Introduced Version
HOUSE BILL No. 1373
_____
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3.1-36.5.
Synopsis: Railroad investment tax credit. Provides that a railroad
company that is classified as a Class II or Class III carrier is entitled to
a credit against the railroad company's state income tax liability equal
to 50% of the amount of qualified railroad expenditures or qualified
new rail infrastructure expenditures made by the railroad company
during the taxable year. Provides that: (1) for qualified railroad
expenditures, the credit may not exceed an amount equal to the product
of: (A) $5,000; multiplied by (B) the number of miles of railroad track
owned or leased in Indiana by the taxpayer as of the close of the
taxable year; and (2) the total amount of credits authorized for qualified
railroad expenditures may not exceed $9,500,000 annually. Provides
that: (1) for qualified new rail infrastructure expenditures, the amount
of the credit may not exceed $500,000 for each project; and (2) the
total amount of credits authorized for qualified new rail infrastructure
expenditures may not exceed $10,000,000 annually.
Effective: January 1, 2023 (retroactive).
Heine
January 17, 2023, read first time and referred to Committee on Ways and Means.
2023 IN 1373—LS 7132/DI 129 Introduced
First Regular Session of the 123rd General Assembly (2023)
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HOUSE BILL No. 1373
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Be it enacted by the General Assembly of the State of Indiana:
1 SECTION 1. IC 6-3.1-36.5 IS ADDED TO THE INDIANA CODE
2 AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
3 JANUARY 1, 2023 (RETROACTIVE)]:
4 Chapter 36.5. Railroad Investment Tax Credit
5 Sec. 1. As used in this chapter, "department" refers to the
6 department of state revenue.
7 Sec. 2. (a) As used in this chapter, "eligible customer" means a
8 person that uses any railroad or railroad related property,
9 facilities, or structures located wholly or partly in Indiana to
10 directly or indirectly transport property, commodities, or goods.
11 (b) The term includes a person that:
12 (1) is served by a Class II or Class III railroad; or
13 (2) stores railcars on any railroad in Indiana.
14 Sec. 3. As used in this chapter, "eligible taxpayer" means any:
15 (1) short line railroad company located wholly or partly in
16 Indiana that is classified by the United States Surface
17 Transportation Board as a Class II or Class III railroad; or
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1 (2) owner or lessee of a rail siding, industrial spur, or industry
2 track located on or adjacent to:
3 (A) a Class II or Class III railroad in Indiana; or
4 (B) a qualified rural county.
5 Sec. 4. As used in this chapter, "eligible vendor" means a person
6 that provides railroad related services directly to an eligible
7 taxpayer.
8 Sec. 5. As used in this chapter, "person" means an individual,
9 corporation, partnership, limited liability company, limited
10 liability partnership, business trust, estate, trust, association,
11 cooperative, or any other legal entity.
12 Sec. 6. As used in this chapter, "qualified new rail infrastructure
13 expenditures" means gross expenditures that an eligible taxpayer
14 makes for the construction of new track infrastructure such as:
15 (1) industrial leads;
16 (2) switches;
17 (3) spurs;
18 (4) sidings;
19 (5) rail loading docks; and
20 (6) transloading structures;
21 that are involved with servicing new customer locations or
22 expansions by a Class II or Class III railroad in Indiana or a
23 qualified rural county.
24 Sec. 7. (a) As used in this chapter, "qualified railroad
25 expenditures" means gross expenditures for maintenance,
26 reconstruction, or replacement of railroad infrastructure, such as:
27 (1) track;
28 (2) roadbed;
29 (3) bridges;
30 (4) grade crossings;
31 (5) signals; and
32 (6) industrial leads, including sidings and track related
33 structures;
34 that are owned or leased by a Class II or Class III railroad located
35 in Indiana.
36 (b) The term does not include expenditures used to generate a
37 federal tax credit or expenditures funded by a state or federal
38 grant.
39 Sec. 7.5. As used in this chapter, "qualified rural county" means
40 a county in Indiana with a population of not more than three
41 hundred thousand (300,000).
42 Sec. 8. (a) As used in this chapter, "railroad related services"
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1 includes the following:
2 (1) Transport of freight by rail.
3 (2) Loading and unloading of freight transported by rail.
4 (3) Railroad bridge services.
5 (4) Railroad track construction.
6 (5) The provision of railroad track material or equipment.
7 (6) Locomotive or freight train car leasing or rental.
8 (7) The provision of railroad financial services, including
9 banking or insurance.
10 (8) Maintenance of a railroad's right-of-way, including
11 vegetation control.
12 (9) Freight train car repair, rehabilitation, or
13 remanufacturing repair services.
14 (b) The list set forth in subsection (a) is not an exhaustive list of
15 the activities that constitute railroad related services.
16 Sec. 9. As used in this chapter, "state tax liability" means an
17 eligible taxpayer's total tax liability that is incurred under:
18 (1) IC 6-3-1 through IC 6-3-7 (the adjusted gross income tax);
19 and
20 (2) IC 6-5.5 (the financial institutions tax);
21 as computed after the application of the credits that under
22 IC 6-3.1-1-2 are to be applied before the credit provided by this
23 chapter.
24 Sec. 9.5. As used in this chapter, "tax exempt entity" means a
25 government agency or an organization that is recognized as exempt
26 under Section 501(c)(3) of the Internal Revenue Code.
27 Sec. 10. (a) Subject to subsections (b) and (c) and section 11 of
28 this chapter, an eligible taxpayer is entitled to a credit against the
29 eligible taxpayer's state tax liability for a taxable year equal to fifty
30 percent (50%) of an eligible taxpayer's qualified railroad
31 expenditures and qualified new rail infrastructure expenditures.
32 (b) For qualified railroad expenditures, the credit may not
33 exceed an amount equal to the product of:
34 (1) five thousand dollars ($5,000); multiplied by
35 (2) the number of miles of railroad track owned or leased in
36 Indiana by the eligible taxpayer as of the close of the taxable
37 year.
38 The total amount of credits authorized for qualified railroad
39 expenditures may not exceed nine million five hundred thousand
40 dollars ($9,500,000) annually.
41 (c) For qualified new rail infrastructure expenditures, the
42 amount of the credit may not exceed five hundred thousand dollars
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1 ($500,000) for each new rail served customer project of an eligible
2 taxpayer. The total amount of credits authorized for qualified new
3 rail infrastructure expenditures may not exceed ten million dollars
4 ($10,000,000) annually.
5 Sec. 11. (a) A taxpayer wishing to obtain a credit under this
6 chapter must first apply to the department for certification
7 following the completion of the project for which qualified railroad
8 expenditures or qualified new rail infrastructure expenditures
9 were incurred. The department shall prescribe the form and
10 manner of the application for certification.
11 (b) The application must contain each of the following
12 components:
13 (1) The number of miles of railroad track owned or leased in
14 Indiana by the taxpayer.
15 (2) The amount of:
16 (A) the qualified railroad expenditures;
17 (B) the qualified new rail infrastructure expenditures; or
18 (C) any combination of expenditures described clauses (A)
19 and (B);
20 incurred by the taxpayer for a particular project.
21 (c) The department shall evaluate a taxpayer's eligibility for a
22 tax credit under this chapter, and, if the taxpayer meets the
23 requirements for the credit, certify that the:
24 (1) taxpayer is an eligible taxpayer; and
25 (2) taxpayer's expenditures are qualified railroad
26 expenditures or qualified new rail infrastructure
27 expenditures.
28 Sec. 12. (a) To receive the credit allowed under this chapter, an
29 eligible taxpayer must claim the credit on the eligible taxpayer's
30 state tax return or returns in the manner prescribed by the
31 department. The eligible taxpayer shall submit to the department
32 the certification of credit, proof of payment of the certified
33 qualified railroad expenditures or qualified new rail infrastructure
34 expenditures, and all information that the department determines
35 is necessary for the calculation of the credit.
36 (b) The department shall record the time of filing of each
37 application for allowance of a tax credit and shall approve the
38 applications, if they otherwise qualify for a tax credit under this
39 chapter, in the chronological order in which the applications are
40 filed.
41 Sec. 13. If a pass through entity is entitled to a credit under
42 section 10 of this chapter but does not have state tax liability
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1 against which the credit may be applied, a shareholder, partner, or
2 member of the pass through entity is entitled to a credit equal to:
3 (1) the credit determined for the pass through entity for the
4 taxable year; multiplied by
5 (2) the percentage of the pass through entity's distributive
6 income to which the shareholder, partner, or member is
7 entitled.
8 Sec. 14. (a) If the credit provided by this chapter exceeds the
9 eligible taxpayer's state tax liability for the taxable year for which
10 the credit is first claimed, the excess may be carried forward to
11 succeeding taxable years and used as a credit against the eligible
12 taxpayer's state tax liability during those taxable years. Each time
13 that the credit is carried forward to a succeeding taxable year, the
14 credit is to be reduced by the amount that was used as a credit
15 during the immediately preceding taxable year. The credit
16 provided by this chapter may be carried forward and applied to
17 succeeding taxable years for five (5) taxable years following the
18 unused credit year.
19 (b) A credit earned by an eligible taxpayer in a particular
20 taxable year shall be applied against the eligible taxpayer's tax
21 liability for that taxable year before any credit carryover is applied
22 against that liability under subsection (a).
23 (c) An eligible taxpayer is not entitled to any carryback or
24 refund of any unused credit.
25 Sec. 15. (a) An eligible taxpayer may assign any part of the
26 credit that the eligible taxpayer may claim under this chapter to an
27 eligible customer, eligible vendor, or any taxpayer subject to tax
28 under IC 6-3-1 through IC 6-3-7 and IC 6-5.5. An eligible taxpayer
29 may assign a credit for up to five (5) taxable years following the
30 first year for which the credit may be claimed. If the assignor of
31 the credit is a tax exempt entity, the assignment must be completed
32 on or before a date that is not more than one (1) year after the
33 close of the taxable year for which the credit was certified under
34 section 11 of this chapter. A credit that is assigned under this
35 section remains subject to this chapter.
36 (b) An assignment of a credit under this section must be in
37 writing. If the right to claim a credit is assigned under this section,
38 the eligible taxpayer and the assignee shall provide the department
39 with a copy of the written assignment not later than thirty (30)
40 days after the assignment is made. The written assignment must
41 include at least the following information:
42 (1) The name, address, and taxpayer identification number of
2023 IN 1373—LS 7132/DI 129 6
1 the eligible taxpayer and the assignee.
2 (2) The taxable year for which the department originally
3 certified the eligible taxpayer's expenditures as qualified
4 railroad expenditures or qualified new rail infrastructure
5 expenditures under section 11 of this chapter.
6 (3) The amount of the credit being assigned and the taxable
7 year or years in which the credit will be claimed by the
8 assignee.
9 (c) Both the eligible taxpayer and assignee shall report the
10 assignment on the eligible taxpayer's and assignee's state tax
11 returns for the year in which the assignment is made, in the
12 manner prescribed by the department.
13 (d) If the amount of credit properly available under this section
14 is less than the amount claimed by the eligible taxpayer that assigns
15 the credit or the credit is subject to recapture, the department shall
16 assess the amount of overstated or recaptured credit as taxes due
17 from the eligible taxpayer and not the assignee. The assessment
18 shall be made in the manner provided for a deficiency in taxes
19 under IC 6-8.1.
20 Sec. 16. Before January 1, 2024, and before January 1 of each
21 year thereafter, the department shall prepare and submit a report
22 to the legislative council in an electronic format under IC 5-14-6
23 that:
24 (1) outlines the credit assignments that take place during each
25 preceding calendar year; and
26 (2) lists and summarizes, for each eligible taxpayer that claims
27 the credit provided by this chapter, the eligible taxpayer's
28 investments in:
29 (A) qualified rail expenditures; or
30 (B) qualified new rail infrastructure expenditures.
31 Sec. 17. The department may adopt rules under IC 4-22-2 for
32 the verification and certification process under sections 10 and 11
33 of this chapter and to otherwise carry out this chapter.
34 SECTION 2. [EFFECTIVE JANUARY 1, 2023 (RETROACTIVE)]
35 (a) IC 6-3.1-36.5, as added by this act, applies only to taxable years
36 beginning after December 31, 2022.
37 (b) This SECTION expires January 1, 2027.
38 SECTION 3. An emergency is declared for this act.
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