Railroad Expansion Tax Credit
The railroad expansion tax credit is a nonrefundable income tax credit that can be applied against income taxes imposed by KRS 141.040 (corporation income tax) and the limited liability entity tax (LLET) imposed by KRS 141.0401 with the ordering of credits as provided in KRS 141.0205. This credit cannot be carried forward.
The credit is equal to 25% of the expenditures paid or incurred by the corporation or railway company to expand or upgrade railroad track, including roadbeds, bridges, and related track structures to accommodate the transport of fossil energy resources or biomass resources. The credit amount approved for a calendar year for all taxpayers under this section is limited to $1,000,000. If the total amount of approved credit exceeds $1,000,000, the Department of Revenue will determine the amount of credit each corporation and railway company may receive during the application process.
Application Process
Each corporation or railway company eligible for the credit shall file a railroad expansion tax credit claim on Schedule RR-E, Application and Credit Certificate of Income Tax/LLET Credit Railroad Expansion. Applications must be filed with the department on January 15 following the close of the preceding calendar year. The department will determine the amount of approved credit and issue a credit certification on said form by March 15 following the close of the preceding calendar year.
Who Can Claim the Credit?
Pass-through Entities
The credit is passed through to the partners, members, or shareholders of a pass-through entity that are the partners, members, or shareholders at the time of the application and subsequent approval of the credit. The income is reported on the Kentucky Schedule K-1 and any credit that is passed through to the partners, members, or shareholders may be used against individual income tax or corporate income tax and LLET.
Corporations
A corporation may apply the tax credit against income tax and LLET on its Kentucky Corporation Income Tax and LLET Return. A corporation may also claim the credit if it is passed through to them from a pass-through entity on a Kentucky Schedule K-1.