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Railroad Modernization Act

  • Railroad Modernization Act

Section 37-11C-1 through Section 37-11C-6, Code of Alabama 1975

Section 37-11C-4 of the Code of Alabama provides for a refundable tax credit equal to 50 percent of an eligible taxpayer’s qualified railroad rehabilitation expenditures.

A rail carrier that owns or leases railroad infrastructure in Alabama and is classified by the United States Surface Transportation Board as a Class II or Class III railroad is eligible to apply for the Rail Credit. The Rail Credit application must include a rehabilitation plan and estimated qualified railroad rehabilitation expenditures. Direct questions about eligibility and qualifications to incentives@revenue.alabama.gov or 334-242-1175.

Provisions of the Rail Credit include:

  • The credit can be applied against corporate income tax, pass-through entities, and individual income taxpayers.
  • Tax credit equals to the lesser of 50 percent of an eligible rail carrier’s qualified railroad rehabilitation expenditure; or $4,100 multiplied by the number of railroad track miles owned or leased within the state by the eligible rail carrier as of December 31 of the application year (for calendar years 2023 through 2027).
  • The tax credit is applicable to tax years beginning on and after December 31, 2019.
  • The entire tax credit may be claimed by the taxpayer in the taxable year in which the qualified railroad rehabilitation expenditures are completed and placed into service.
  • Tax credits granted to a partnership, a limited liability company, S- Corporations, trusts, or estates, must be claimed at the entity level and will not pass through to the partners, members, or owners.
  • The credit is capped at $3.7 million annually for calendar years 2020 through 2022, with an aggregate credit cap of $11.1 million. For calendar years 2023 through 2027, the annual credit is capped at $4.5 million with an aggregate cap of $22.5 million.  
  • The tax credit is transferable and assignable, in full on in part. The transferred credit is not refundable to the transferee.
  • The credit is refundable to the eligible rail carrier awarded the rail credit and cannot be carried forward to any subsequent year.

To utilize the credit on the income tax return, a credit claim request must be made via My Alabama Taxes.

Additional Resources