owned by the taxpayer that— (i) were in service within the 48 months preceding the beginning of the taxable year, and (ii) which were both scrapped and permanently removed from the AAR Umler System master file during such taxable year. (4) Qualified freight railcar (A) In general The term qualified freight railcar means a freight railcar that— (i) is either acquired or modernized by the taxpayer after the date of the enactment of this section, (ii) meets the significant improvement requirements for capacity, fuel efficiency, or performance of subparagraph (B), (iii) was built in a qualified facility, and (iv) with respect to which no credit under this section was previously claimed by any taxpayer. (B) Significant improvement For purposes of this paragraph, an improvement in capacity or fuel efficiency and performance with respect to a modernized freight railcar is a significant improvement if— (i) such capacity or fuel efficiency, as the case may be, is increased by at least 8 percent, or (ii) in the case of performance, the qualified freight railcar meets the requirements of the Association of American Railroads Standard S–286 or is modernized to meet the design standards set forth in final rule HM–251 of the Pipeline and Hazardous Materials Safety Administration (as amended by HM–251C). (C) Modernized The term modernized means modified, retrofitted, converted or rebuilt for the purpose of meeting the significant improvement criteria of subparagraph (B). (5) Qualified railcar modernization expenditure The term qualified railcar modernization expenditure means any amount paid or incurred— (A) in connection with the modernization of a freight railcar resulting in such railcar being designated a qualified freight railcar, and (B) which is properly chargeable to a capital account with respect to such freight railcar. (6) Qualified facility The term qualified facility means a facility that is not owned or leased by an entity that would be ineligible for an award of a contract or subcontract under 49 U.S.C. 5323(u)