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<ns0:Description>
<ns0:Id>20250SB__128799INT</ns0:Id>
<ns0:VersionNum>99</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-20</ns0:ActionDate>
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<ns0:LegislativeInfo>
<ns0:SessionYear>2025</ns0:SessionYear>
<ns0:SessionNum>0</ns0:SessionNum>
<ns0:MeasureType>SB</ns0:MeasureType>
<ns0:MeasureNum>1287</ns0:MeasureNum>
<ns0:MeasureState>INT</ns0:MeasureState>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Senator Hurtado</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>SENATE</ns0:House>
<ns0:Name>Hurtado</ns0:Name>
</ns0:Legislator>
</ns0:Authors>
<ns0:Title> An act to add Sections 17053.31, 17053.32, 23631, and 23632 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. </ns0:Title>
<ns0:RelatingClause>taxation, to take effect immediately, tax levy</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Personal Income Tax Law: Corporation Tax Law: credits: shortline railroad expenditures and railroad infrastructure. </ns0:Subject>
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<ns0:DigestText>
<html:p>The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.</html:p>
<html:p>This bill, the Shortline Railroad Modernization Act of 2026, would allow credits against those taxes for each taxable year beginning on or after January 1, 2026, to a qualified taxpayer in an amount equal to 50% of the qualified shortline railroad expenditures and 50% of the qualified new rail infrastructure expenditures, as defined and specified.</html:p>
<html:p>Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.</html:p>
<html:p>This bill would include additional information required for any
bill authorizing a new tax expenditure.</html:p>
<html:p>This bill would take effect immediately as a tax levy.</html:p>
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<ns0:DigestKey>
<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
<ns0:Appropriation>NO</ns0:Appropriation>
<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
<ns0:LocalProgram>NO</ns0:LocalProgram>
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<ns0:ImmediateEffect>YES</ns0:ImmediateEffect>
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<ns0:Urgency>NO</ns0:Urgency>
<ns0:TaxLevy>YES</ns0:TaxLevy>
<ns0:Election>NO</ns0:Election>
<ns0:UsualCurrentExpenses>NO</ns0:UsualCurrentExpenses>
<ns0:BudgetBill>NO</ns0:BudgetBill>
<ns0:Prop25TrailerBill>NO</ns0:Prop25TrailerBill>
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<ns0:Bill id="bill">
<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_0A947879-58EE-49BD-88BA-889B81E85C62">
<ns0:Num>SECTION 1.</ns0:Num>
<ns0:Content>
<html:p>This act shall be known, and may be cited, as the “Shortline Railroad Modernization Act of 2026.”</html:p>
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<ns0:BillSection id="id_5A2464DD-91CC-49C1-B87E-E751E051710E">
<ns0:Num>SEC. 2.</ns0:Num>
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Section 17053.31 is added to the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
, to read:
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<ns0:LawSection id="id_7B12A65E-8DEF-488F-8912-1F51A7160AD6">
<ns0:Num>17053.31.</ns0:Num>
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<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For taxable years beginning on or after January 1, 2026, there shall be allowed to a qualified taxpayer a credit against the “net tax,” as defined in Section 17039, in an amount equal to 50 percent of the qualified taxpayer’s qualified shortline railroad expenditures, subject to paragraph (2).
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The amount of the credit allowed by this section shall not exceed the product of five thousand dollars ($5,000) and the number of miles of railroad track owned or leased within the State of California by the qualified taxpayer at the close of the taxable year for which the credit is claimed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The credit shall be allowed for the taxable year in which the
department issues the credit certificate pursuant to subdivision (d).
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The aggregate amount of credits that may be allocated in a fiscal year pursuant to this section and Section 23631 shall not exceed seven million dollars ($7,000,000).
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Board” means the Franchise Tax Board.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Department” means the Department of Transportation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified shortline railroad expenditures” means the costs paid or incurred by the qualified taxpayer for railroad infrastructure maintenance and capital improvements for infrastructure or capital owned or leased by a Class II or Class III railroad, including, but not limited to, maintenance
of or improvements to rail, tie plates, joint bars, fasteners, switches, ballast, subgrade, bridges, industrial leads, sidings, signs, safety barriers, crossing signal and gates, and related track structures.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
“Qualified shortline railroad expenditures” does not include any cost paid or incurred by the qualified taxpayer that is used as the basis for a federal tax credit or that is funded by a federal grant.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
“Qualified taxpayer” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A company that owns a railroad located wholly or partly in California that is classified by the federal Surface Transportation Board as a Class II or Class III railroad.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An owner or lessee of a rail siding, industrial spur, or industry track located on or adjacent to any railroad in
California.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In the case where the credit allowed under this section exceeds the “net tax,” as defined in Section 17039, for a taxable year, the excess credit may be carried over to reduce the “net tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A credit allowed pursuant to this section for a qualified taxpayer that is a partnership, limited liability company, or an estate or trust shall be distributed to the partner, members, or beneficiaries in the same manner as income is distributed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A qualified taxpayer may assign all or part of the credit allowed pursuant to this section.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The qualified taxpayer and the
assignee shall report to the Franchise Tax Board, in the form and manner specified by the board, all required information regarding the assignment of the credit. The amount paid in consideration of the assignment shall not exceed the amount of the credit assigned.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A credit shall not be assigned pursuant to this paragraph to more than one taxpayer, nor may the credit be reassigned by the assignee to another taxpayer.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A party that has acquired a tax credit under this section shall be subject to the requirements of this section.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A qualified taxpayer shall not assign a tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
In the event that the taxpayer originally allocated a
credit under this section by the department and a taxpayer to whom the credit has been assigned both claim the same amount of credit on their tax returns, the board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
To be eligible for a credit under this section, a qualified taxpayer shall apply to the department for a credit certification pursuant to this subdivision.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The qualified taxpayer shall submit an application, in the form and manner prescribed by the department, upon completion of the project for which the qualified shortline railroad expenditures were incurred. The application shall include both of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The number of miles of railroad track owned or leased in California.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A description and certification, under penalty of perjury, of the amount of the taxpayer’s qualified shortline railroad expenditures.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The department shall evaluate a taxpayer’s application and shall issue a credit certificate upon finding the taxpayer is eligible for the credit allowed by this section on a first-come-first-served basis, subject to the aggregate amount allowed under paragraph (4) of subdivision (a).
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The certificate shall state the amount of the credit allowed.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The department shall annually provide the board with a list of qualified taxpayers to whom a certificate has been issued and the tax credit amounts allocated to each qualified taxpayer.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
The department
and the board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section and Section 23631.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
For purposes of complying with Section 41 for the tax credits allowed under this section and Sections 17053.32, 23631, and 23632, the Legislature finds and declares all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The specific goals, purposes, and objectives the tax credits will achieve include all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Improving the safety, reliability, and efficiency of shortline and regional rail service, consistent with the 2024 California State Rail Plan.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Preserving and enhancing rail access for existing industrial, agricultural, and commercial shippers, and facilitating new rail-served economic development.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Supporting the diversion of freight movement from trucks to rail by preserving and expanding rail infrastructure capacity, thereby reducing highway congestion, pavement damage, and vehicle emissions.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Supporting job retention and job creation in rail-dependent industries and associated supply chains through increased private capital investment in rail infrastructure.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The detailed performance indicators for the Legislature to use when measuring whether the tax credits meet the goals, purposes, and objectives described in subparagraph (A) include all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The number of miles of railroad track improved, rehabilitated, or constructed as a result of projects receiving the credit.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The number and type of rail infrastructure projects completed, including track, bridges, sidings, and spurs.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Private capital investment leveraged by the tax credits, expressed as a ratio of private dollars invested per dollar of tax credit claimed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Data collection requirements to enable the Legislature to determine whether the tax credits are meeting, failing to meet, or exceeding those specific goals, purposes, and objectives include both of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A description of each project for which the credit was claimed, including project location and general scope of work, and, where applicable, the approximate number of track miles improved or constructed.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The amount of qualified expenditures incurred and the amount of
credit claimed.
</html:p>
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<ns0:BillSection id="id_0D776048-3E58-4A20-B216-09142F78E918">
<ns0:Num>SEC. 3.</ns0:Num>
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Section 17053.32 is added to the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
, to read:
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<ns0:Fragment>
<ns0:LawSection id="id_5B171DE7-534E-46F8-A82C-0A7C527DB2E0">
<ns0:Num>17053.32.</ns0:Num>
<ns0:LawSectionVersion id="id_A64EAFA6-7E57-4B9D-80A4-9C8736B9E2E1">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For taxable years beginning on or after January 1, 2026, there shall be allowed to a qualified taxpayer a credit against the “net tax,” as defined in Section 17039, in an amount equal to 50 percent of the qualified taxpayer’s qualified new rail infrastructure expenditures, subject to paragraph (2).
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The amount of the credit allowed by this section shall not exceed one million dollars ($1,000,000) per new rail infrastructure project completed in the taxable year for which the credit is claimed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The credit shall be allowed for the taxable year in which the department issues the credit certificate pursuant to subdivision (d).
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The aggregate amount of credits that may be allocated in a fiscal year pursuant to this section and Section 23631 shall not exceed ten million dollars ($10,000,000).
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Board” means the Franchise Tax Board.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Department” means the Department of Transportation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
“New rail infrastructure project” means a project to acquire, engineer, or construct new rail infrastructure, or improvements thereto, included with servicing customer locations or expansions by any railroad located in California, including, but not limited to, a right-of-way; new track, including industrial leads, switches, spurs, and siding; rail loading dock; and transloading
structures.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
“Qualified new rail infrastructure expenditures” means the costs paid or incurred by the qualified taxpayer for a new rail infrastructure project that has been precertified by the department and is commenced within 12 months of the issuance of a credit precertification letter.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
“Qualified taxpayer” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A company that owns a railroad located wholly or partly in California that is classified by the federal Surface Transportation Board as a Class II or Class III railroad.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An owner or lessee of a rail siding, industrial spur, or industry track located on or adjacent to any railroad in California.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In the case
where the credit allowed under this section exceeds the “net tax,” as defined in Section 17039, for a taxable year, the excess credit may be carried over to reduce the “net tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A credit allowed pursuant to this section for a qualified taxpayer that is a partnership, a limited liability company, an S corporation, or an estate or trust shall be distributed to the partner, members, shareholders, or beneficiaries in the same manner as income is distributed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A qualified taxpayer may assign all or part of the credit allowed pursuant to this section.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The qualified taxpayer and the assignee shall report to the Franchise Tax Board, in the form and manner specified by
the board, all required information regarding the assignment of the credit. The amount paid in consideration of the assignment shall not exceed the amount of the credit assigned.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A credit shall not be assigned pursuant to this paragraph to more than one taxpayer, nor may the credit be reassigned by the assignee to another taxpayer.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A party that has acquired a tax credit under this section shall be subject to the requirements of this section.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A qualified taxpayer shall not assign a tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
In the event that the taxpayer originally allocated a credit under this section by the department and a taxpayer to whom the credit has been
assigned both claim the same amount of credit on their tax returns, the board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
To be eligible for a credit under this section, a qualified taxpayer shall apply to the department for a credit precertification and a credit certification pursuant to this subdivision.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
A qualified taxpayer shall submit an application for a credit precertification, in the form and manner prescribed by the department, before commencing a new rail infrastructure project.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The department shall establish quarterly application windows for precertification applications. Applications received during a quarterly window shall be reviewed together. The department shall evaluate
a taxpayer’s application and shall issue a credit precertification letter upon finding the project and taxpayer meet the requirements for a credit allowed by this section, in accordance with the priority criteria described in subparagraph (C) and subject to the annual aggregate amount allowed under paragraph (4) of subdivision (a). The credit precertification letter shall include the maximum amount of the credit allowed under this section based on the estimated qualified new rail infrastructure expenditures included in the application and subject to the limit described in paragraph (2) of subdivision (a).
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The department shall give priority to applications for projects that provide critical rail access to industrial parks, ports, or economic development projects located adjacent to rail or that serve businesses in value-added agriculture, advanced manufacturing, supply chain or distribution solutions, or environmentally friendly or
sustainable manufacturing, including those reducing carbon emissions or utilizing renewable energy.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
If the annual aggregate amount allowed under paragraph (4) of subdivision (a) is not fully allocated in any quarterly period, the unused amount shall carry forward to the next quarterly application period within the same fiscal year. Any amount not awarded by the close of the fiscal year shall expire.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The qualified taxpayer shall submit an application, in the form and manner prescribed by the department, upon completion of the new rail infrastructure project. The application shall provide any documentation required by the department to certify completion of the project and to calculate the credit amount.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The department shall evaluate a taxpayer’s application and shall issue a credit certificate upon finding
the taxpayer is eligible for the credit allowed by this section.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The certificate shall state the amount of the credit allowed. Notwithstanding paragraph (1) of subdivision (a), the amount of the credit shall not exceed the maximum amount listed in the credit precertification letter.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The department shall annually provide the board with a list of qualified taxpayers to whom a certificate has been issued and the tax credit amounts allocated to each qualified taxpayer.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
The department and the board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section and Section 23632.
</html:p>
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<ns0:Num>SEC. 4.</ns0:Num>
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Section 23631 is added to the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
, to read:
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<ns0:Num>23631.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For taxable years beginning on or after January 1, 2026, there shall be allowed to a qualified taxpayer a credit against the “tax,” defined in Section 23036, in an amount equal to 50 percent of the qualified taxpayer’s qualified shortline railroad expenditures, subject to paragraph (2).
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The amount of the credit allowed by this section shall not exceed the product of five thousand dollars ($5,000) and the number of miles of railroad track owned or leased within the State of California by the qualified taxpayer at the close of the taxable year for which the credit is claimed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The credit shall be allowed for the taxable year in which the department
issues the credit certificate pursuant to subdivision (d).
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The aggregate amount of credits that may be allocated in a fiscal year pursuant to this section and Section 17053.31 shall not exceed seven million dollars ($7,000,000).
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Board” means the Franchise Tax Board.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Department” means the Department of Transportation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified shortline railroad expenditures” means the costs paid or incurred by the qualified taxpayer for railroad infrastructure maintenance and capital improvements for infrastructure or capital owned or leased by a Class II or Class III railroad, including, but not limited to, maintenance of or
improvements to rail, tie plates, joint bars, fasteners, switches, ballast, subgrade, bridges, industrial leads, sidings, signs, safety barriers, crossing signal and gates, and related track structures.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
“Qualified shortline railroad expenditures” does not include any cost paid or incurred by the qualified taxpayer that is used as the basis for a federal tax credit or that is funded by a federal grant.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
“Qualified taxpayer” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A company that owns a railroad located wholly or partly in California that is classified by the federal Surface Transportation Board as a Class II or Class III railroad.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An owner or lessee of a rail siding, industrial spur, or industry track located on or adjacent to any railroad in
California.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In the case where the credit allowed under this section exceeds the “tax,” defined in Section 23036, for a taxable year, the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A qualified taxpayer may assign all or part of the credit allowed pursuant to this section.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The qualified taxpayer and the assignee shall report to the Franchise Tax Board, in the form and manner specified by the board, all required information regarding the assignment of the credit. The amount paid in consideration of the assignment shall not exceed the amount of the credit assigned.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A credit shall not be assigned pursuant to this paragraph to more than one taxpayer, nor may the credit be reassigned by the assignee to another taxpayer.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A party that has acquired a tax credit under this section shall be subject to the requirements of this section.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A qualified taxpayer shall not assign a tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
In the event that the taxpayer originally allocated a credit under this section by the department and a taxpayer to whom the credit has been assigned both claim the same amount of credit on their tax returns, the board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
To be eligible for a credit under this section, a qualified taxpayer shall apply to the department for a credit certification pursuant to this subdivision.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The qualified taxpayer shall submit an application, in the form and manner prescribed by the department, upon completion of the project for which the qualified shortline railroad expenditures were incurred. The application shall include both of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The number of miles of railroad track owned or leased in California.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A description and certification, under penalty of perjury, of the amount of the taxpayer’s qualified shortline railroad expenditures.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The department shall evaluate a
taxpayer’s application and shall issue a credit certificate upon finding the taxpayer is eligible for the credit allowed by this section on a first-come-first-served basis, subject to the aggregate amount allowed under paragraph (4) of subdivision (a).
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The certificate shall state the amount of the credit allowed.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The department shall annually provide the board with a list of qualified taxpayers to whom a certificate has been issued and the tax credit amounts allocated to each qualified taxpayer.
</html:p>
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</ns0:BillSection>
<ns0:BillSection id="id_95FA4CF8-E91E-40F2-AC52-0C7A9AE600AD">
<ns0:Num>SEC. 5.</ns0:Num>
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Section 23632 is added to the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
, to read:
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<ns0:Fragment>
<ns0:LawSection id="id_0294231F-7B2B-48BD-9A5F-A5D31F0D7290">
<ns0:Num>23632.</ns0:Num>
<ns0:LawSectionVersion id="id_6BB29717-B0E3-4B8A-B05A-BE20B5A1F525">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For taxable years beginning on or after January 1, 2026, there shall be allowed to a qualified taxpayer a credit against the “tax,” defined in Section 23036, in an amount equal to 50 percent of the qualified taxpayer’s qualified new rail infrastructure expenditures, subject to paragraph (2).
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The amount of the credit allowed by this section shall not exceed one million dollars ($1,000,000) per new rail infrastructure project completed in the taxable year for which the credit is claimed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The credit shall be allowed for the taxable year in which the department issues the credit certificate pursuant to subdivision (d).
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The aggregate amount of credits that may be allocated in a fiscal year pursuant to this section and Section 23631 shall not exceed ten million dollars ($10,000,000).
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Board” means the Franchise Tax Board.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Department” means the Department of Transportation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
“New rail infrastructure project” means a project to acquire, engineer, or construct new rail infrastructure, or improvements thereto, included with servicing customer locations or expansions by any railroad located in California, including, but not limited to, a right-of-way; new track, including industrial leads, switches, spurs, and siding; rail loading dock; and transloading
structures.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
“Qualified new rail infrastructure expenditures” means the costs paid or incurred by the qualified taxpayer for a new rail infrastructure project that has been precertified by the department and is commenced within 12 months of the issuance of a credit precertification letter.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
“Qualified taxpayer” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A company that owns a railroad located wholly or partly in California that is classified by the federal Surface Transportation Board as a Class II or Class III railroad.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An owner or lessee of a rail siding, industrial spur, or industry track located on or adjacent to any railroad in California.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In the case
where the credit allowed under this section exceeds the “tax,” defined in Section 23036, for a taxable year, the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A credit allowed pursuant to this section for a qualified taxpayer that is a partnership, a limited liability company, an S corporation, or an estate or trust shall be distributed to the partner, members, shareholders, or beneficiaries in the same manner as income is distributed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A qualified taxpayer may assign all or part of the credit allowed pursuant to this section.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The qualified taxpayer and the assignee shall report to the Franchise Tax Board, in the form and manner specified by the board,
all required information regarding the assignment of the credit. The amount paid in consideration of the assignment shall not exceed the amount of the credit assigned.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A credit shall not be assigned pursuant to this paragraph to more than one taxpayer, nor may the credit be reassigned by the assignee to another taxpayer.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A party that has acquired a tax credit under this section shall be subject to the requirements of this section.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A qualified taxpayer shall not assign a tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
In the event that the taxpayer originally allocated a credit under this section by the department and a taxpayer to whom the credit has been assigned
both claim the same amount of credit on their tax returns, the board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
To be eligible for a credit under this section, a qualified taxpayer shall apply to the department for a credit precertification and a credit certification pursuant to this subdivision.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
A qualified taxpayer shall submit an application for a credit precertification, in the form and manner prescribed by the department, before commencing a new rail infrastructure project.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The department shall establish quarterly application windows for precertification applications. Applications received during a quarterly window shall be reviewed together. The department shall evaluate a
taxpayer’s application and shall issue a credit precertification letter upon finding the project and taxpayer meet the requirements for a credit allowed by this section, in accordance with the priority criteria described in subparagraph (C) and subject to the annual aggregate amount allowed under paragraph (4) of subdivision (a). The credit precertification letter shall include the maximum amount of the credit allowed under this section based on the estimated qualified new rail infrastructure expenditures included in the application and subject to the limit described in paragraph (2) of subdivision (a).
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The department shall give priority to applications for projects that provide critical rail access to industrial parks, ports, or economic development projects located adjacent to rail or that serve businesses in value-added agriculture, advanced manufacturing, supply chain or distribution solutions, or environmentally friendly or sustainable
manufacturing, including those reducing carbon emissions or utilizing renewable energy.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
If the annual aggregate amount allowed under paragraph (4) of subdivision (a) is not fully allocated in any quarterly period, the unused amount shall carry forward to the next quarterly application period within the same fiscal year. Any amount not awarded by the close of the fiscal year shall expire.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The qualified taxpayer shall submit an application, in the form and manner prescribed by the department, upon completion of the new rail infrastructure project. The application shall provide any documentation required by the department to certify completion of the project and to calculate the credit amount.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The department shall evaluate a taxpayer’s application and shall issue a credit certificate upon finding the
taxpayer is eligible for the credit allowed by this section.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The certificate shall state the amount of the credit allowed. Notwithstanding paragraph (1) of subdivision (a), the amount of the credit shall not exceed the maximum amount listed in the credit precertification letter.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The department shall annually provide the board with a list of qualified taxpayers to whom a certificate has been issued and the tax credit amounts allocated to each qualified taxpayer.
</html:p>
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</ns0:Fragment>
</ns0:BillSection>
<ns0:BillSection id="id_352700DC-A6EE-473F-B1BF-78829C116E5C">
<ns0:Num>SEC. 6.</ns0:Num>
<ns0:Content>
<html:p>This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.</html:p>
</ns0:Content>
</ns0:BillSection>
</ns0:Bill>
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