Program Summary

The Freight Rail Tax Credit (based on Senate Bill 24-190) is a tax relief program for businesses that have new or expanded freight rail use on specific rail lines that are in danger of going out of service due to coal production reductions and closures. The freight rail tax credit is a refundable state income tax credit for an amount up to 75% of a user’s eligible costs.

The program is administered by the Colorado Office of Economic Development & International Trade (OEDIT), in consultation with the Colorado Department of Transportation (CDOT) and the Office of Just Transition (OJT), a division of the Colorado Department of Labor and Employment.

The program may reserve up to $5 million annually in freight rail tax credits starting on or after January 1, 2025 and prior to January 1, 2036.

In order to claim a tax credit, qualified applicants that have reserved a tax credit must execute their freight rail use plan on or before December 31, 2038.
Qualified applicants can apply tax credits for income tax years between January 1, 2026 and January 1, 2039.

As this tax credit is new, some of the requirements may be altered in future years to better suit the taxpayer/user.

OEDIT expects to launch the Freight Rail Tax Credit for applications by June 2025. More information on eligibility and timeline for the tax credit will be made available here throughout 2025.

Overview

Type: Tax credit

For: Freight dependent businesses

Amount: $5 million annually in tax credits

Application period: Launching by June 2025

OEDIT division: Business Funding and Incentives

Eligible Rail Line

At this time, CDOT has determined that only one line, Union Pacific’s Craig Branch Line, is at imminent risk of inactivity or abandonment due to a reduction in coal traffic. This is the freight rail line that runs through the Yampa Valley, which branches from the mainline in Bond, runs north through Phippsburg to Steamboat Springs, and then west through Hayden and past Craig.

Craig Subdivision MP 168 (Phippsburg) to MP 230.1 (Craig)
Moffat Tunnel Subdivision MP 128.8 (Center Bond) to MP 168 (Phippsburg)

Business Eligibility

For a business to be eligible for this tax credit, it needs to:

Be a corporation, partnership, LLC, or other business entity
Operate in or influence one or more of the following industries: manufacturing, agriculture, repairing or refurbishing, recycling, distribution center for consumer products, or energy production
Have regular demand for new or expanded use of freight rail transportation:
1. Of freight either originating or terminating at a business located in a coal transition community, which includes Routt, Moffat and Rio Blanco counties
2. On a rail line that the Colorado Department of Transportation has determined is at risk of inactivity or abandonment due to a lack of demand resulting from coal transition
Be registered with the Colorado Secretary of State and in Good Standing.
1. Businesses registered out of state must file a Statement of Foreign Entity Authority with the Colorado Secretary of State.