Indiana Railroad Tax Credits: Boosting Economic Development and Safety

Strategic Insights -

Indiana's new railroad tax credits have been praised by rail industry leaders as a game-changer for small railroads and rural communities. The tax credits, part of House Enrolled Act 1461, aim to encourage investment in rail infrastructure and economic development in rural Indiana. According to Adam Robillard, general manager of Madison Railroad and chairman of Railroads of Indiana (ROI), the tax credits will help small railroads increase their infrastructure safety while encouraging the growth of Class II and Class III railroads.

Key Takeaways:

  • The tax credits allow small railroads to receive up to 50% in state tax credits for qualified rail expenditures on improvements and new infrastructure in rural counties with populations under 300,000.
  • The railroad expenditure element of the legislation provides a $3,500 tax credit per mile for existing rail infrastructure improvements up to $9.5 million each fiscal year.
  • A tax credit of up to $500,000 per new track project, up to $5 million each fiscal year, is also available for small railroads.
  • The tax credits aim to boost investment in rail infrastructure, not only through state funding but also through private sources, by emphasizing the importance of repairs and reconstruction.
  • Five state statutes regulate railroads in Indiana: Chapter 8, Railroads (IC 8), Interstate Commerce Commission (IC 8-1), Railroad Company, (IC 8-2) Railroad Authority,(IC 8-3) Railroad Corridor Management, (IC 8-4) Railroads Defined (IC 8-5-1-3).
  • The new rail infrastructure incentive in Indiana's legislation is an element that could create additional high-paying jobs for Hoosiers, according to Joe Gioe, president and CEO of Indiana Rail Road.
  • Small railroads, mostly for-profit railroads, primarily pay to maintain their privately-owned tracks, unlike other modes of freight transportation that benefit from taxpayer-funded infrastructure.

Statistics:

  • $3,500 tax credit per mile for existing rail infrastructure improvements
  • $9.5 million each fiscal year for existing rail infrastructure improvements
  • Up to $500,000 per new track project, up to $5 million each fiscal year
  • 38 Class III railroads in Indiana
  • 52 jobs added on Indiana Rail Road in 2025
  • 10 acres purchased by Madison Railroad for new infrastructure development

Sources:

  • House Enrolled Act 1461
  • Railroads of Indiana (ROI)
  • Mickelson and Company - Railroad Tax Credit Advisory Firm
  • Indiana State Legislative Action Registry (ASLRA)
  • INDOT Railroad Definitions
  • https://www.aslrra.org/advocacy/45g-short-line-tax-credit-modernization/