RAIL: Short Line Railroad Infratructure Modernization Credit (2024)
Minnesota · Minnesota DOR · Used for tax years 2024
Minnesota’s 2024 Schedule RAIL is used to claim the Short Line Railroad Infrastructure Modernization Credit. It records railroad qualifications, qualified reconstruction and replacement expenses, and Minnesota track mileage to calculate the credit.
Who files this form
Use 2024 Schedule RAIL to claim Minnesota’s Short Line Railroad Infrastructure Modernization Credit.
Part 1 requires you to meet all four conditions:
- Be classified by the U.S. Surface Transportation Board as a Class II or Class III railroad.
- Have owned or leased railroad infrastructure in Minnesota as of January 1, 2021.
- Have owned or leased railroad infrastructure in Minnesota at the close of the tax year.
- Have paid qualified railroad reconstruction or replacement expenses during the tax year.
File Schedule RAIL with Form M1, M2, M3, M4, M8, or M4NP, as applicable. The credit can be claimed against income, corporate franchise, or unrelated business income taxes.
What you'll need
To complete Schedule RAIL, have the following information ready:
- Taxpayer name and identifying numbers requested on the form.
- Your railroad classification and infrastructure ownership or lease information.
- Qualified railroad reconstruction and replacement expenses for the tax year.
- Miles of qualifying Minnesota track owned or leased at year-end for which you are claiming expenses.
If you transfer unused credit, use the optional assignment form on page 3. It asks for the amount assigned, the tax year, and identifying information, titles, telephone numbers, signatures, and dates for both parties. The transfer instructions also refer to a written agreement between the parties.
How to file
Complete Part 1, then continue to Part 2 only if you checked all four qualification boxes. File Schedule RAIL with your applicable tax return.
Report the credit from Part 2, line 5, on:
- C corporation: Form M4T, line 22.
- S corporation: Form M8, line 11.
- Partnership: Form M3, line 10.
- Sole proprietor: Schedule M1C, line 14.
- Fiduciary: Form M2, line 20.
- Tax-exempt organization: Form M4NPI, line 4e.
If transferring credit: First claim the credit on your return for the year you paid or incurred the qualifying expenses. Both parties must file the assignment form within 30 days of reaching a written transfer agreement. The assignment form must be mailed to the appropriate address printed below.
Individuals
Minnesota Department of Revenue
Tax Operations Division
c/o Policy Lead
Mail Station 4122
600 N. Robert St.
St. Paul, MN 55146-4122
Corporations, partnerships, and S corporations
Minnesota Department of Revenue
Tax Operations Division
c/o Policy Lead
Mail Station 4122
600 N. Robert St.
St. Paul, MN 55146-5122
Insurance
Minnesota Department of Revenue
Insurance Taxes
c/o Insurance Taxes
Mail Station 1780
600 N. Robert St.
St. Paul, MN 55146-1780
Common mistakes
- Continuing without meeting every qualification: All four Part 1 boxes must be checked to qualify.
- Assuming a credit certificate confirms eligibility: The instructions warn that issuing a certificate does not approve eligibility or validate the credit calculation.
- Overlooking the recipient’s repayment responsibility: If an audit or assessment finds that too much transferred credit was claimed, the recipient is responsible for repaying the excess.
- Missing the assignment mailing requirement: The assignment form must be mailed within 30 days of the agreement between the parties.
Questions people ask
How much is the credit?
The credit is the smaller of 50% of qualified expenses or $3,000 multiplied by the miles of qualifying track.
What expenses qualify?
The general explanation includes maintenance, reconstruction, or replacement of Minnesota railroad infrastructure owned or leased as of January 1, 2021. It also includes new construction of industrial leads, switches, spurs, and sidings, plus extensions of existing sidings. Railroad infrastructure includes track, roadbed, bridges, industrial leads and sidings, and track-related structures.
Is the credit refundable?
No. The credit is nonrefundable and may be transferred or carried forward for five succeeding taxable years.
Who can transfer unused credit?
Only a Class II or Class III railroad can transfer the credit. The amount exceeding its tax liability can be transferred to one other taxpayer. Distributions by partnerships, S corporations, and fiduciaries to partners, shareholders, and beneficiaries are not considered transfers.
Which ownership date appears in the 2024 schedule?
The text contains different dates. Part 1 and the general eligibility explanation use January 1, 2021. The Part 2, line 1 instructions instead say January 1, 2024, and the close of the 2024 tax year. The supplied text does not resolve this difference.