Schedule RR-I: Railroad Maintenance and Improvement Tax Credit (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
Kentucky Schedule RR-I computes the railroad maintenance and improvement tax credit and reports the amount used against income tax or limited liability entity tax. It records qualified expenditures and Kentucky railroad track mileage used to calculate the credit. The credit is no
Who files this form
Use Schedule RR-I to compute the Kentucky railroad maintenance and improvement tax credit, and attach it to the tax return claiming the credit.
Eligible taxpayers are:
- Owners of Class II or Class III railroads located in Kentucky.
- People who transport property using those railroads, or furnish railroad-related property or services to them, but only for track miles assigned to them by a Class II or Class III railroad for this credit.
Qualified expenditures must be for maintaining or improving Kentucky railroad property that was owned or leased by a Class II or Class III railroad on January 1, 2008. You do not qualify if you claimed the railroad expansion credit on the same expenditures, or if another taxpayer claimed either credit on those expenditures.
What you'll need
Have the following information available to complete Schedule RR-I:
- Entity name, mailing address, location address, federal identification number, and Kentucky Corporation/LLET account number, if applicable.
- How the taxpayer is taxed, using the choices on the form.
- Qualified expenditures paid or incurred during the 2025 tax year.
- Kentucky track miles owned or leased at the close of the tax year, and qualifying track miles assigned to the taxpayer.
- Whether the property met the January 1, 2008 ownership or lease requirement, and whether credits were claimed on the same expenditures.
- Credit amounts being claimed against LLET, corporation income tax, or individual income tax.
The schedule must accompany the return claiming the credit. A pass-through entity must also report each partner’s, member’s, shareholder’s, or beneficiary’s pro rata share of the approved credit on Schedule K-1.
How to file
- Complete Part I. If you answer “yes” to any qualification question, stop. You do not qualify. Continue only if all three answers are “no.”
- Complete Part II. Calculate 50% of qualified expenditures, then compare that amount with $3,500 multiplied by the total eligible Kentucky track miles. Enter the smaller amount on line 7.
- Complete Part III for the credit used. Report the LLET credit on Schedule TCS, Part II, Column E; the corporation income tax credit in Column F; and the individual income tax credit on Form 740, 740-NP, or 741.
- Attach Schedule RR-I to the return claiming the credit. The form lists Forms 720, 720U, PTE, 725, 740, 740-NP, and 741.
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Continuing after a “yes” answer in Part I. Any “yes” answer means you do not qualify.
- Claiming both the maintenance and improvement credit and the railroad expansion credit for the same expenditure. You must choose one.
- Carrying unused credit into another period. The credit is nonrefundable and must be used in the tax year of the expenditures that generated it. No carryforward is allowed.
- Using the credit to reduce LLET below the $175 minimum.
- Forgetting to reduce the track’s basis by the credit taken under KRS 141.385(2).
- Omitting Schedule RR-I from the return claiming the credit, or omitting a pass-through owner’s pro rata share of the approved credit from Schedule K-1.
- Entering a six-digit Kentucky Corporation/LLET account number without leading zeros. The form requires nine digits.
Questions people ask
What expenses qualify?
Qualified expenditures are amounts spent to maintain or improve Kentucky railroads, including roadbeds, bridges, and related structures, that were owned or leased by a Class II or Class III railroad on January 1, 2008. Expenditures may qualify whether or not they are otherwise chargeable to a capital account.
How much is the credit?
The credit is 50% of qualified expenditures paid or incurred during the tax year, limited to $3,500 times the sum of eligible Kentucky track miles owned or leased at year-end and qualifying track miles assigned to the taxpayer.
Can I get a refund or carry the credit forward?
No. The credit is nonrefundable, and it cannot be carried forward to another period. It must be used in the tax year of the qualified expenditures that generated it.
What makes a railroad Class II or Class III?
It must be classified as a Class II or Class III carrier by the federal Surface Transportation Board.
How does a pass-through entity report the credit to its owners?
It must include each partner’s, member’s, shareholder’s, or beneficiary’s pro rata share of the approved credit on that person’s Schedule K-1.