S.F. 630 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 5. “Transferee” means any of the following: 17 a. A class II or class III railroad. 18 b. A person or entity who transports property using the rail 19 facilities of a class II or class III railroad in this state. 20 c. A person or entity who furnishes railroad-related 21 property or services to a class II or class III railroad in 22 this state. 23 Sec. 2. NEW SECTION . 15K.2 Shortline railroad restoration 24 tax credit —— limitations. 25 To qualify for the tax credit, all of the following must 26 apply: 27 1. The taxpayer must be classified as a class II or class 28 III railroad by the federal surface transportation board 29 pursuant to 49 C.F.R. §1106.2. 30 2. The taxpayer must have a qualifying shortline railroad 31 restoration project expenditure during the tax year. 32 3. A qualifying shortline railroad restoration project 33 expenditure is deemed to have occurred on the date the 34 expenditure is incurred. 35 -1- LSB 1937SV (3) 88 jm/jh 1/ 7

S.F. 630 4. a. For a class III railroad, the amount of the tax 1 credit shall not exceed the product of seven thousand dollars 2 multiplied by the number of miles of railroad track owned or 3 leased within the state by the taxpayer at the close of the tax 4 year when the qualifying shortline railroad project expenditure 5 occurred. 6 b. For a class II railroad, the amount of the tax credit 7 shall not exceed the product of two thousand dollars multiplied 8 by the number of miles of railroad track owned or leased within 9 the state by the taxpayer at the close of the tax year when the 10 qualifying shortline railroad project expenditure occurred. 11 5. The amount of the tax credit shall equal fifty percent 12 of the total expense of the qualifying shortline railroad 13 restoration project expenditure paid for by the taxpayer, 14 subject to the limitation in subsection 4. 15 Sec. 3. NEW SECTION . 15K.3 Shortline railroad restoration 16 tax credit —— certificate —— transferability. 17 1. a. Except as provided in section 15K.5, a tax credit 18 is allowed against the taxes imposed in chapter 422, divisions 19 II, III, and V, and in chapter 432, and against the moneys and 20 credits tax imposed in section 533.329. 21 b. An individual may claim a tax credit under this 22 subsection of a partnership, limited liability company, 23 S corporation, estate, or trust electing to have income 24 taxed directly to the individual. The amount claimed by the 25 individual shall be based upon the pro rata share of the 26 individual’s earnings from the partnership, limited liability 27 company, S corporation, estate, or trust. 28 c. Any tax credit in excess of the taxpayer’s liability 29 for the tax year is not refundable but may be credited to the 30 tax liability for the following five years or until depleted, 31 whichever is earlier. 32 d. A tax credit shall not be carried back to a tax year 33 prior to the tax year in which the taxpayer first receives the 34 tax credit. 35 -2- LSB 1937SV (3) 88 jm/jh 2/ 7

S.F. 630 2. a. To claim a tax credit under subsection 1, a taxpayer 1 must include one or more tax credit certificates with the 2 taxpayer’s tax return. A tax credit certificate shall not be 3 included with a return filed for a taxable year beginning prior 4 to the tax year listed on the certificate. 5 b. The tax credit certificate shall contain the taxpayer’s 6 name, address, tax identification number, the amount of the 7 credit, any other information required by the department, 8 and a place for the name and tax identification number of a 9 transferee and the amount of the tax credit being transferred. 10 c. The tax credit certificate, unless rescinded by the 11 department, shall be accepted by the department as payment for 12 taxes imposed pursuant to chapter 422, divisions II, III, and 13 V, and in chapter 432, and against the moneys and credits tax 14 imposed in section 533.329. 15 d. Tax credit certificates issued under this section may be 16 transferred to any individual or entity. Within ninety days 17 of transfer, the transferee shall submit the transferred tax 18 credit certificate to the department along with a statement 19 containing the transferee’s name, tax identification number, 20 and address, the denomination that each replacement tax credit 21 certificate is to carry, and any other information required by 22 the department. 23 e. Within thirty days of receiving the transferred tax 24 credit certificate and the transferee’s statement, the 25 department shall issue one or more replacement tax credit 26 certificates to the transferee. Each replacement tax credit 27 certificate must contain the information required for the 28 original tax credit certificate and must have the same 29 expiration date that appeared in the transferred tax credit 30 certificate. Tax credit certificate amounts of less than the 31 minimum amount established by rule of the department shall not 32 be transferable. 33 f. A tax credit shall not be claimed by a transferee 34 under this section until a replacement tax credit certificate 35 -3- LSB 1937SV (3) 88 jm/jh 3/ 7

S.F. 630 identifying the transferee as the proper holder has been 1 issued. The transferee may use the amount of the tax credit 2 transferred against the taxes imposed in chapter 422, divisions 3 II, III, and V, and chapter 432, and against the moneys and 4 credits tax imposed in section 533.329, for any tax year the 5 original transferor could have claimed the tax credit. Any 6 consideration received for the transfer of the tax credit shall 7 not be included as income under chapter 422, divisions II, III, 8 and V. Any consideration paid for the transfer of the tax 9 credit shall not be deducted from income under chapter 422, 10 divisions II, III, and V. 11 3. The amount of the tax credit shall be determined by the 12 department as provided in section 15K.4. 13 Sec. 4. NEW SECTION . 15K.4 Tax credit —— application —— 14 award. 15 1. The department shall develop a system for the 16 application, review, and authorization of tax credits awarded 17 pursuant to this chapter and shall control the issuance of all 18 tax credit certificates. 19 2. Upon review of the information required to be submitted 20 by a taxpayer, which shall include documentation of qualifying 21 shortline railroad restoration projects eligible expenditures, 22 the number of track miles in this state, and status as a class 23 II or class III railroad, the department shall issue the tax 24 credit certificate stating the amount of the tax credit that 25 may be claimed. 26 3. Qualifying shortline railroad restoration project 27 expenditures funded by grants from an agency of the federal 28 government, from another state agency, or from a political 29 subdivision of the state shall not be eligible to generate a 30 tax credit award pursuant to this chapter. 31 4. The department shall adopt rules pursuant to chapter 17A 32 to administer this chapter. 33 Sec. 5. NEW SECTION . 15K.5 Contingent applicability. 34 A tax credit shall not be claimed pursuant to this chapter 35 -4- LSB 1937SV (3) 88 jm/jh 4/ 7

S.F. 630 until such time as the general assembly specifies the 1 cumulative value of tax credits that may be claimed annually 2 by taxpayers. 3 Sec. 6. NEW SECTION . 422.12N Shortline railroad restoration 4 tax credit. 5 The taxes imposed under this division, less the credits 6 allowed under section 422.12, shall be reduced by a shortline 7 railroad restoration tax credit as allowed under section 15K.3. 8 Sec. 7. Section 422.33, Code 2019, is amended by adding the 9 following new subsection: 10 NEW SUBSECTION . 31. The taxes imposed under this division 11 shall be reduced by a shortline railroad restoration tax credit 12 as allowed under section 15K.3. 13 Sec. 8. Section 422.60, Code 2019, is amended by adding the 14 following new subsection: 15 NEW SUBSECTION . 14. The taxes imposed under this division 16 shall be reduced by a shortline railroad restoration tax credit 17 as allowed under section 15K.3. 18 Sec. 9. NEW SECTION . 432.12N Shortline railroad restoration 19 tax credit. 20 The taxes imposed under this chapter shall be reduced by 21 a shortline railroad restoration tax credit as allowed under 22 section 15K.3. 23 Sec. 10. Section 533.329, subsection 2, Code 2019, is 24 amended by adding the following new paragraph: 25 NEW PARAGRAPH . l. The moneys and credits tax imposed 26 under this section shall be reduced by a shortline railroad 27 restoration tax credit allowed under section 15K.3. 28 EXPLANATION 29 The inclusion of this explanation does not constitute agreement with 30 the explanation’s substance by the members of the general assembly. 31 This bill establishes a shortline railroad restoration tax 32 credit to be administered by the department of revenue for 33 qualifying shortline railroad restoration projects. 34 The bill defines “qualifying shortline railroad restoration 35 -5- LSB 1937SV (3) 88 jm/jh 5/ 7

S.F. 630 project” to mean expenditures for maintenance, reconstruction, 1 or replacement of shortline railroad infrastructure. 2 The bill defines “railroad infrastructure” to include 3 track, roadbed, bridges, industrial leads, and track-related 4 structures owned or leased as of January 1, 2019. 5 The bill allows a tax credit against the taxes imposed 6 in Code chapter 422, divisions II (personal income tax), III 7 (corporations), and V (franchise), and in Code chapter 432 8 (insurance companies tax), and against the moneys and credits 9 tax imposed in Code section 533.329 (credit union taxation). 10 To qualify for the tax credit under the bill, the taxpayer 11 must be classified as a class II or class III railroad by the 12 federal surface transportation board, and have a qualifying 13 shortline railroad restoration project expenditure during the 14 tax year. 15 For a class III railroad, the amount of the tax credit shall 16 not exceed the product of $7,000 multiplied by the number of 17 miles of railroad track owned or leased within this state by 18 the taxpayer at the close of the tax year when the qualifying 19 shortline railroad restoration project expenditure occurred. 20 For a class II railroad, the amount of the tax credit shall 21 not exceed the product of $2,000 multiplied by the number of 22 miles of railroad track owned or leased within the state by 23 the taxpayer at the close of the tax year when the qualifying 24 railroad project expenditure occurred. The amount of the tax 25 credit shall equal 50 percent of the total expense of the 26 qualifying shortline railroad restoration project. The bill 27 specifies that a qualifying shortline railroad restoration 28 project expenditure is deemed to have occurred on the date the 29 expenditure is incurred. 30 The tax credit is not refundable, but any credit not used 31 by the taxpayer may be carried forward for up to five years. 32 However, a tax credit shall not be carried back to a tax year 33 prior to the tax year in which the taxpayer first receives the 34 tax credit. 35 -6- LSB 1937SV (3) 88 jm/jh 6/ 7

S.F. 630 The bill allows the tax credit to be transferred to any of 1 the following: a class II and class III railroad; a person or 2 entity who transports property using the rail facilities of a 3 class II or class III railroad in this state; or a person or 4 entity who furnishes railroad-related property or services to a 5 class II or class III railroad in this state. 6 The department of revenue is required to develop a system 7 for the application, review, and authorization of tax credits 8 awarded pursuant to this bill and shall control the issuance 9 of all tax credit certificates. 10 A tax credit shall not be claimed pursuant to the bill until 11 such time as the general assembly specifies the cumulative 12 value of tax credits that may be claimed annually by taxpayers. 13 -7- LSB 1937SV (3) 88 jm/jh 7/ 7