RAILROAD MOD CREDIT

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB4703

Introduced , by Rep. Dave Vella

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 5/246 new

Creates the Short Line Railroad Modernization Act. Creates an income
tax credit for taxpayers that incur qualified railroad expenditures or
qualified new rail infrastructure expenditures. Sets forth the amount of
the credit and limitations on the amount of the credit that may be awarded.
Amends the Illinois Income Tax Act to make conforming changes. Effective
immediately.
LRB104 18237 HLH 31676 b

A BILL FOR

HB4703
LRB104 18237 HLH 31676 b
1

AN ACT concerning revenue.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 1.
Short title.
This Act may be cited as the
Short
5
Line Railroad Modernization Act.

6

Section 5.
Definitions.
As used in this Act:
7

"Credit" means the Short Line Railroad Infrastructure
8
Modernization Credit awarded under this Act.
9

"Department" means the Department of Commerce and Economic
10
Opportunity.
11

"Qualified applicant" means:
12

(1) a railroad company located in whole or in part in
13

Illinois that is classified by the United States Surface
14

Transportation Board as a Class II or Class III railroad
15

and that makes qualified railroad expenditures; or
16

(2) an owner or lessee of a rail siding, industrial
17

spur, or industry track that is located on or adjacent to
18

any railroad in Illinois if the applicant makes qualified
19

new rail infrastructure expenditures.
20

"Qualified new rail infrastructure" means:
21

(1) new track infrastructure such as industrial leads,
22

switches, spurs, sidings, rail loading docks, and
23

transloading structures;

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LRB104 18237 HLH 31676 b
1

(2) infrastructure necessary for engineering and site
2

preparation involved with servicing rail-served customer
3

locations;
4

(3) infrastructure associated with the expansion of a
5

Class II or Class III railroad; and
6

(4) new track infrastructure constructed to serve
7

rail-served customer locations in Illinois.
8

"Qualified railroad expenditures" means gross expenditures
9
for maintenance, reconstruction, or replacement of existing
10
railroad infrastructure that is owned or leased by a Class II
11
or Class III railroad and is located partly or wholly in
12
Illinois, including track, roadbed, bridges, crossings,
13
signals, industrial leads and sidings, and track related
14
structures. "Qualified railroad expenditures" does not include
15
expenditures that are used to generate a federal tax credit or
16
that are funded by a State or federal grant.
17

"Rail-served customer location" means a location in the
18
State at which qualified new rail infrastructure will be
19
constructed to connect a customer's facility to a rail line
20
either by building a new facility with rail access or by
21
connecting an existing facility to the rail network.
22

"Taxpayer" means a qualified applicant that is (i) subject
23
to subsections (a) and (b) of Section 201 of the Illinois
24
Income Tax Act or (ii) a tax-exempt entity that is owned by a
25
port or a governmental entity.

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LRB104 18237 HLH 31676 b
1

Section 10.
Purpose.
The Illinois General Assembly finds
2
that a modern, efficient, and safe rail system is vital to
3
Illinois' economic competitiveness, supply chain resilience,
4
and environmental goals. Through targeted investment in short
5
line railroads, industrial sidings, and new freight rail
6
infrastructure, this Act is intended to spur private sector
7
development, strengthen rural and urban connectivity, and
8
ensure that Illinois remains a national leader in
9
transportation and logistics. This Act will support
10
manufacturing, agriculture, renewable energy, and emerging
11
industries by lowering shipping costs, improving access to
12
global markets, and expanding multimodal opportunities. By
13
adopting forward-looking infrastructure tools, Illinois will
14
create good-paying jobs, attract long-term investment, reduce
15
highway congestion, and decrease greenhouse gas emissions.
16
Illinois must aggressively modernize its rail system so that
17
businesses and communities can compete and thrive against
18
domestic and foreign competitors.

19

Section 15.
Allowable credits; limitations.
20

(a) For taxable years that begin after January 1, 2027 and
21
begin before January 1, 2037, a taxpayer is entitled to a
22
credit against the taxes imposed under subsections (a) and (b)
23
of Section 201 of the Illinois Income Tax Act equal to:
24

(1) the taxpayer's:
25

(A) qualified railroad expenditures; and

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(B) qualified new rail infrastructure
2

expenditures; multiplied by
3

(2) 50%.
4

(b) The amount of a tax credit allowed under subsection
5
(a) shall not exceed the following:
6

(1) For qualified railroad expenditures, the product
7

of:
8

(A) the number of miles of Class II or Class III
9

railroad track owned or leased by the taxpayer in
10

Illinois at the close of the taxable year; multiplied
11

by
12

(B) $5,000.
13

(2) For qualified new rail infrastructure
14

expenditures, the lesser of:
15

(A) 50% of the qualified new rail infrastructure
16

expenditures for each rail-served customer location
17

completed by the taxpayer in the taxable year; or
18

(B) $2,000,000 per rail-served customer location.
19

Notwithstanding any other provision of law, an expenditure
20
shall be classified as either a qualified railroad expenditure
21
or a qualified new rail infrastructure expenditure, but not
22
both.
23

(c) The aggregate amount of tax credits permitted in a
24
taxable year under this Section for all taxpayers shall not
25
exceed:
26

(1) for qualified railroad expenditures allowed under

HB4703
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LRB104 18237 HLH 31676 b
1

this Act, $9,000,000; and
2

(2) for qualified new rail infrastructure expenditures
3

allowed under this Act, $10,000,000.
4

(d) In no event shall a credit under this Section reduce
5
the taxpayer's liability to less than zero. If the amount of
6
the credit exceeds the tax liability for the year, the excess
7
may be carried forward and applied to the tax liability of the
8
5 taxable years following the excess credit year. The credit
9
shall be applied to the earliest year for which there is tax
10
liability. If there are credits from more than one tax year
11
that are available to offset tax liability, the earlier credit
12
shall be applied first.

13

Section 20.
Application; qualified railroad expenditures.
14

(a) A taxpayer wishing to claim a tax credit under this
15
Section must apply to the Department after completion of the
16
project for which qualified railroad expenditures were
17
incurred. The Department shall prescribe the form and manner
18
of the application, which must include:
19

(1) the number of miles of railroad track owned or
20

leased by the taxpayer in Illinois; and
21

(2) a description and certification of the amount of
22

the taxpayer's qualified railroad expenditures.
23

(b) The Department shall evaluate a taxpayer's eligibility
24
for a tax credit under this Act.
25

(c) The Department shall certify the eligibility of a

HB4703
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LRB104 18237 HLH 31676 b
1
taxpayer that meets the requirements for a tax credit under
2
this Act.
3

(d) Upon satisfactory review of the application, the
4
Department shall issue a tax credit certificate to the
5
taxpayer stating the amount of the tax credit earned in the
6
taxable year to which the taxpayer is entitled.

7

Section 25.
Application; qualified new rail infrastructure
8
expenditures.
9

(a) A taxpayer wishing to claim a tax credit under this
10
Section must apply to the Department for precertification
11
prior to commencing construction, in the form and manner
12
prescribed by the Department. Upon review, and if the
13
Department determines that the application conforms to the
14
requirements of this Act and the rules adopted under this Act,
15
the Department shall issue a precertification letter
16
authorizing the taxpayer to proceed with the project.
17

(b) The Department shall establish quarterly application
18
windows for precertification requests. Applications received
19
during a quarterly application window shall be reviewed
20
together, and credits shall be awarded to taxpayers meeting
21
statutory qualifications, subject to the caps specified in
22
Section 15.
23

(c) If eligible applications in a quarterly period would
24
cause total awards for the fiscal year to exceed the cap in
25
subsection (c) of Section 15, the Department shall apply the

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LRB104 18237 HLH 31676 b
1
prioritization criteria in subsection (d) of this Section.
2
Credits shall be awarded until the annual cap is fully used.
3

(d) The Department shall give priority to projects that:
4

(1) provide critical rail access to industrial parks,
5

ports, or economic development projects locating adjacent
6

to rail;
7

(2) serve businesses in value-added agriculture,
8

advanced manufacturing, supply chain/distribution
9

solutions, or environmentally friendly or sustainable
10

manufacturers, including those reducing carbon emissions
11

or utilizing renewable energy; and
12

(3) demonstrate the facilitation of significant
13

private capital investment, job creation, or strategic
14

economic benefits to the State.
15

(e) If aggregate funding authority under subsection (c) of
16
Section 15 is not fully used in any quarterly period, the
17
unused authority shall automatically carry forward to the next
18
application period within the same fiscal year. Any funding
19
authority not awarded by the close of the fiscal year shall
20
expire.
21

(f) A precertification is valid for 12 months after
22
project award. A project that has been pre-certified must
23
commence construction within 12 months of the date of the
24
precertification award.
25

(g) Upon project completion, the taxpayer must notify the
26
Department and provide necessary documentation as required by

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LRB104 18237 HLH 31676 b
1
the Department to calculate the tax credit and certify project
2
completion. The Department shall certify the eligibility of a
3
taxpayer that meets the requirements for a tax credit under
4
this Act.
5

(h) Upon satisfactory review of the final application and
6
supporting documentation, the Department shall issue a tax
7
credit certificate to the taxpayer stating the amount of tax
8
credit earned in the taxable year in which the taxpayer is
9
entitled.

10

Section 30.
Transferability.
A taxpayer may transfer the
11
tax credit awarded under this Act by written agreement. A
12
transfer of credits earned under this Act shall be made, in
13
accordance with rules adopted by the Department, by the
14
taxpayer earning the credits at any time after certification
15
and before expiration of the credit. The Department shall
16
issue a certificate of transfer to each transferor and
17
transferee, identifying the amount of the credit transferred.
18
The transfer certificate shall be attached to the transferor's
19
and transferee's income tax return under the Illinois Income
20
Tax Act.

21

Section 35.
Pass-through entities.
For partners and
22
shareholders of Subchapter S corporations, the provisions of
23
Section 251 of the Illinois Income Tax Act shall apply with
24
respect to the credit under this Act.

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LRB104 18237 HLH 31676 b
1

Section 40.
Rulemaking.
The Department shall adopt rules
2
for the implementation of this Act.

3

Section 45.
Sunset.
The Department shall not enter into
4
any new agreements under the provisions of this Act after
5
December 31, 2036.

6

Section 900.
The Illinois Income Tax Act is amended by
7
adding Section 246 as follows:

8

(35 ILCS 5/246 new)
9

Sec. 246.
Short Line Railroad Modernization Act.
For
10
taxable years that begin after January 1, 2027 and begin
11
before January 1, 2037, a taxpayer that qualifies for a credit
12
against the taxes imposed by subsections (a) and (b) of
13
Section 201 under the Short Line Railroad Modernization Act is
14
entitled to a credit as provided in that Act.

15

Section 999.
Effective date.
This Act takes effect upon
16
becoming law.

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