A bill to provide for the tax treatment of the transfer of ownership of the Consolidated Rail Corporation (Conrail) to the private sector, to amend the Regional Rail Reorganization Act of 1973 with respect to such transfer, and for other purposes.

Title I: Revenue Provisions - Sale of Conrail Tax Provisions Act of 1985 - Provides that, for purposes of the Internal Revenue Code, no Conrail net operating loss, capital loss, or income tax credit attributable to any period before the closing of the sale of Conrail may be carried forward to any period after the closing.

Excludes from gross income any amounts relating to the cancellation of debt or preferred stock of Conrail in connection with the sale of Conrail.

Provides that the adjusted basis of Conrail assets after the closing of the sale shall be the adjusted basis shown in good faith on Conrail's tax return for the taxable year ending as of the closing.

Allows the waiver of certain employee stock ownership plan requirements for purposes of Conrail's employee stock ownership plans.

Provides that, for purposes of the consolidated return regulations, the following shall not be treated as built-in deductions: any amounts which are ordinary and necessary business expenses and which are paid to Conrail employees for services rendered after the closing to increase their post-closing wages to industry standards, or are paid for specified routing concessions.

Title II: Transfer of Ownership Provisions - Sale of Conrail Act of 1985 - Subtitle A: General Provisions - Amends the Regional Rail Reorganization Act of 1973 and the Northeast Rail Service Act of 1981 to define the terms: (1) Definitive Agreements (any and all agreements between the United States and Norfolk Southern Corporation); and (2) Secretary's Plan (Memorandum of Intent between the United States and Norfolk Southern Corporation signed February 8, 1985).

Declares it is the purpose of the Congress to return the Consolidated Rail Corporation (Conrail) to the private sector by implementing the Plan of the Secretary of Transportation (the Secretary) to sell the Federal interest in Conrail common stock.

Subtitle B: Amendments to the Regional Rail Reorganization Act of 1973 and the Northeast Rail Service Act of 1981 - Amends the Regional Rail Reorganization Act of 1973 to terminate the authority of the United States Railway Association (the Association) to purchase Conrail securities when the sale of the Federal interest in Conrail common stock has been consummated. Makes the Regional Rail Reorganization Act of 1973 inapplicable to Conrail after the sale of the Federal interest in Conrail common stock has been consummated. Makes specified provisions of such Act still applicable to Conrail under certain conditions.

Directs the Secretary to implement the plan to sell Conrail common stock to the Norfolk Southern Corporation. States that such implementation, and the coordinated operation of Conrail's properties with those of Norfolk Southern Corporation and its affiliates as a single rail system, is deemed approved by the Interstate Commerce Commission.

Directs the Secretary to implement the Secretary's Plan by performing specified Definitive Agreements which shall conform substantially with the Memorandum of Intent between the United States and Norfolk Southern Corporation signed February 8, 1985.

Repeals provisions which allow the sale of Conrail common stock to the railroads or to certain railroad employees.

Authorizes the Secretary to recapitalize Conrail in such a way that the Federal interest in any debt or preferred stock is cancelled and contributed to the Corporation's capital.

Provides protective labor conditions under specified arbitration provisions to certain personnel whose employment is adversely affected by the sale of the Federal interest in Conrail common stock.

Amends the Northeast Rail Service Act of 1981 to confer jurisdiction upon a special Federal district court (established by the judicial panel on multi-district litigation) to hear civil actions relating to the: (1) Sale of Conrail Act of 1985; (2) enforcement of the Secretary's Plan or the Definitive Agreements (pertaining to the Conrail sale); and (3) the value of the interest in Conrail Equity Corporation preferred stock of the Conrail Employees Stock Ownership Plan (ESOP) and related trusts.

Provides that, with certain exceptions, no persons connected with the Conrail ESOP shall be subject to any fiduciary obligation or fiduciary civil liability for actions pertaining to the Secretary's Plan or disposition of Conrail Equity Corporation assets.

States that the registration and prospectus delivery requirements of the Securities Act of 1933 (including State laws and certain Federal approval requirements) shall not apply to implementation of the Secretary's Plan through: (1) the sale or contribution of securities by Norfolk Southern Corporation to fulfill arrangements with Conrail employees or (2) the distribution of shares from Conrail employee stock ownership plans.

Subtitle C: Technical and Conforming Amendments - Makes technical and conforming amendments to various laws affected by this Act.

Subtitle D: Miscellaneous Provisions - States that Conrail's status as a common carrier is not affected by the sale of the Federal interest in Conrail common stock.