---
kind: "section"
citation: "45 U.S.C. § 721"
title: "45"
title_heading: "Railroads"
number: "721"
heading: "Loans"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/45/721"
units:
  - "Chapter 16 — Regional Rail Reorganization"
  - "Subchapter II — United States Railway Association"
---

# §721. Loans

- (a) **General—** The [Association](/usc/45/702.md?p=1) is authorized, in accordance with the provisions of this section and such rules and regulations as it shall prescribe, to make loans to the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), and other [railroads](/usc/45/702.md?p=15) (including a [railroad in reorganization](/usc/45/702.md?p=16) which has been found to be reorganizable under section 77 of the Bankruptcy Act pursuant to [section 717(b) of this title](/usc/45/717.md?p=b)) in the [region](/usc/45/702.md?p=17), for purposes of achieving the goals of this chapter; to a [State](/usc/45/702.md?p=19) or [local or regional transportation authority](/usc/45/702.md?p=11) pursuant to section 763[^1] of this title; and to provide assistance in the form of loans to any [railroad](/usc/45/702.md?p=15) which (A) connects with a [railroad in reorganization](/usc/45/702.md?p=16), and (B) is in need of financial assistance to avoid reorganization proceedings under section 77 of the Bankruptcy Act. No such loan shall be made by the [Association](/usc/45/702.md?p=1) to a [railroad](/usc/45/702.md?p=15) unless such loans shall, where applicable, be treated as an expense of administration. The rights referred to in the last sentence of section 77(j) of the Bankruptcy Act shall in no way be affected by this chapter.
- (b) **Applications—** Each application for such a loan shall be made in writing to the [Association](/usc/45/702.md?p=1) in such form and with such content and other submissions as the [Association](/usc/45/702.md?p=1) shall prescribe to protect reasonably the interests of the United States. The [Association](/usc/45/702.md?p=1) shall publish a notice of the receipt of each such application in the Federal Register and shall afford interested persons an opportunity to comment thereon.
- (c) **Terms and conditions—** Each loan shall be extended in such form, under such terms and conditions, and pursuant to such regulations as the [Association](/usc/45/702.md?p=1) deems appropriate. Such loan shall bear interest at a rate not less than the greater of a rate determined by the [Secretary](/usc/45/702.md?p=18) of the Treasury taking into consideration (1) the rate prevailing in the private market for similar loans as determined by the [Secretary](/usc/45/702.md?p=18) of the Treasury, or (2) the current average yield on outstanding marketable obligations of the [Association](/usc/45/702.md?p=1) with remaining periods of maturity comparable to the average maturities of such loans, plus such additional charge, if any, toward covering costs of the [Association](/usc/45/702.md?p=1) as the [Association](/usc/45/702.md?p=1) may determine to be consistent with the purposes of this chapter.
- (d) **Modifications—** The [Association](/usc/45/702.md?p=1) is authorized to approve any modification of any provision of a loan under this section, including the rate of interest, time of payment of interest or principal, security, or any other term or condition, upon agreement of the recipient of the loan and upon a finding by the [Association](/usc/45/702.md?p=1) that such modification is equitable and necessary or appropriate to achieve the policy declared in [subsection (f)](#f) of this section. Notwithstanding any other provision of this section, in the case of a loan made under [subsection (a)](#a) of this section to a [railroad](/usc/45/702.md?p=15) in the [region](/usc/45/702.md?p=17), the [Association](/usc/45/702.md?p=1) is not required to make the findings with respect to subsections [(e)(3)](#e-3) and [(f)](#f) and may, upon the request of such [railroad](/usc/45/702.md?p=15)—
  - (1) continue to make advances to such [railroad](/usc/45/702.md?p=15) pursuant to such loan, up to the total principal provided, as of November 8, 1978, under the agreement between such [railroad](/usc/45/702.md?p=15) and the [Association](/usc/45/702.md?p=1) under this section, upon finding only that (A) a good faith effort has been commenced by such [railroad](/usc/45/702.md?p=15) toward the establishment of an [employee stock ownership plan](/usc/45/702.md?p=7), and (B) such continued advances will permit the continuation of rail service determined by the [Association](/usc/45/702.md?p=1), in the [Final System Plan](/usc/45/702.md?p=8) or under the goals of this chapter, to be desirable; and
  - (2) increase the principal amount of such loan to such [railroad](/usc/45/702.md?p=15), in an amount not to exceed $7,500,000, only if the [Association](/usc/45/702.md?p=1) makes the finding referred to in paragraph (1)(B) of this subsection and determines that such [railroad](/usc/45/702.md?p=15) is making a good faith effort to establish an [employee stock ownership plan](/usc/45/702.md?p=7) for review and approval by the [Association](/usc/45/702.md?p=1). Any such approval shall be conditioned upon a written commitment that by December 31, 1980, the [railroad](/usc/45/702.md?p=15) will adopt an [employee stock ownership plan](/usc/45/702.md?p=7) which will acquire qualifying employer securities with a fair market value of $250,000.

  The [Association](/usc/45/702.md?p=1) may not take any action pursuant to the preceding sentence of this subsection after December 31, 1981.

- (e) **Prerequisites—** The [Association](/usc/45/702.md?p=1) shall make a finding in writing, before making a loan to any applicant under this section, that—
  - (1) the loan is necessary to achieve the goals of this chapter or to prevent insolvency;
  - (2) it is satisfied that the business affairs of the applicant will be conducted in a reasonable and prudent manner; and
  - (3) the applicant has offered such security as the [Association](/usc/45/702.md?p=1) deems necessary to protect reasonably the interests of the United States.
- (f) **Policy—** It is the intent of Congress that loans made under this section shall be made on terms and conditions which furnish reasonable assurance that the [Corporation](/usc/45/702.md?p=5) or the [railroads](/usc/45/702.md?p=15) to which such loans are granted will be able to repay them within the time fixed and that the goals of this chapter are reasonably likely to be achieved.
- (g) **Pre-conveyance loans to Corporation—** During the period between the [effective date of the final system plan](/usc/45/702.md?p=6) and the date of the conveyance of [rail properties](/usc/45/702.md?p=14) pursuant to [section 743(b) of this title](/usc/45/743.md?p=b), the [Association](/usc/45/702.md?p=1) may make such loans in such amounts to the [Corporation](/usc/45/702.md?p=5) as the [Association](/usc/45/702.md?p=1) deems essential to provide for the purchase by the [Corporation](/usc/45/702.md?p=5) of material, supplies, equipment, and services necessary to permit the orderly and efficient implementation of the [final system plan](/usc/45/702.md?p=8). Notwithstanding any inability of the [Association](/usc/45/702.md?p=1) during such period to make the finding required by [subsection (e)(3)](#e-3) of this section because of any existing contingencies, the [Association](/usc/45/702.md?p=1) may make any such loans to the [Corporation](/usc/45/702.md?p=5), subject to—
  - (1) the most favorable terms and conditions for assuring timely repayment and security as may then be reasonably available, and
  - (2) the requirement that any loan to the [Corporation](/usc/45/702.md?p=5) under this subsection be refinanced immediately out of the proceeds of the first sale by the issuance of debentures under [section 726 of this title](/usc/45/726.md).

  In order to assure that necessary funds are available to the [Corporation](/usc/45/702.md?p=5) for implementation of the [final system plan](/usc/45/702.md?p=8), the [Corporation](/usc/45/702.md?p=5) is authorized to accept such loans as may be approved by the [Association](/usc/45/702.md?p=1) under this subsection, and any such acceptance shall be deemed for all purposes to constitute a reasonable and prudent business judgment in compliance with any fiduciary obligations imposed on the [Corporation](/usc/45/702.md?p=5) or its directors. For purposes of this subsection, the term “[Corporation](/usc/45/702.md?p=5)” includes a [subsidiary](/usc/45/702.md?p=20) of the [Corporation](/usc/45/702.md?p=5).

- (h) **Loans for payment of obligations—**
  - (1)
    - (A) The [Association](/usc/45/702.md?p=1) is authorized, subject to the limitations set forth in [section 720(b) of this title](/usc/45/720.md?p=b), to enter into loan agreements, in amounts not to exceed, at any given time, $350,000,000 in the aggregate principal amount, with the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), and any [profitable railroad](/usc/45/702.md?p=13) to which [rail properties](/usc/45/702.md?p=14) are transferred or conveyed pursuant to [section 743(b)(1) of this title](/usc/45/743.md?p=b-1), under which the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), and any [profitable railroad](/usc/45/702.md?p=13) entering into such agreement will agree to meet existing or prospective obligations of the [railroads](/usc/45/702.md?p=15) in reorganization in the [region](/usc/45/702.md?p=17) which the [Association](/usc/45/702.md?p=1), in accordance with procedures established by the [Association](/usc/45/702.md?p=1), determines should be paid by the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13), on behalf of such [railroads](/usc/45/702.md?p=15) in reorganization, in order to avoid disruptions in ordinary business relationships. Such obligations shall be limited to—
      - (i) amounts claimed by suppliers (including private car lines) of materials or services utilized or purchased in current rail operations;
      - (ii) claims by shippers arising from current rail services;
      - (iii) payments to [railroads](/usc/45/702.md?p=15) for settlement of current interline accounts and all other current accounts and obligations;
      - (iv) claims of employees arising under the collective-bargaining agreements of the [railroads](/usc/45/702.md?p=15) in reorganization in the [region](/usc/45/702.md?p=17) and subject to [section 153 of this title](/usc/45/153.md) (including claims for accrued vacation and wages and similar claims arising in connection with labor and services performed);
      - (v) claims of all employees or their personal representatives for personal injuries or death and subject to the provisions of Employers’ Liability Act ([45 U.S.C. 51–60](https://uscode.house.gov/view.xhtml?req=(/us/usc/t45/s51–60)));
      - (vi) amounts required for adequate funding of accrued pension benefits existing at the time of a conveyance or discontinuance of service under employee pension benefit plans described in section 775(a)[^2] of this title;
      - (vii) amounts required to provide adequate funding for payment, when due, of claims deriving from membership in any employee voluntary relief plan which provides benefits to its members and their beneficiaries in the event of sickness, accident, disability, or death, and to which both a [railroad in reorganization](/usc/45/702.md?p=16) and employee members have made contributions;
      - (viii) amounts required to provide adequate funding for continuation, by the [Corporation](/usc/45/702.md?p=5), of medical and life insurance coverage and benefits for retired employees of [railroads](/usc/45/702.md?p=15) in reorganization as required and limited by [section 743(b)(6)(B) of this title](/usc/45/743.md?p=b-6-B).[^3]
      - (ix) amounts required to discharge the obligations of each such [railroad in reorganization](/usc/45/702.md?p=16) to nonemployee claimants for personal injuries suffered during the period such [railroad](/usc/45/702.md?p=15) has been in reorganization; and
      - (x) amounts required to discharge any obligation of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) to the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), arising out of a contract between such [railroad in reorganization](/usc/45/702.md?p=16) and such [Corporation](/usc/45/702.md?p=5) under which such [railroad in reorganization](/usc/45/702.md?p=16) is required to provide a suitable rail passenger station, in any case in which such [railroad in reorganization](/usc/45/702.md?p=16) sold a rail passenger station pursuant to a judicial order of condemnation prior to April 1, 1976.
    - (B) The [Association](/usc/45/702.md?p=1) shall make a loan pursuant to subparagraph (A) of this paragraph if, notwithstanding any other requirement of this subsection, it finds that the Corpration,[^4] the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13) is entitled to a loan pursuant to section [743(b)(6)](/usc/45/743.md?p=b-6), 774(e), or 774(g)[^2] of this title, or if, with respect to an obligation referred to in subparagraph (A) of this paragraph, it finds that—
      - (i) provision for the payment of such obligation was not included in the financial projections of the [final system plan](/usc/45/702.md?p=8);
      - (ii) such obligation arose from rail operations prior to the date of conveyance of [rail properties](/usc/45/702.md?p=14) pursuant to [section 743(b)(1) of this title](/usc/45/743.md?p=b-1) and is, under other applicable law, the responsibility of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17), and a claim is presented to a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17), or the [Corporation](/usc/45/702.md?p=5) within 2 years after October 19, 1976;
      - (iii) the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13) has advised the [Association](/usc/45/702.md?p=1) that the direct payment of such obligation by the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13) is for services or materials, the furnishing of which served to avoid disruptions in ordinary business relationships prior to the date of conveyance of [rail properties](/usc/45/702.md?p=14) pursuant to [section 743(b)(1) of this title](/usc/45/743.md?p=b-1), or is necessary to avoid postconveyance disruptions in ordinary business relationships;
      - (iv) the transferor is unable to pay such obligation within a reasonable period of time; and
      - (v) with respect to loans made to the [Corporation](/usc/45/702.md?p=5), the procedures to be followed by the [Corporation](/usc/45/702.md?p=5), in seeking reimbursement from a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) for an obligation paid on its behalf under this subsection, have been jointly agreed to by the [Finance Committee](/usc/45/702.md?p=9) and the [Corporation](/usc/45/702.md?p=5), and the joint agreement—
        - (I) provides for the [Corporation](/usc/45/702.md?p=5) to receive reimbursement from the [Association](/usc/45/702.md?p=1) for any expenses incurred in seeking reimbursement from any [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) for an obligation paid on its behalf under this subsection; and
        - (II) includes a stipulation of the exact procedures the [Corporation](/usc/45/702.md?p=5) shall undertake to avoid the finding, referred to in paragraph (6)(A)(i) of this subsection, that it has not exercised due diligence.
  - (2) The trustees of each [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) shall attempt to negotiate agency agreements with the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13) for the processing of all accounts receivable and accounts payable attributable to operations prior to the conveyance of property pursuant to [section 743(b)(1) of this title](/usc/45/743.md?p=b-1) and for the payment of only those accounts payable which relate to obligations of the estates identified in paragraph (1) of this subsection. If any [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) fails to conclude such an agreement within a reasonable time prior to such conveyance, the applicable reorganization courts, after giving all parties an opportunity to be heard, shall prescribe the terms of such an agency arrangement by order, giving due consideration to the need, wherever possible, to make such agreements uniform among the various estates. Nothing in this subsection shall be construed as permitting any district court of the United States having jurisdiction over the reorganization of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) to enjoin, restrain, or limit the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13) from applying, to payment of the obligations of the estates identified in paragraph (1) of this subsection, amounts collected as (A) accounts receivable pursuant to this paragraph, (B) cash or other current assets identified pursuant to paragraph (3) of this subsection, or (C) proceeds of loans pursuant to paragraph (1) of this subsection. Any agency agreement executed prior to October 19, 1976, shall be deemed amended to the extent necessary to conform such agreement or order to the provisions of this paragraph. Nothing in this paragraph shall be construed to affect any payment made prior to October 19, 1976, with respect to obligations other than those identified in paragraph (1) of this subsection.
  - (3) The [Association](/usc/45/702.md?p=1) may, not less than 30 days prior to the date of conveyance pursuant to [section 743(b)(1) of this title](/usc/45/743.md?p=b-1), petition each district court of the United States having jurisdiction over the reorganization of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) for an order, which shall be entered prior to such conveyance, and which—
    - (A) identifies that cash and other current assets of the estate of such [railroad](/usc/45/702.md?p=15) which shall be utilized to satisfy obligations of the estates identified in paragraph (1) of this subsection; and
    - (B) provides for the application by the trustees of such [railroads](/usc/45/702.md?p=15) and their agents, consistent with the principles of reorganization under section 77 of the Bankruptcy Act and with the agency agreement specified in paragraph (2) of this subsection, of all such current assets, including cash available as of or subsequent to such date of conveyance, to the payment in the postconveyance period of the obligations of the estates identified in paragraph (1) of this subsection.
  - (4)
    - (A) Each obligation of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) which is paid with financial assistance under paragraph (1) of this subsection shall be processed, on behalf of such [railroad](/usc/45/702.md?p=15), by the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13), whichever is appropriate. An obligation of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) shall be paid, on behalf of such [railroad](/usc/45/702.md?p=15), by the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13), whichever is appropriate, if—
      - (i) such obligation is deemed by the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13), whichever is appropriate, to have been, on the date of conveyance of [rail properties](/usc/45/702.md?p=14) pursuant to [section 743(b)(1) of this title](/usc/45/743.md?p=b-1), the obligation of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17);
      - (ii) such obligation accrues after such date of conveyance but as a result of rail operations conducted prior to such date, and the trustees of such [railroad in reorganization](/usc/45/702.md?p=16) acknowledge that it is an obligation of such [railroad](/usc/45/702.md?p=15); or
      - (iii) the district court of the United States having jurisdiction over such [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) approves such obligation as a valid administrative claim against such [railroad](/usc/45/702.md?p=15);

      to the extent that payment is required under a loan agreement with the [Association](/usc/45/702.md?p=1) under such [paragraph (1)](#h-1).

    - (B) The [Association](/usc/45/702.md?p=1) shall resolve any disputes among the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), and a [profitable railroad](/usc/45/702.md?p=13) concerning which of them shall process and pay any particular obligation on behalf of a particular [railroad in reorganization](/usc/45/702.md?p=16).
    - (C) The [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13) shall have a direct claim, as a current expense of administration, for reimbursement from the estate of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) for all obligations of such estate (plus interest thereon) which are paid by the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13), as the case may be. The right of the [Corporation](/usc/45/702.md?p=5) or the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5) to receive reimbursement under this subparagraph from the estate of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) shall be reduced by the amount, if any, of loans, plus interest forgiven under paragraph (5) of this subsection.
    - (D)
      - (i) Except as provided in clause (ii) of this subparagraph, any funds held in an escrow account by a [railroad in reorganization](/usc/45/702.md?p=16) on October 19, 1976, which are thereafter determined to be cash and other current assets of the estate of such [railroad in reorganization](/usc/45/702.md?p=16), for purposes of paragraph (3) of this subsection, shall be applied as follows—
        - (I) first, to the reduction of any outstanding loans to the [Corporation](/usc/45/702.md?p=5) by the [Association](/usc/45/702.md?p=1), pursuant to paragraph (1) of this subsection, the proceeds of which were used to discharge obligations of such [railroad in reorganization](/usc/45/702.md?p=16);
        - (II) second, to the [Association](/usc/45/702.md?p=1) to the extent of any such loans which have been forgiven pursuant to paragraph (5) of this subsection; and
        - (III) third, to the payment of any remaining obligations of such [railroad in reorganization](/usc/45/702.md?p=16), in accordance with the provision of the agency agreement entered into pursuant to paragraph (2) of this subsection.
      - (ii) The manner of disposition set forth in clause (i) of this subparagraph shall not apply with respect to a [railroad in reorganization](/usc/45/702.md?p=16) if the [Secretary](/usc/45/702.md?p=18) (I) determines that a different disposition of assets is necessary to carry out a reorganization plan of such [railroad in reorganization](/usc/45/702.md?p=16), and that such different disposition adequately protects the interests of the United States, and (II) transmits his determination to the court having jurisdiction over the reorganization of such [railroad](/usc/45/702.md?p=15).
  - (5)
    - (A) If, at any time, the [Finance Committee](/usc/45/702.md?p=9) of the [Association](/usc/45/702.md?p=1) determines that the failure of the [Corporation](/usc/45/702.md?p=5) to receive full reimbursement with interest from the estate of a [railroad in reorganization](/usc/45/702.md?p=16) in the [region](/usc/45/702.md?p=17) for any obligation of such estate paid pursuant to this subsection could adversely affect the fairness and equity of the transfers and conveyances pursuant to [section 743(b)(1) of this title](/usc/45/743.md?p=b-1), or that the failure of the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5) to receive such full reimbursement plus interest for any such obligation would be contrary to the public interest, the [Association](/usc/45/702.md?p=1) shall forgive the indebtedness, plus accrued interest, of the [Corporation](/usc/45/702.md?p=5) or of the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5) incurred pursuant to paragraph (1) of this subsection in the amount recommended by the [Finance Committee](/usc/45/702.md?p=9). The [Association](/usc/45/702.md?p=1) shall have a direct claim, as a current expense of administration of the estate of such [railroad in reorganization](/usc/45/702.md?p=16), equal to the amount by which loans of the [Corporation](/usc/45/702.md?p=5) or of the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), plus interest, have been forgiven. Such direct claim shall not be subject to any reduction by way of setoff, cross-claim, or counter-claim which the estate of such [railroad in reorganization](/usc/45/702.md?p=16) may be entitled to assert against the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), the [Association](/usc/45/702.md?p=1), or the United States.
    - (B) The direct claim of the [Association](/usc/45/702.md?p=1) under this paragraph, and any direct claim authorized under paragraph (4) of this subsection, shall be prior to all other administrative claims of the estate of a [railroad in reorganization](/usc/45/702.md?p=16), except claims arising under trustee’s certificates or from default on the payment of such certificates. The [Corporation](/usc/45/702.md?p=5), the National Rail Passenger [Corporation](/usc/45/702.md?p=5), or a [profitable railroad](/usc/45/702.md?p=13), as the case may be, shall, with respect to each direct claim for reimbursement pursuant to paragraph (4) of this subsection, file a proof of administrative expense claim with the trustees of the [railroad in reorganization](/usc/45/702.md?p=16) from whom reimbursement is sought. Each such proof of administrative expense claim shall set forth, by category and amount, the obligations of such [railroad in reorganization](/usc/45/702.md?p=16) which were paid pursuant to such [paragraph (4)](#h-4).
  - (6)
    - (A) Notwithstanding any other provision of this subsection, the [Association](/usc/45/702.md?p=1) shall forgive any loan made to the [Corporation](/usc/45/702.md?p=5) or the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5) pursuant to this subsection, plus accrued interest thereon, on the 3rd anniversary date of any such loan, except that the [Association](/usc/45/702.md?p=1) shall not forgive any loan or portion thereof, in accordance with this paragraph, if—
      - (i) the [Finance Committee](/usc/45/702.md?p=9) makes an affirmative finding, with respect to such loan or portion thereof, that—
        - (I) the [Corporation](/usc/45/702.md?p=5) has not exercised due diligence in executing the procedures adopted pursuant to paragraph (1)(B)(v) of this subsection, and
        - (II) the failure of the [Association](/usc/45/702.md?p=1) to forgive such loan or portion thereof will not adversely affect the ability of the [Corporation](/usc/45/702.md?p=5) to become financially self-sustaining;
      - (ii) the [Finance Committee](/usc/45/702.md?p=9) so directs the [Association](/usc/45/702.md?p=1); and
      - (iii) neither House of the Congress disapproves such affirmative finding and direction, in accordance with the following provisions of this paragraph.

      A copy of each such finding, the reasons therefor, and such direction made by the [Finance Committee](/usc/45/702.md?p=9), together with the comments and recommendations thereon of the Board of Directors of the [Association](/usc/45/702.md?p=1), shall be transmitted to the Congress by the [Association](/usc/45/702.md?p=1) within 10 days after the date on which the [Finance Committee](/usc/45/702.md?p=9) makes such finding and direction, or if not so transmitted, shall be transmitted by the [Finance Committee](/usc/45/702.md?p=9). Each such finding and direction so transmitted shall become effective immediately, and shall remain in effect, unless, within the first period of 30 calendar days of continuous session of Congress after the date of transmittal of such finding and direction to Congress, either House of Congress disapproves such finding and direction in accordance with the procedures specified in [section 688 of title 2](/usc/2/688.md). For purposes of this paragraph, continuity of session of Congress is broken only in the circumstances described in [section 682(5) of title 2](/usc/2/682.md?p=5).

    - (B) The [Association](/usc/45/702.md?p=1) shall have a direct claim, as a current expense of administration of the estate of the [railroad in reorganization](/usc/45/702.md?p=16) whose obligations were paid with the proceeds of loans forgiven under this paragraph, equal to the amount by which the loans, plus interest, have been forgiven. Such direct claim shall not be subject to any reduction by way of setoff, cross-claim, or counterclaim which the estate of such [railroad in reorganization](/usc/45/702.md?p=16) may be entitled to assert against the [Corporation](/usc/45/702.md?p=5), the National [Railroad](/usc/45/702.md?p=15) Passenger [Corporation](/usc/45/702.md?p=5), the [Association](/usc/45/702.md?p=1), or the United States. The direct claim of the [Association](/usc/45/702.md?p=1) under this paragraph shall be prior to all other administrative claims of the estate of the [railroad in reorganization](/usc/45/702.md?p=16), except claims arising under trustee’s certificates or from default on the payment of such certificates.
  - (7) For purposes of this subsection, the term “[Corporation](/usc/45/702.md?p=5)” includes a [subsidiary](/usc/45/702.md?p=20) of the [Corporation](/usc/45/702.md?p=5).

## Footnotes

[^1]: See References in Text note below.
[^2]: See References in Text note below.
[^3]: So in original. The period probably should be a semicolon.
[^4]: So in original. Should be “Corporation,”.

## Source credit

(Pub. L. 93–236, title II, § 211, Jan. 2, 1974, 87 Stat. 1001; Pub. L. 94–5, § 5, Feb. 28, 1975, 89 Stat. 8; Pub. L. 94–210, title VI, § 606, Feb. 5, 1976, 90 Stat. 92; Pub. L. 94–555, title II, §§ 203(a)–(d), 220(a), Oct. 19, 1976, 90 Stat. 2617, 2619, 2620, 2629; Pub. L. 95–611, § 3(a), Nov. 8, 1978, 92 Stat. 3089; Pub. L. 96–73, title II, § 204(b), Sept. 29, 1979, 93 Stat. 556; Pub. L. 96–101, § 23, Nov. 4, 1979, 93 Stat. 746; Pub. L. 96–448, title IV, §§ 407, 408, Oct. 14, 1980, 94 Stat. 1948; Pub. L. 105–178, title VII, § 7203(b)(3), June 9, 1998, 112 Stat. 477.)

## Notes

### Editorial Notes

### References in Text

Section 77 of the Bankruptcy Act, referred to in subsecs. (a) and (h)(3)(B), was classified to section 205 of former Title 11, Bankruptcy. The Bankruptcy Act (act July 1, 1898, ch. 541, 30 Stat. 544, as amended) was repealed effective Oct. 1, 1979, by Pub. L. 95–598, §§ 401(a), 402(a), Nov. 6, 1978, 92 Stat. 2682, section 101 of which enacted revised Title 11. For current provisions relating to railroad reorganization, see subchapter IV (§ 1161 et seq.) of chapter 11 of Title 11.

Section 763 of this title, referred to in subsec. (a), was repealed by Pub. L. 94–210, title VIII, § 806, Feb. 5, 1976, 90 Stat. 143, eff. Apr. 1, 1978.

The Employers’ Liability Act (45 U.S.C. 51–60), referred to in subsec. (h)(1)(A)(v), is act Apr. 22, 1908, ch. 149, 35 Stat. 65, and is classified generally to chapter 2 (§ 51 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 51 of this title and Tables.

Sections 774 and 775 of this title, referred to in subsec. (h)(1)(A)(vi), (B), were repealed by Pub. L. 97–35, title XI, § 1144(a)(1), Aug. 13, 1981, 95 Stat. 669.

### Codification

In the closing par. of subsec. (h)(6)(A), “section 688 of title 2” and “section 682(5) of title 2” substituted for “section 1017 of the Congressional Budget and Impoundment Control Act of 1974 (31 U.S.C. 1407)” and “section 1011(5) of that Act (31 U.S.C. 1401(5))”, respectively, to reflect the transfer of sections 1407 and 1401 of former Title 31, Money and Finance, to sections 688 and 682 of Title 2, the Congress.

### Amendments

1998—Subsec. (i). Pub. L. 105–178 struck out heading and text of subsec. (i). Text read as follows: “Upon application by the Corporation or any other railroad, the Secretary shall, pursuant to the provisions of and within the obligational limitations contained in sections 831 through 833 of this title, guarantee obligations of the Corporation or such railroad for the purpose of electrifying high-density mainline routes if the Secretary finds that such electrification will return operating and financial benefits to the Corporation or such railroad and will facilitate compatibility with existing or renewed electrification systems. Upon application by the Corporation or by any railroad in reorganization in the region which receives a loan under subsection (a) of this section, the Secretary shall, pursuant to the provisions of and within the obligational limitations contained in sections 831 through 833 of this title, guarantee obligations of the Corporation or such railroad for purposes of making capital improvements to coal export facilities. The aggregate unpaid principal amount of obligations which may be guaranteed by the Secretary under this paragraph shall not exceed $200,000,000 at any one time.”

1980—Subsec. (d). Pub. L. 96–448, § 408, substituted “Association is not required to make the findings with respect to subsections (e)(3) and (f) and may” for “Association may” in provision preceding par. (1), “$7,500,000” for “$4,000,000” in par. (2), and “December 31, 1981” for “December 31, 1980” in provision following par. (2).

Subsec. (i). Pub. L. 96–448, § 407, substituted “Corporation or any other railroad, the Secretary” for “Corporation, the Secretary”, “Corporation or such railroad for the purpose” for “Corporation for the purpose”, and “Corporation or such railroad and will facilitate” for “Corporation and will facilitate” and inserted provision authorizing the Secretary, upon application and with regard to obligational limitations, to guarantee obligations of the Corporation or such railroad for the purposes of making capital improvements to coal export facilities.

1979—Subsec. (d)(2). Pub. L. 96–101 substituted “$4,000,000” for “$2,000,000”, “and determines that such railroad is making a good faith effort to establish an employee stock ownership plan for review and approval by the Association” for “and such railroad has in effect an employee stock ownership plan which has been approved by the Association”, and “December 31, 1980” for “December 31, 1979” and inserted provision requiring that any such approval be conditioned upon a written commitment that by December 31, 1980, the railroad will adopt an employee stock ownership plan which will acquire qualifying employer securities with a fair market value of $250,000.

Subsec. (h)(1)(A)(viii). Pub. L. 96–73, § 204(b)(1), substituted “funding for continuation, by the Corporation, of medical and life insurance coverage and benefits for retired employees of railroads in reorganization as required and limited by section 743(b)(6)(B) of this title” for “funding for payment, when due, of medical and life insurance benefits for employees (whether or not their employment was governed by a collective bargaining agreement) on account of their service with a railroad in reorganization prior to the date of conveyance pursuant to section 743(b)(1) of this title, and for individuals who retired, prior to such date of conveyance, from service with a railroad in reorganization”.

Subsec. (h)(6). Pub. L. 96–73, § 204(b)(2)(A)–(C), redesignated existing provisions as subpar. (A), and in subpar. (A) as so redesignated, redesignated former subpars. (A) to (C) as cls. (i) to (iii), respectively, and former cls. (i) and (ii) of former subpar. (A) as subcls. (I) and (II) of cl. (i), respectively, and added subpar. (B).

1978—Subsec. (d). Pub. L. 95–611 inserted provision authorizing increase of loans to railroads until Dec. 31, 1979.

1976—Subsec. (g). Pub. L. 94–210 added subsec. (g).

Subsec. (h). Pub. L. 94–210 added subsec. (h).

Subsec. (h)(1). Pub. L. 94–555, § 203(a), increased aggregate principal amount of loan agreements, at any given time, to $350,000,000; substituted “such railroads in reorganization” for “the transferors” after “railroad, in behalf of”; struck out “and obligations” after “all other current accounts”; inserted “(including claims for accrued vacation and wages and similar claims arising in connection with labor and services performed)” after “section 153 of this title”; added clauses (vii) to (x) to subpar. (A); authorized Association to make loans pursuant to subpar. (A), as amended, and inserted reference to section 743(b)(6) of this title; inserted provisions that claim arising prior to conveyance of rail properties must be presented to a railroad in reorganization in the region, or the Corporation within 2 years after Oct. 19, 1976, and that loan requested is for direct payment made for services or materials, the furnishing of which avoided disruption of ordinary business relationships prior to date of conveyance or made to avoid postconveyance disruptions; and added subcls. (I) and (II) to cl. (V) relating to provisions to be included in joint agreement between Finance Committee and the Corporation.

Subsec. (h)(2). Pub. L. 94–555, § 203(b), inserted “and for the payment of only those accounts payable which relate to the obligations of the estates identified in paragraph (1) of this subsection” after “section 743(b)(1) of this title”, and inserted provisions relating to the jurisdiction of district courts in railroad reorganization proceedings.

Subsec. (h)(4)(D). Pub. L. 94–555, § 203(c), added subpar. (D).

Subsec. (h)(5)(B). Pub. L. 94–555, § 203(d), inserted provisions relating to filing proof of claim for administrative expense.

Subsec. (h)(6)(A)(i). Pub. L. 94–555, § 220(a), substituted “paragraph (1)(B)(v)” for “paragraph (1)(E)”.

Subsec. (i). Pub. L. 94–210 added subsec. (i).

1975—Subsec. (a). Pub. L. 94–5, § 5(a), substituted “for purposes of achieving the goals of this chapter” for “for purposes of assisting in the implementation of the final system plan”.

Subsec. (e)(1). Pub. L. 94–5, § 5(b), substituted “achieve the goals of this chapter” for “carry out the final system plan”.

Subsec. (f). Pub. L. 94–5, § 5(c), substituted “goals of this chapter” for “goals of the final system plan”.

### Statutory Notes and Related Subsidiaries

### Effective Date of 1980 Amendment

Amendment by Pub. L. 96–448 effective Oct. 1, 1980, see section 710(a) of Pub. L. 96–448, set out as a note under section 1170 of Title 11, Bankruptcy.

### Effective Date of 1979 Amendment

Amendment by Pub. L. 96–73 effective Nov. 4, 1978, see section 501(b) of Pub. L. 96–73, set out as a note under section 743 of this title.

### Effective Date of 1976 Amendment

Amendment by Pub. L. 94–555 effective Oct. 1, 1976, see section 303 of Pub. L. 94–555, set out as a note under section 702 of this title.

### Abolition of United States Railway Association and Transfer of Functions and Securities

See section 1341 of this title.

### Applicability of National Environmental Policy Act

Application of National Environmental Policy Act to actions of Commission not affected by title VI of Pub. L. 94–210, see section 619 of Pub. L. 94–210, set out as a note under section 791 of this title.