Page 13: of Maritime Reporter Magazine (April 1982)

AWO Perspective

Tax Act Creates 'New Subsidy7 For Railroads

The nation's railroads will re- ceive major profit windfalls in the next few years due to a change of accounting methods allowed them in the Economic Recovery Tax

Act of 1981, according to a study conducted by the Chicago law firm of Lord, Bissell & Brook.

The study was jointly pub- lished by a coalition of barge industry associations, including

The American Waterways Oper- ators, Inc. (AWO). It was com- missioned by members of the in- dustry who are concerned with the competitive impact of this major new tax break for the rail- roads.

The study cites findings in in- dependent reports by several banks and investment houses, showing that the 1981 Tax Act provides a special bonanza worth over $16 billion for railroads by switching them from one form of accounting, which was previously available only to railroads, to the new accelerated cost recovery system (ACRS accounting), which is applicable to taxpayers generally.

Under the accounting system used by railroads prior to the 1981 Act — retirement-replace- ment-betterment tax accounting ("betterment accounting") — a

GAO study showed that 10 se- lected, high-revenue Class I rail- roads received benefits during 1976-78 totaling nearly $1 billion.

AWO president Anthony L.

Kucera said, "Betterment ac- counting has long given the rail- roads a financial benefit not avail- able to any other industry. This large infusion of cash from the write-off of railway roadbeds is being given by the government to the railroad industry as a sweet- ner for converting ACRS, the tax depreciation system applicable to taxpayers generally. We regard this as yet another federal sub- sidy to the railroads," said Mr.

Kucera.

A First Boston Corporation re- port dated June 26, 1981, con- cluded that the new depreciation accounting procedures for rail- roads "will dramatically increase depreciation for tax purposes, and for the most profitable railroads could eliminate much of current tax liability for the first three to four years."

A report by Harris Trust and

Savings Bank of Chicago said about the railroads it studied that "it is doubtful that any of these companies would have to pay taxes over the next five years," because of benefits re- ceived from this act. For exam- ple, the vice president of a major railroad was quoted in the Wall

Street Journal as saying, "this year's working capital figure in- cludes $66.5 million due to the company's decreased current tax liability."

Dean Witter Reynolds Inc., the investment firm, concluded in a separate study that "the cash flow ramifications are enormous" for railroads as a result of the 1981 act.

AWO's Mr. Kucera said, "The underlying significance of the over $16-billion tax break is that it comes at a time when the rail- roads are leading a move to bur- den, if not cripple, the barge and towing industry with numerous tax increases. The net effect is to reduce the competitiveness of the barge lines while increasing the competitiveness of the railroads —all working in total contradic- tion to the free market objective being promoted by the Adminis- tration."

AWO is a 300-member national trade association that represents the interests of the barge and towing industry.

Oceaneering Selected

To Support Deepwater

Platform Installation In Gulf

Union Oil Co. has awarded a diving services contract to Ocean- eering International, Inc., Hou- ston, Texas. Oceaneering will sup- ply diving support and remotely operated vehicle inspection serv- ices during the installation of

Union's drilling and production platform, "Cerveza Ligera."

The "Cerveza Ligera," Union's second deepwater platform in the

Gulf of Mexico, will be installed in East Breaks 159 A, located about 100 miles south of Galves- ton. Water depth at centerline of platform location is surveyed at 925 feet. The eight leg structure is scheduled to be installed be- ginning in June 1982.

Michigan Yard Completes 180-Foot Deck Barge

Kobasic Marine, Inc., of Escan- aba, Miss., recently completed a 180-foot by 54-foot by 12-foot deck barge for Midas Offshore

International of New Orleans, La.

It was the largest barge built by the four year old shipyard that specializes in barge and trawler building.

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