GAO Comments on Department of Transportation Study of Amtrak State and Local Taxation

PAD-81-58: Published: Jan 30, 1981. Publicly Released: Jan 30, 1981.

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GAO commented on the Department of Transportation's review of Amtrak. The review concluded that Amtrak should be exempted from State and local personal property, sales and use, income, and gross revenue taxes and construction fees and permits. It did not recommend complete exemption from real property taxes. However, it did recommend freezing assessment levels for real property taxes at those in effect as of April 1976. Permitting real property taxation at those assessment levels is intended to provide State and local governments with some payment for the services they provide Amtrak but prevent the taxation of federally financed improvements. Amtrak would remain subject to all other user fees, licenses, and taxes and would continue to collect retail sales taxes on sales to its customers. Any Amtrak activities not related to railroad passenger transportation would remain fully taxable. The review also recommended that private railroad companies be exempt from taxation on improvements to their property that are financed by Amtrak.

GAO agrees that Amtrak's railroad passenger operations should be seen as a Government-controlled, nonprofit public service and should generally be tax exempt. GAO agrees that Amtrak should not impose costs on State and local governments that are not necessarily related to the benefits it conveys to State and local governments. However, it believes that it is doubtful whether the proposal to freeze property tax assessments at the 1976 level is an adequate solution. This would be an unusual arrangement and would afford no mechanism for responding to changes in Amtrak's demand on State and local services or in the goals of the State and local governments. Most Government corporations analogous to Amtrak make payments in lieu of taxes to State and local governments. GAO believes that this alternative should be considered instead of the proposed assessments freeze. The review proposes that improvements made at Amtrak's expense on right-of-way or other real property owned by private railroads should be exempt from State and local property taxes. GAO believes that this seems too broad an extention of the tax exemption and that Congress should not extend the exemption to non-Amtrak property unless a more persuasive case for doing so is presented.

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