HF 655 (LSB 1937HV (1) 88)

HOUSE FILE 655

BY  COMMITTEE ON TRANSPORTATION

(SUCCESSOR TO HSB 196)

A BILL FOR

An Act establishing a shortline railroad restoration tax credit, and including effective date and retroactive applicability provisions. 
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  15K.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Department” means the department of revenue.
   2.  “Qualifying shortline railroad restoration project” means an expenditure for maintenance, reconstruction, or replacement of railroad infrastructure. A “qualifying shortline railroad restoration project” also includes an expenditure for maintenance, reconstruction, or replacement expenses that may include new construction of industrial leads, switches, spurs, sidings, and extensions of existing sidings. 
   3.  “Railroad infrastructure” includes track, roadbed, bridges, industrial leads, and track-related structures owned or leased as of January 1, 2019. 
   4.  “Tax credit” means the shortline railroad restoration tax credit. 
    Sec. 2.  NEW SECTION.  15K.2  Shortline railroad restoration tax credit —— limitations.
   To qualify for the tax credit, all of the following must apply:
   1.  The taxpayer must be classified as a class II or class III railroad by the federal surface transportation board pursuant to 49 C.F.R. §1106.2.
   2.  The taxpayer must have a qualifying shortline railroad restoration project expenditure during the tax year. 
   3.  A qualifying shortline railroad restoration project expenditure is deemed to have occurred on the date the expenditure is incurred.
   4.  a.  For a class III railroad, the amount of the tax credit shall not exceed the product of seven thousand dollars multiplied by the number of miles of railroad track owned or leased within the state by the taxpayer at the close of the tax year when the qualifying shortline railroad project expenditure occurred. 
   b.  For a class II railroad, the amount of the tax credit shall not exceed the product of two thousand dollars multiplied by the number of miles of railroad track owned or leased within the state by the taxpayer at the close of the tax year when the qualifying shortline railroad project expenditure occurred. 
   5.  The amount of the tax credit shall equal fifty percent of the total expense of the qualifying shortline railroad restoration project expenditure paid for by the taxpayer, subject to the limitation in subsection 4.
    Sec. 3.  NEW SECTION.  15K.3  Shortline railroad restoration tax credit —— certificate —— transferability.
   1.  a.  A tax credit is allowed against the taxes imposed in chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329.
   b.  An individual may claim a tax credit under this subsection of a partnership, limited liability company, S corporation, estate, or trust electing to have income taxed directly to the individual. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings from the partnership, limited liability company, S corporation, estate, or trust.
   c.  Any tax credit in excess of the taxpayer’s liability for the tax year is not refundable but may be credited to the tax liability for the following five years or until depleted, whichever is earlier.
   d.  A tax credit shall not be carried back to a tax year prior to the tax year in which the taxpayer first receives the tax credit.
   2.  a.  To claim a tax credit under subsection 1, a taxpayer must include one or more tax credit certificates with the taxpayer’s tax return. A tax credit certificate shall not be included with a return filed for a taxable year beginning prior to the tax year listed on the certificate.
   b.  The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the amount of the credit, any other information required by the department, and a place for the name and tax identification number of a transferee and the amount of the tax credit being transferred.
   c.  The tax credit certificate, unless rescinded by the department, shall be accepted by the department as payment for taxes imposed pursuant to chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329.
   d.  Tax credit certificates issued under this section may be transferred to any individual or entity. Within ninety days of transfer, the transferee shall submit the transferred tax credit certificate to the department along with a statement containing the transferee’s name, tax identification number, and address, the denomination that each replacement tax credit certificate is to carry, and any other information required by the department.
   e.  Within thirty days of receiving the transferred tax credit certificate and the transferee’s statement, the department shall issue one or more replacement tax credit certificates to the transferee. Each replacement tax credit certificate must contain the information required for the original tax credit certificate and must have the same expiration date that appeared in the transferred tax credit certificate. Tax credit certificate amounts of less than the minimum amount established by rule of the department shall not be transferable.
   f.  A tax credit shall not be claimed by a transferee under this section until a replacement tax credit certificate identifying the transferee as the proper holder has been issued. The transferee may use the amount of the tax credit transferred against the taxes imposed in chapter 422, divisions II, III, and V, and chapter 432, and against the moneys and credits tax imposed in section 533.329, for any tax year the original transferor could have claimed the tax credit. Any consideration received for the transfer of the tax credit shall not be included as income under chapter 422, divisions II, III, and V. Any consideration paid for the transfer of the tax credit shall not be deducted from income under chapter 422, divisions II, III, and V.
   3.  The amount of the tax credit shall be determined by the department as provided in section 15K.4.
    Sec. 4.  NEW SECTION.  15K.4  Tax credit —— application —— award.
   1.  The department shall develop a system for the application, review, and authorization of tax credits awarded pursuant to this chapter and shall control the issuance of all tax credit certificates.
   2.  Upon review of the information required to be submitted by a taxpayer, which shall include documentation of qualifying shortline railroad restoration projects eligible expenditures, the number of track miles in this state, and status as a class II or class III railroad, the department shall issue the tax credit certificate stating the amount of the tax credit that may be claimed. 
   3.  Qualifying shortline railroad restoration project expenditures funded by grants from an agency of the federal government, from another state agency, or from a political subdivision of the state shall not be eligible to generate a tax credit award pursuant to this chapter. 
   4.  The department shall adopt rules pursuant to chapter 17A to administer this chapter.
    Sec. 5.  NEW SECTION.  422.12N  Shortline railroad restoration tax credit.
   The taxes imposed under this division, less the credits allowed under section 422.12, shall be reduced by a shortline railroad restoration tax credit as allowed under section 15K.3.
    Sec. 6.  Section 422.33, Code 2019, is amended by adding the following new subsection:
   NEW SUBSECTION.  31.  The taxes imposed under this division shall be reduced by a shortline railroad restoration tax credit as allowed under section 15K.3.
    Sec. 7.  Section 422.60, Code 2019, is amended by adding the following new subsection:
   NEW SUBSECTION.  14.  The taxes imposed under this division shall be reduced by a shortline railroad restoration tax credit as allowed under section 15K.3.
    Sec. 8.  NEW SECTION.  432.12N  Shortline railroad restoration tax credit.
   The taxes imposed under this chapter shall be reduced by a shortline railroad restoration tax credit as allowed under section 15K.3.
    Sec. 9.  Section 533.329, subsection 2, Code 2019, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  l.  The moneys and credits tax imposed under this section shall be reduced by a shortline railroad restoration tax credit allowed under section 15K.3.
    Sec. 10.  EFFECTIVE DATE.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 11.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2019, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill establishes a shortline railroad restoration tax credit to be administered by the department of revenue for qualifying shortline railroad restoration projects.
   The bill defines “qualifying shortline railroad restoration project” to mean expenditures for maintenance, reconstruction, or replacement of shortline railroad infrastructure.
   The bill defines “railroad infrastructure” to include track, roadbed, bridges, industrial leads, and track-related structures owned or leased as of January 1, 2019. 
   The bill allows a tax credit against the taxes imposed in Code chapter 422, divisions II (personal income tax), III (corporations), and V (franchise), and in Code chapter 432 (insurance companies tax), and against the moneys and credits tax imposed in Code section 533.329 (credit union taxation).
   To qualify for the tax credit under the bill, the taxpayer must be classified as a class II or class III railroad by the federal surface transportation board, and have a qualifying shortline railroad restoration project expenditure during the tax year.
   For a class III railroad, the amount of the tax credit shall not exceed the product of $7,000 multiplied by the number of miles of railroad track owned or leased within this state by the taxpayer at the close of the tax year when the qualifying shortline railroad restoration project expenditure occurred. For a class II railroad, the amount of the tax credit shall not exceed the product of $2,000 multiplied by the number of miles of railroad track owned or leased within the state by the taxpayer at the close of the tax year when the qualifying railroad project expenditure occurred. The amount of the tax credit shall equal 50 percent of the total expense of the qualifying shortline railroad restoration project. The bill specifies that a qualifying shortline railroad restoration project expenditure is deemed to have occurred on the date the expenditure is incurred.
   The tax credit is not refundable, but any credit not used by the taxpayer may be carried forward for up to five years. However, a tax credit shall not be carried back to a tax year prior to the tax year in which the taxpayer first receives the tax credit.
   The bill allows the tax credit to be transferred to any individual or entity. 
   The department of revenue is required to develop a system for the application, review, and authorization of tax credits awarded pursuant to the bill and shall control the issuance of all tax credit certificates.
   The bill takes effect upon enactment and applies retroactively to January 1, 2019, to tax years beginning on or after that date.