Ontario proposes first-ever tax credit to support province's short lines 

By Jeff Stagl, Managing Editor 

Since short lines play an integral role in connecting Ontario shippers to the national rail network by providing first- and last-mile service, the province recently introduced a measure to better support small railroads in a big way. 

Provincial officials have proposed the Ontario Shortline Railway Investment Tax Credit, which would provide a 50% refundable corporate income tax credit to qualifying short lines for eligible track maintenance and rehabilitation expenditures. 

“This is the first time Ontario has introduced a corporate income tax credit for short line railways,” said Scott Blodgett, a senior media relations advisor for Ontario’s Ministry of Finance, in an email. 

There are 13 short lines in Ontario that collectively operate more than 600 miles of track in the province and originate more than 85,000 carloads annually. 

“During this period of global economic uncertainty, the government is taking steps to protect businesses that rely on a unified rail network for transporting goods and raw materials to customers,” provincial officials wrote in a tax credit summary. “The government is proposing a new temporary tax credit to support Ontario’s shortline railway industry and ensure a safe and reliable rail network across the province.” 

Eligible expenditures would include labor and capital asset investments related to railway maintenance and repairs that are made on or after May 15, 2025, and before Jan. 1, 2030. The proposed tax credit would provide up to C$8,500 per track mile per year to support improvements in tracks, signaling equipment, trestles, bridges, culverts and tunnels that are leased or owned by a qualifying short line. 

The measure would provide an estimated C$23 million in income tax support over three years, starting in 2025–26. The tax credit would be available to railroads that are licensed provincially under the Shortline Railways Act or federally under the Railway Safety Act, which would exclude urban transit-rail systems and industrial railways. 

Last year, the provincial government explored ways to better support short lines, said Blodgett. 

“The new proposed tax credit would lower the cost of track maintenance and repair,” he said. 

Legislation drafted to implement the tax credit will be included in a bill that’s anticipated to be introduced in fall following the release of Ontario’s 2025 economic outlook and fiscal review. 

RAC: 'A meaningful step forward'
The Railway Association of Canada (RAC) — which counts many short lines among its members — hailed the province for introducing the tax credit. Investments in Ontario’s short-line network are crucial so the full potential of the province’s Ring of Fire mineral-rich region and other development opportunities can be realized, RAC officials say. 

“This is a meaningful step forward for regional supply chains, economic development and long-term infrastructure investment,” said RAC President and CEO Eric Harvey in a statement. “In Ontario, short lines move $7 billion worth of goods every year. They connect local producers and manufacturers to national and global markets through critical first-mile and last-mile connections.” 

The tax credit will help enable infrastructure upgrades, unlock new business opportunities and support communities, he added. Every dollar invested through the tax credit is projected to generate C$10.58 in economic output. 

“This is especially important in regions where industry is growing and increasingly looking to rail,” said Harvey. 

The tax credit is especially promising for Cando Rail & Terminals Ltd. The company provides rail-car switching, rail-car loading/unloading and material handling services at 12 locations in Ontario ranging from automobile plants to pulp and paper mills to oil and gas terminals. In addition, it owns and operates four rail terminals in Ontario — two in Hamilton and one each in Sarnia and Kingston — and operates the Barrie Collingwood Railway (BCRY) that’s owned by the city of Barrie. 

“A provincial tax credit will not only help short line railways perform necessary capital upgrades to meet and surpass stringent safety standards, but may also foster meaningful medium- and long-term investments,” said Julie Pomehichuk, Cando Rail & Terminals’ director of marketing, communications and community engagement, in an email. 

BCRY poses great investment potential for growth, she stressed. The 19-mile short line runs from a Canadian Pacific Kansas City Interchange in Utopia to Barrie, Ontario, serves 10 customers and offers service twice each week. 

“Cando is currently working with the city of Barrie on potential opportunities for our BCRY, including the development of rail-car staging and storage, transload and laydown areas, as well as rail spur development to connect customers to Class I rail infrastructure,” said Pomehichuk.