SB 1287 California Senate · 2025-2026 Regular Session

Personal Income Tax Law: Corporation Tax Law: credits: shortline railroad expenditures and railroad infrastructure.

Summary

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. 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, 2027, and before January 1, 2032, to a qualified taxpayer in an amount equal to 50% of the qualified shortline railroad expenditures and for each taxable year beginning on or after January 1, 2028, and before January 1, 2033, in an amount equal to 50% of the qualified new rail infrastructure expenditures, as defined and specified. 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. This bill would include additional information required for any bill authorizing a new tax expenditure. This bill would take effect immediately as a tax levy.

Bill status in committee 1 of 4 stages cleared

Introduction

Feb 2026

Committee Review

Floor Vote

Governor

Introduced Feb 20, 2026 Last action May 14, 2026

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What changed between versions

04/09/26 - Amended Senate → SB1287 · 4 edits

MODERATE

The amended version of SB 1287 (Shortline Railroad Modernization Act of 2026) pushes back the effective dates for both tax credits: the shortline railroad maintenance credit now begins January 1, 2027 instead of January 1, 2026, and the new rail infrastructure credit now begins January 1, 2028 instead of January 1, 2026. The definition of qualified shortline railroad expenditures was broadened by changing 'maintenance and capital improvements' to 'maintenance or capital improvements,' making either type of spending independently eligible for the credit.

TIMELINE

The effective date for the shortline railroad maintenance tax credit (Sections 17053.31 and 23631) was changed from January 1, 2026 to January 1, 2027, delaying when taxpayers can begin claiming this credit by one year.

The effective date for the new rail infrastructure tax credit (Sections 17053.32 and 23632) was changed from January 1, 2026 to January 1, 2028, delaying when taxpayers can begin claiming this credit by two years.

DEFINITION

The definition of 'qualified shortline railroad expenditures' was broadened by changing 'maintenance and capital improvements for infrastructure or capital' to 'maintenance or capital improvements of infrastructure or capital.' The change from 'and' to 'or' means a taxpayer no longer needs both maintenance and capital improvements to qualify; either type of spending alone is sufficient.

The definition of 'qualified taxpayer' was revised in multiple sections, removing the 'company that owns' qualifier and simplifying the language to 'a person or entity engaged in a trade or business that operates a railroad,' which may broaden eligibility to include entities that are not structured as companies.

02/20/26 - Introduced → 04/09/26 - Amended Senate · 8 edits · Apr 9, 2026

MODERATE

The Senate amendment to SB 1287 (Shortline Railroad Modernization Act of 2026) adds sunset dates to both tax credits, broadens eligibility to include railroad operators who do not own the track, restricts qualifying expenditures to nonreimbursed costs incurred within 12 months of application, and adds new provisions for credit transferability, anti-double-dipping rules, annual legislative reporting, and Board authority to disallow credits.

Scope change

The bill's scope was narrowed by adding sunset dates (2032 for shortline credits, 2033 for new infrastructure credits) and delaying the start of the new rail infrastructure credit from 2026 to 2028. Simultaneously, eligibility was broadened to include railroad operators who do not own the track, while adding an explicit Class I railroad exclusion.

TIMELINE

The shortline railroad expenditure credit (Section 17053.31) now sunsets on December 1, 2032, applying only to taxable years beginning on or after January 1, 2026 and before January 1, 2032. The new rail infrastructure credit (Section 17053.32) now applies only to taxable years beginning on or after January 1, 2028 and before January 1, 2033, delaying its start by two years.

ELIGIBILITY

The definition of 'qualified taxpayer' was broadened from a company that owns a Class II or Class III railroad to include any person or entity engaged in a trade or business that operates such a railroad. An explicit exclusion was added for Class I railroads.

A new provision explicitly allows a qualified taxpayer to sell any credit allowed under the section to an unrelated party, notwithstanding any other law, enhancing credit liquidity and transferability.

DEFINITION

Both 'qualified shortline railroad expenditures' and 'qualified new rail infrastructure expenditures' now require costs to be nonreimbursed and exclude costs paid or incurred more than 12 months before the application submission date. The list of covered infrastructure items was expanded to include industrial spur and industry track.

REQUIREMENT

A new anti-double-dipping rule was added: if a taxpayer claims the credit, any deduction or credit otherwise allowed under the same part of the code for those qualified expenditures must be reduced by the amount of the credit claimed.

A new annual reporting requirement mandates that the Department of Transportation, in collaboration with the Board, submit a report to the Legislature by June 30, 2028 and each June 30 thereafter containing project descriptions, track miles improved, qualified expenditures, and credit amounts claimed.

Application requirements were expanded to include itemized expenditure amounts, estimated track miles at year-end, taxable year information, and any other information the department deems necessary. For new rail infrastructure, the application process changed from a single completion filing to annual filings for expenditures incurred during the year.

ENFORCEMENT

The Franchise Tax Board was given authority to disallow a credit to a taxpayer that received a certificate from the Department of Transportation if the Board finds the taxpayer does not meet the eligibility criteria.

Floor votes

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No floor votes recorded yet.

Full legislative history

Actions timeline

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Key actions

Committee

Amendments

May 14, 2026

Upper · Passed

May 14 hearing: Held in committee and under submission.

upper

Apr 22, 2026

Upper · Passed

From committee: Do pass and re-refer to Com. on APPR. (Ayes 12. Noes 0. Page 3985.) (April 21). Re-referred to Com. on APPR.

upper

Apr 9, 2026

Upper · Passed

Read second time and amended. Re-referred to Com. on TRANS.

upper

Apr 8, 2026

Upper · Passed

From committee: Do pass as amended and re-refer to Com. on TRANS. (Ayes 5. Noes 0. Page 3795.) (April 8).

upper

Mar 4, 2026

Committee

Referred to Coms. on REV. & TAX. and TRANS.

upper

Feb 20, 2026

Introduced

Introduced. To Com. on RLS. for assignment. To print.

upper

1 primary · 0 co-sponsors