Current State of U.S.
The American passenger rail infrastructure
is in need of major innovation in order to keep the country on
par with our global peers. Unlike Japan, China and other
developed countries, the United States has not adopted
high-speed bullet trains or high powered “magnetic levitation”
bullet train network, for example, operates at speeds between
150 and 200 miles per hour, covers nearly 1,500 miles, has no
grade-level road crossings, and uses overpasses and tunnels to
go over or under rather than around geographic
obstacles. The average delay time in 2012 for that
service was an impressive thirty-six seconds. Since it
began operations in 1964, there have been no fatal collisions
or derailments. It is equipped with earth-quake
detectors and anti-derailment devices that automatically bring
the train to a stop when necessary. Instead of single
engine propulsion, all of the trains axles are electronically
powered which allows for greater acceleration.
Transrapid service is one of two “magnetic levitation” train
systems in the world. The passenger train provides
service between downtown Shanghai and the Pudong Airport at
speeds of up to 268 miles per hour.
France provides a
high-speed service to passengers that can reach over 200 miles
per hour while serving most of the country with its 1,300
miles of operational track. Turkey, Russia, and Iran
also have competing high-speed systems.
The U.S.’s high speed
equivalent by contrast can only reach 150 miles per hour for a
very short stint of track between Rhode Island and
Massachusetts. Our very common, grade-level road
crossings cause significant delays, accidents, and economic
2013 data reveals that
an Amtrak train hit a car or person at a grade-level crossing
an average of 2.2 times a week. In response to these and
similar accidents, the federal government enacted legislation
that mandates technological implantation of positive train
control (PTC) technology.
Positive Train Control
Positive train control (PTC) is a GPS-based technology
designed to prevent head-to-head train collisions, derailments
caused by excessive speed, unauthorized entry into work zones,
and train incursions onto the wrong tracks. In the event
of human error, PTC will take over the train in order to avoid
accidents or at a bare minimum alert the engineer of the
In 2008, Congress passed
the Rail Safety Improvement Act. By doing so, the
government mandated that the country’s major railroads fund,
build, and implement a safer PTC system by the end of 2015.
The law also called for Union Pacific to refit an average of
2.5 locomotives and 10 miles of track per day for seven years,
placing GPS devices on every locomotive.
PTC communicates with
the train’s onboard computer, allowing it to audibly warn the
engineer and determine a safe braking distance based on the
train’s speed, length, width, weight, and the grade and
curvature of the track. If the engineer does not respond to
the ample audible warning and screen display, the onboard
computer will activate the brakes and safely stop the
The PTC system not only
increases safety, it also increases fuel efficiency as
well. By storing precise geographical data marks and
calculating the optimal routes of several trains in relation
to each other, the system allows operators to avoid speeding
up and slowing down arbitrarily. Having the ability to predict
stops in advance means conductors can simply cruise through at
an optimal speed so that they pass through certain stop-and-go
points. This allows them to save fuel that would
otherwise be wasted on accelerating from a standstill.
However, some railroads
see PTC as a burdensome, backward-looking, approach to a
problem that could have an even more efficient solution.
At a cost of $13 billion or more, the technology requires
railroads to install tens of thousands of sensors along tracks
to collect data about a locomotives speed, weight, and
length. Meanwhile, passengers aboard trains have
hundreds of smartphones that broadcast their location using
GPS that is perfectly capable of transmitting the same
data. The question many engineers are asking is why the
programs are not installed in the train itself, as Google does
with map information programmed into self-driving cars.
Google cars have the
ability to stop when another car is approaching in order to
avoid an accident or yield to a pedestrian. If Google
can make the technology work almost flawlessly in a 360 degree
unpredictable environment, why can’t train engineers use it to
avoid collisions on a simple one-track course?
Like the freight rail industry, many of the innovations
in the commuter rail industry involve energy efficiency.
The federal government recently conducted a study on the best
practices for improving rail energy efficiency.
Summarized below are some of the innovative technologies
discussed in that study.
Regenerative Braking: used to capture and reuse
electricity produced by dynamic braking. Dynamic braking
uses the electric train motor to slow the train by running it
in reverse. Currently, most trains squander this energy
by using inefficient technology that only captures a small
percentage of it for re-use. Energy savings can be
maximized by innovative designs that increasingly become more
efficient in recycling this energy which can be returned to
the grid or reused for accelerating or climbing hills.
Electronic Multiple Units (EMU’s): self
propelled electronic train carts that have no diesel engine
locomotive. They are currently used by commuter railroads with
electrified rails to power trains. The Metro North
operates the technology on three routes in New York,
Connecticut, and the Long Island Railroad. New Jersey
Transit, also operates EMUs on several electrified routes.
The future for hybrid
electric locomotives using battery stacks to recover braking
energy and store it for on-demand delivery looks bright.
Pike’s Research predicted that by 2020, hybrid locomotives
will be readily available for the industry, utilizing lead
acid or lithium ion large-capacity batteries. This low-cost
hybrid technology could reduce emissions by 80 percent over
standard locomotives and reduce noise levels and maintenance
costs just as much.
In addition to innovation in locomotives
and rail cars, major industry players spend considerably on
innovative track maintenance technologies. Transportation
Technology Center Inc. (TTC) in Pueblo, CO is one example and
some of their innovations developed in their world class
facility are discussed below.
Laser Rail Inspection
The world’s first
laser-based rail inspection system is being developed at the
TTC. Internal flaws in railroad tracks are largely
invisible to the human eye. To find them, innovative railroads
employ defect detector cars and HiRail trucks with GPS,
induction, and ultrasound technology. This laser
technology helps track workers to locate and identify internal
rail defects before they cause an accident. Due in large
part to technologies such as these, accidents are at an all
time low - track-caused accidents per million train-miles have
dropped 85 percent since 1980 and 49 percent since 2000.
Straight, hard metal
railroad tracks are not as simple as they appear. There is
innovation even in the production of this seemingly simple
technology. Not only must railroad tracks safely support
trains weighing over 3,500 tons, but they must do so while
maximizing fuel efficiency of trains and must be built to
last. Track engineering involves careful 3D geometry
analysis of tracks that encompasses everything from the
alignment and elevation of track to its curvature and track
Today, railroads use
sophisticated electronic and optical instruments to inspect
all aspects of their production. The latest technology
involves on-board computer systems that provide sophisticated
analyses of track geometry and predict the response of freight
cars to track geometry deviations. This allows railroads
to determine when tracks need maintenance all while making
money during regular scheduled deliveries.
Ensuring a Solid Rail
A strong foundation is critical for
railroad track layouts. Track ballast is the rock foundation,
upon which the railroad track sits. Strong track
foundations help transfer the load of the trains to the
underlying foundation while facilitating drainage of water and
minimizing vegetation that might interfere with track
structure. Over time, ballast breakdown can occur and lead to
track instability. To measure this, railroads regularly use
ground-penetrating radar to measure ballast thickness and
identify areas where repairs are needed.
Maintaining the Health
of Rail Bridges
With more than 100,000 privately-owned
bridges in America’s freight rail system, railroads are
continuously seeking ways to monitor bridge health and detect
damage in real time. Researchers are developing a new
generation of monitoring equipment to be installed on both
trains and bridges in order to provide regular feedback on the
health of each bridge. Researchers at the Association of
American Railroads are conducting research to gain insight
into current bridge design, component standards, and
maintenance practices to identify new ways to extend the
lifespan of rail bridges.
Keeping Rail Wheels
Wheel bearings allow the wheels of a rail
car to rotate freely along track. The journal box holds
the oil to keep wheel bearings operating smoothly.
Despite the journal box, bearings get worn overtime can cause
enough friction to heat up the journal box and create a
“hotbox.” During the early days of railroads, oil soaked wool
would be placed in the journal box to detect signs of friction
and overheating. When the journal box became overheated, the
wool would smoke, alerting brakemen to an issue. Today,
engineers use infrared technology and acoustic monitoring
devices to detect problems. For example, friction from a
faulty wheel bearing sometimes causes a distinct sound.
The latest technology is constantly roaming operations to pick
up on these clues.
and sensors assist in detecting defects as well. Wheel
images captured by lasers show worn wheel treads or flanges,
indicating when the wheels on a rail car need to be replaced.
Meanwhile, wheel impact load detectors are used to measure
vertical wheel loads as rail cars travel across track and
alert railroads when a wheel is warped and needs to be
repaired or replaced.
Like they do in most innovative industries,
IBM has its hands in the passenger rail market. In
pursuit of a smarter plant, IBM has been developing computer
analytical technologies that create efficient systems in
a broad array of industries. Railroads have always
generated data. Today, with RFID and other technologies, they
generate more data than ever before. IBM uses that data
to help make railroads safer, faster, cleaner, more efficient,
and profitable - more or less, smarter.
IBM creates mobile
monitoring systems that provide railroads with more
intelligence through continuous real-time capture and analysis
of critical data. Sensors on cars collect information
based on decision modeling and analytics. Automated systems
then distribute the information to various departments,
dispatching service, ordering parts, scheduling maintenance,
and performing remote diagnostics. Eventually, such mobile
technologies could reduce the need for fixed infrastructure
along the wayside and give railroads the flexibility and
responsiveness they need to make quicker and more efficient
decisions to optimize crew schedules, add or remove cars, and
integrate passenger transport with fewer delays.
This technology will help eliminate many of the challenges
facing the railroad industry today.
4 Challenges Faced by Global
Efficiency and Reliability
and Competition Issues
Long Island Rail Road
The LIRR serves more than 300,000
passengers riding more than 700 miles of track every day. It
recently chose IBM Maximo software to manage and maintain
approximately 1,180 rail cars, locomotives, and their
components. As part of a 2012 project, IBM
assisted the LIRR in expanding its asset management systems to
include facilities such as Penn Station, bridges, tunnels,
linear assets such as rail, and IT assets including PCs,
servers, and software. "The efficiency of the Long
Island Rail Road is heavily dependent on the proper
maintenance and repair of thousands of components, from trains
to facilities, tracks, signals and communications" said
Vincent Mezzanotte, Chief Information Officer, LIRR. IBM
Maximo software helps railroads with preventative maintenance
so they can replace components or fix assets before they
break—keeping things running smoothly and significantly
The LIRR is North
America’s busiest commuter rail and over 175 years
San Francisco Bay Area
Rapid Transit (BART)
BART, the nation's fifth busiest
transportation system, offers travelers an alternative to
driving on bridges and highways, easing the traffic and
pollution. "Because we are managing an aging fleet while
planning for the future, the efficiency of BART requires
visibility across all of our assets" said Randall
Franklin, Program Director of BART's Business Advancement
Program. IBM software will manage the purchasing, inventory,
and maintenance systems that support its operations and
conduct analysis and schedule maintenance before a part or
system fails. It will manage and update the extensive parts
inventory and plan jobs to maximize workforce efficiency. With
a smarter system, BART can continue its modernization with
tightened budgets and fewer resources while maintaining its
high standards of service.
The BART system has been operating for
passengers since September 11, 1972.
Google Maps to Include
Every U.S. Rail Crossing
Accidents at U.S. rail crossings have
attracted widespread industry and media attention across the
Northeast. So much so that Google Maps and the U.S.
Federal Railroad Administration have agreed to use the
agency’s data along with Google’s technology app to notify
drivers about upcoming railroad crossings on Google
Maps. The initiative will pinpoint every rail crossing
in the country and send visual and audio alerts to the vast
array of drivers who use the turn by turn navigation
feature. Drivers are increasingly relying on this and
similar technology when they drive. Most rail crossing
accidents are caused by driver inattention and error.
With the new app, a driver who is focusing attention on
navigation instead of the road will now have a larger
opportunity to become aware of the approaching crossing.
The passenger rail industry in North
America is in need of substantial investment in innovation and
technological development. Looking forward, the industry
might get exactly that. R&D tax credits are available to
help support and stimulate companies developing rail
technology in the U.S.