S.F. 314 Section 1. NEW SECTION . 15K.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Department” means the department of revenue. 4 2. “Qualifying shortline railroad restoration project” 5 means an expenditure for maintenance, reconstruction, or 6 replacement of railroad infrastructure. A “qualifying shortline 7 railroad restoration project” also includes an expenditure for 8 maintenance, reconstruction, or replacement expenses that may 9 include new construction of industrial leads, switches, spurs, 10 sidings, and extensions of existing sidings. 11 3. “Railroad infrastructure” includes track, roadbed, 12 bridges, industrial leads, and track-related structures owned 13 or leased as of January 1, 2019. 14 4. “Tax credit” means the shortline railroad restoration tax 15 credit. 16 Sec. 2. NEW SECTION . 15K.2 Shortline railroad restoration 17 tax credit —— limitations. 18 To qualify for the tax credit, all of the following must 19 apply: 20 1. The taxpayer must be classified as a class II or class 21 III railroad by the federal surface transportation board 22 pursuant to 49 C.F.R. §1106.2. 23 2. The taxpayer must have a qualifying shortline railroad 24 restoration project expenditure during the tax year. 25 3. A qualifying shortline railroad restoration project 26 expenditure is deemed to have occurred on the date the 27 expenditure is incurred. 28 4. a. For a class III railroad, the amount of the tax 29 credit shall not exceed the product of seven thousand dollars 30 multiplied by the number of miles of railroad track owned or 31 leased within the state by the taxpayer at the close of the tax 32 year when the qualifying shortline railroad project expenditure 33 occurred. 34 b. For a class II railroad, the amount of the tax credit 35 -1- LSB 1937XS (6) 88 jm/jh 1/ 7

S.F. 314 shall not exceed the product of two thousand dollars multiplied 1 by the number of miles of railroad track owned or leased within 2 the state by the taxpayer at the close of the tax year when the 3 qualifying shortline railroad project expenditure occurred. 4 5. The amount of the tax credit shall equal fifty percent 5 of the total expense of the qualifying shortline railroad 6 restoration project expenditure paid for by the taxpayer, 7 subject to the limitation in subsection 4. 8 Sec. 3. NEW SECTION . 15K.3 Shortline railroad restoration 9 tax credit —— certificate —— transferability. 10 1. a. A tax credit is allowed against the taxes imposed in 11 chapter 422, divisions II, III, and V, and in chapter 432, and 12 against the moneys and credits tax imposed in section 533.329. 13 b. An individual may claim a tax credit under this 14 subsection of a partnership, limited liability company, 15 S corporation, estate, or trust electing to have income 16 taxed directly to the individual. The amount claimed by the 17 individual shall be based upon the pro rata share of the 18 individual’s earnings from the partnership, limited liability 19 company, S corporation, estate, or trust. 20 c. Any tax credit in excess of the taxpayer’s liability 21 for the tax year is not refundable but may be credited to the 22 tax liability for the following five years or until depleted, 23 whichever is earlier. 24 d. A tax credit shall not be carried back to a tax year 25 prior to the tax year in which the taxpayer first receives the 26 tax credit. 27 2. a. To claim a tax credit under subsection 1, a taxpayer 28 must include one or more tax credit certificates with the 29 taxpayer’s tax return. A tax credit certificate shall not be 30 included with a return filed for a taxable year beginning prior 31 to the tax year listed on the certificate. 32 b. The tax credit certificate shall contain the taxpayer’s 33 name, address, tax identification number, the amount of the 34 credit, any other information required by the department, 35 -2- LSB 1937XS (6) 88 jm/jh 2/ 7

S.F. 314 and a place for the name and tax identification number of a 1 transferee and the amount of the tax credit being transferred. 2 c. The tax credit certificate, unless rescinded by the 3 department, shall be accepted by the department as payment for 4 taxes imposed pursuant to chapter 422, divisions II, III, and 5 V, and in chapter 432, and against the moneys and credits tax 6 imposed in section 533.329. 7 d. Tax credit certificates issued under this section may be 8 transferred to any individual or entity. Within ninety days 9 of transfer, the transferee shall submit the transferred tax 10 credit certificate to the department along with a statement 11 containing the transferee’s name, tax identification number, 12 and address, the denomination that each replacement tax credit 13 certificate is to carry, and any other information required by 14 the department. 15 e. Within thirty days of receiving the transferred tax 16 credit certificate and the transferee’s statement, the 17 department shall issue one or more replacement tax credit 18 certificates to the transferee. Each replacement tax credit 19 certificate must contain the information required for the 20 original tax credit certificate and must have the same 21 expiration date that appeared in the transferred tax credit 22 certificate. Tax credit certificate amounts of less than the 23 minimum amount established by rule of the department shall not 24 be transferable. 25 f. A tax credit shall not be claimed by a transferee 26 under this section until a replacement tax credit certificate 27 identifying the transferee as the proper holder has been 28 issued. The transferee may use the amount of the tax credit 29 transferred against the taxes imposed in chapter 422, divisions 30 II, III, and V, and chapter 432, and against the moneys and 31 credits tax imposed in section 533.329, for any tax year the 32 original transferor could have claimed the tax credit. Any 33 consideration received for the transfer of the tax credit shall 34 not be included as income under chapter 422, divisions II, III, 35 -3- LSB 1937XS (6) 88 jm/jh 3/ 7

S.F. 314 and V. Any consideration paid for the transfer of the tax 1 credit shall not be deducted from income under chapter 422, 2 divisions II, III, and V. 3 3. The amount of the tax credit shall be determined by the 4 department as provided in section 15K.4. 5 Sec. 4. NEW SECTION . 15K.4 Tax credit —— application —— 6 award. 7 1. The department shall develop a system for the 8 application, review, and authorization of tax credits awarded 9 pursuant to this chapter and shall control the issuance of all 10 tax credit certificates. 11 2. Upon review of the information required to be submitted 12 by a taxpayer, which shall include documentation of qualifying 13 shortline railroad restoration projects eligible expenditures, 14 the number of track miles in this state, and status as a class 15 II or class III railroad, the department shall issue the tax 16 credit certificate stating the amount of the tax credit that 17 may be claimed. 18 3. Qualifying shortline railroad restoration project 19 expenditures funded by grants from an agency of the federal 20 government, from another state agency, or from a political 21 subdivision of the state shall not be eligible to generate a 22 tax credit award pursuant to this chapter. 23 4. The department shall adopt rules pursuant to chapter 17A 24 to administer this chapter. 25 Sec. 5. NEW SECTION . 422.12N Shortline railroad restoration 26 tax credit. 27 The taxes imposed under this division, less the credits 28 allowed under section 422.12, shall be reduced by a shortline 29 railroad restoration tax credit as allowed under section 15K.3. 30 Sec. 6. Section 422.33, Code 2019, is amended by adding the 31 following new subsection: 32 NEW SUBSECTION . 31. The taxes imposed under this division 33 shall be reduced by a shortline railroad restoration tax credit 34 as allowed under section 15K.3. 35 -4- LSB 1937XS (6) 88 jm/jh 4/ 7

S.F. 314 Sec. 7. Section 422.60, Code 2019, is amended by adding the 1 following new subsection: 2 NEW SUBSECTION . 14. The taxes imposed under this division 3 shall be reduced by a shortline railroad restoration tax credit 4 as allowed under section 15K.3. 5 Sec. 8. NEW SECTION . 432.12N Shortline railroad restoration 6 tax credit. 7 The taxes imposed under this chapter shall be reduced by 8 a shortline railroad restoration tax credit as allowed under 9 section 15K.3. 10 Sec. 9. Section 533.329, subsection 2, Code 2019, is amended 11 by adding the following new paragraph: 12 NEW PARAGRAPH . l. The moneys and credits tax imposed 13 under this section shall be reduced by a shortline railroad 14 restoration tax credit allowed under section 15K.3. 15 Sec. 10. EFFECTIVE DATE. This Act, being deemed of 16 immediate importance, takes effect upon enactment. 17 Sec. 11. RETROACTIVE APPLICABILITY. This Act applies 18 retroactively to January 1, 2019, for tax years beginning on 19 or after that date. 20 EXPLANATION 21 The inclusion of this explanation does not constitute agreement with 22 the explanation’s substance by the members of the general assembly. 23 This bill establishes a shortline railroad restoration tax 24 credit to be administered by the department of revenue for 25 qualifying shortline railroad restoration projects. 26 The bill defines “qualifying shortline railroad restoration 27 project” to mean expenditures for maintenance, reconstruction, 28 or replacement of shortline railroad infrastructure. 29 The bill defines “railroad infrastructure” to include 30 track, roadbed, bridges, industrial leads, and track-related 31 structures owned or leased as of January 1, 2019. 32 The bill allows a tax credit against the taxes imposed 33 in Code chapter 422, divisions II (personal income tax), III 34 (corporations), and V (franchise), and in Code chapter 432 35 -5- LSB 1937XS (6) 88 jm/jh 5/ 7

S.F. 314 (insurance companies tax), and against the moneys and credits 1 tax imposed in Code section 533.329 (credit union taxation). 2 To qualify for the tax credit under the bill, the taxpayer 3 must be classified as a class II or class III railroad by the 4 federal surface transportation board, and have a qualifying 5 shortline railroad restoration project expenditure during the 6 tax year. 7 For a class III railroad, the amount of the tax credit shall 8 not exceed the product of $7,000 multiplied by the number of 9 miles of railroad track owned or leased within this state by 10 the taxpayer at the close of the tax year when the qualifying 11 shortline railroad restoration project expenditure occurred. 12 For a class II railroad, the amount of the tax credit shall 13 not exceed the product of $2,000 multiplied by the number of 14 miles of railroad track owned or leased within the state by 15 the taxpayer at the close of the tax year when the qualifying 16 railroad project expenditure occurred. The amount of the tax 17 credit shall equal 50 percent of the total expense of the 18 qualifying shortline railroad restoration project. The bill 19 specifies that a qualifying shortline railroad restoration 20 project expenditure is deemed to have occurred on the date the 21 expenditure is incurred. 22 The tax credit is not refundable, but any credit not used 23 by the taxpayer may be carried forward for up to five years. 24 However, a tax credit shall not be carried back to a tax year 25 prior to the tax year in which the taxpayer first receives the 26 tax credit. 27 The bill allows the tax credit to be transferred to any 28 individual or entity. 29 The department of revenue is required to develop a system 30 for the application, review, and authorization of tax credits 31 awarded pursuant to this bill and shall control the issuance 32 of all tax credit certificates. 33 The bill takes effect upon enactment and applies 34 retroactively to January 1, 2019, to tax years beginning on or 35 -6- LSB 1937XS (6) 88 jm/jh 6/ 7