SSB 3084

Topics:Agriculture Tax credits & incentives

Write your legislators about itWhat changed before it passed

Official bill page Lobbyist declarations One-pager to print

Where it is now

Done: IntroducedJanuary 26, 2022
Done: SubcommitteeJanuary 31, 2022
Done: Senate committeeFebruary 9, 2022
Done: Passes the SenateApril 26, 202242–3
Skipped: House committeeSkipped
Done: Passes the HouseFebruary 2, 202282–10
Done: To the GovernorMay 16, 2022
Done: Signed into lawMay 17, 2022

HF 2128 became law → The same legislation passed as HF 2128, so this version was set aside. Go to HF 2128 What’s a funnel?

What’s in it

AI summary This bill creates new rules and incentives to encourage the use of renewable fuels like ethanol and biodiesel in motor vehicles. It requires gas stations to sell certain types of renewable fuel and provides tax credits and financial help to businesses that store or sell these fuels. Additionally, state agencies must use renewable fuels for their vehicle fleets whenever those fuels are available for purchase.¹

Read the official explanation

OVERVIEW., both conventional and flex-fuel). The bill provides for both compliance requirements regulating the storage and dispensing of renewable fuel, and promotional measures (specifically financial and tax incentives) to increase the availability and opportunity for consumers to select a renewable fuel. OVERVIEW —— TYPES AND CLASSIFICATIONS OF RENEWABLE FUELS. The term “motor fuel” is sometimes used to describe both gasoline and diesel fuel (Code chapter 214A) but is also used to describe only gasoline, while the term “special fuel” is used to describe diesel fuel (Code chapter 452A). The term “renewable fuel” is used to describe gasoline or diesel fuel when blended with a percentage of its biofuel component (biofuel). For gasoline, the biofuel, referred to as ethanol, is denatured grain (corn) alcohol. For diesel fuel, the biofuel, referred to as biodiesel, is derived from processed animal fat or plant (soybean) oil.2). The biofuel’s percentage is designated by its classification. Ethanol is abbreviated as “E” and biodiesel is abbreviated as “B”. The term “xx” is a variable which represents the biofuel percentage present by volume. Typically, a statute establishes a classification threshold meaning that a renewable fuel must have a minimum biofuel percentage. For ethanol blended gasoline, the most widely recognized classification thresholds are E-10, E-15, and E-85; and for biodiesel blended fuel, the most widely recognized threshold classifications are B-5, B-11, and B-20. For E-85, the biofuel percentage ranges from percent to percent. OVERVIEW —— STATE AGENCIES REGULATING AND PROMOTING RENEWABLE FUELS. _____ fire marshal (SFM), the department of revenue (DOR), and the department of administrative services (DAS) together with various agencies that operate the state’s motor vehicle fleet. OVERVIEW —— REGULATION OF MOTOR FUEL (DALS). DALS is responsible for setting standards for motor fuel (defined to include gasoline and diesel fuel), including renewable fuel and its biofuel components.2).3). A retail dealer must notify a consumer at the pump that the motor fuel being dispensed is a renewable fuel.16). DALS also regulates the licensure of retail dealers and the inspection of meters used to measure the discharge of motor fuel pumped from a motor fuel storage tank (storage tank) to a dispenser at either a fixed location such as a service station or a mobile location such as a tank wagon (Code chapters 214 and 215 regulating weights and measures). The term motor fuel pump (pump), including a motor fuel blender pump, is often used colloquially to describe the meter which is equipment sealed from tampering and used to record and display the volume of motor fuel dispensed and to calculate the purchase price.2).11(1)).11(2)).4). OVERVIEW —— REGULATION OF MOTOR FUEL INFRASTRUCTURE (DNR AND SFM). Generally, DNR is required to regulate underground infrastructure, including a storage tank used to hold gasoline or diesel fuel, including associated renewable fuels, in a manner that prevents water pollution (Code chapter 455G). The SFM regulates the storage, transportation, handling, or use of flammable or combustible liquids including an aboveground storage tank holding gasoline or diesel fuel and associated renewable fuels (Code chapter 101). OVERVIEW —— STATE VEHICLE USE OF RENEWABLE FUELS (DAS AND VARIOUS STATE ENTITIES). DAS and other state entities maintaining the state motor vehicle fleet must operate those motor vehicles using a renewable fuel which must be either ethanol blended gasoline or biodiesel blended fuel, if commercially available. State agencies subject to the requirement include DAS (Code chapter 8A), the commission for the blind (Code chapter 216B), the state board of regents (Code chapter 262), the department of transportation (Code chapter 307), and the department of corrections (Code chapter 904). OVERVIEW —— RENEWABLE FUEL PROMOTION —— INCOME TAX CREDIT PROGRAMS (DOR).33(11C)). _____ on a companywide basis and reported to DOR during the prior determination period by a designated rate. For the E-85 gasoline promotion tax credit, the designated rate is cents.5 cents for B-5 or higher but not as high as B-11 and cents for B-11 or higher. For the E-15 plus gasoline promotion tax credit, the designated rate depends upon the time of the year. For the first period beginning January and ending May 31, it is cents, for the second period beginning June and ending September 15, it is cents, and for the third period beginning September and ending December 31, it returns to cents. All three tax rates expire on January 1, 2025. OVERVIEW —— RENEWABLE FUEL PROMOTION —— EXCISE TAXES (DOR). DOR compiles information from reports submitted by retail dealers regarding the total gallonages of gasoline and diesel fuel sold to consumers during the prior calendar year (determination period).33). The information compiled by a retail dealer is used as the basis for calculating a promotional income tax credit claimed by the retail dealer. The aggregated information is used by DOR to calculate the amount of promotional incentives awarded in the form of reduced excise taxes imposed on certain renewable fuel sold in this state (Code chapter 452A).3). OVERVIEW —— RENEWABLE FUEL PROMOTION —— DEDUCTION OF EXCISE TAX FOR LICENSED RENEWABLE FUEL BLENDERS (DOR).1).6).4). OVERVIEW —— RENEWABLE FUEL SALES AND USE TAX PROMOTION —— BIODIESEL PRODUCERS.4(9)). The amount of the refund is cents multiplied by the total number of gallons of biodiesel during each quarter of the year. However, a producer is not entitled to claim a refund during a calendar year on any gallon in excess of million gallons produced at a facility. The refund expires on January 1, 2025. OVERVIEW —— PROMOTION OF RENEWABLE FUEL AT RETAIL SITES (DALS). DALS promotes renewable fuels by administering the renewable fuel infrastructure program for retail motor fuel sites (infrastructure program) in cooperation with the renewable fuel infrastructure board (Code chapter 159A, subchapter III)., fittings and pipes).14). _____ is based on either a three-year agreement with the state’s incurred cost share limited to percent of the actual costs incurred or $30,000, whichever is less, or a five-year agreement with the state cost share limited to percent of the actual costs incurred or $50,000, whichever is less. A participating person may receive multiple awards to improve the same retail site so long as the total amount of awards does not exceed the percentage or dollar amount limit.14(7)).16). BILL IN SUMMARY —— REQUIREMENTS —— COMPLIANCE WITH THE E-15 ACCESS STANDARD (DALS).31) beginning January 1, 2023., a dispenser that dispenses gasoline) located at the retail dealer’s retail site. The number of qualified dispensers required depends on whether the retail dealer installed, replaced, or converted a gasoline storage tank on or after that date. If so, a general form of compliance applies and the retail dealer must dispense E-15 gasoline from at least percent of all qualified gasoline dispensers located at the retail site. If the retail site has only one qualified dispenser, that dispenser must dispense E-15 gasoline. An alternative form of compliance applies if the retail dealer has not installed, replaced, or converted a gasoline storage tank on or after that date. Under the alternative form of compliance, the retail dealer is not required to dispense E-15 gasoline from any qualified dispenser until January 1, 2026. _____ the retail dealer must advertise and sell E-15 gasoline from one qualified dispenser located at the retail motor fuel site. If the retail dealer fails to meet any of the two conditions under the alternative form of compliance, the retail dealer is subject to the general form of compliance and must immediately advertise and sell E-15 gasoline from the minimum number (one or percent) of the qualified dispensers at the retail site. BILL IN SUMMARY —— REQUIREMENTS —— COMPLIANCE WITH E-15 ACCESS STANDARD —— SUSPENSION AND WAIVERS.32). It also exempts dispensers that are part of a tank vehicle dispensing motor fuel off-site. A special exemption applies when the retail dealer cannot meet the E-15 access standard because of maintenance, repair, or reconditioning of infrastructure or the installation, expansion, replacement, or conversion of infrastructure.33). The governor’s suspension order must be supported by credible evidence that market forces or existing infrastructure prevents compliance. The secretary of agriculture may issue either of two administrative orders that waive compliance by a retail dealer on a site-by-site basis.34). The E-15 incompatible infrastructure waiver order must be based on credible evidence that the motor fuel storage and dispensing infrastructure located at the retail motor fuel site is not compatible with the use of E-15 gasoline.35). _____ of all motor fuel tanks dispensing gasoline, and specifically the date of installation and the construction materials used (specifically fiberglass). A class waiver order is based on an evaluation of the motor fuel site to determine if the motor fuel storage and dispensing infrastructure is not compatible with E-15 gasoline. The evaluation must be completed by DALS or a certified professional retail motor fuel site installer (installer) certified by DALS.14).2); the cessation of the retail dealer’s business; or the installation, replacement, or conversion of a motor fuel storage tank. A retail dealer or installer who falsely completes an application for a class or class waiver order commits perjury and is subject to a class “D” felony (punishable by confinement for no more than five years and a fine of at least $1,025 but not more than $10,245). BILL IN SUMMARY —— REQUIREMENTS —— RETAIL MOTOR FUEL SITE INSPECTIONS AND REGULATION OF RETAIL DEALER ADVERTISING (DALS).12).3).16).1501(a)). BILL IN SUMMARY —— REQUIREMENTS —— RETAIL DEALER DISCIPLINARY ACTION AND ENFORCEMENT (DALS).36). BILL IN DETAIL —— REQUIREMENTS —— NEW INSTALLATION OF GASOLINE AND BIODIESEL INFRASTRUCTURE AT RETAIL DEALER SITES (DNR AND SFM).31 excusing the storage of ethanol blended gasoline classified as higher than E-9, which the bill increases to E-10). BILL IN SUMMARY —— REGULATION OF MOTOR VEHICLES POWERED BY QUALIFIED RENEWABLE FUELS AND PURCHASE OF QUALIFIED RENEWABLE FUELS BY STATE GOVERNMENT ENTITIES. The bill provides that DAS and other state entities administering the state government fleet must provide that state motor vehicles operating using engines powered by gasoline or diesel fuel must use the highest classification of qualified renewable fuel available. _____ gasoline or biodiesel blended fuel. Certain limitations apply: (1) the qualified renewable fuel must be warranted by the motor vehicle’s manufacturer, (2) that classification of qualified renewable fuel must be available, and (3) an emergency situation must not exist.368).312A). BILL IN SUMMARY —— PROMOTION —— TAX CREDITS. The bill extends the period before promotional tax credits expire.33(11D)). The bill changes the threshold classifications and designated rates for two of the tax credits beginning January 1, 2023. This includes the biodiesel blended fuel tax credit (5 cents for B-11, cents for B-20, cents for B-30) and the E-15 plus gasoline promotion tax credit (a flat cents). _____ than B-20 but not as high as B-30) and the third full step of the threshold (B-30 and higher) take effect after standards for those classifications are established by DALS. BILL IN SUMMARY —— PROMOTION —— RETAIL DEALER REPORTING OF GALLONAGES OF GASOLINE AND DIESEL FUEL (DOR). Beginning January 1, 2022, a retail dealer must include additional information regarding subclassifications of ethanol blended gasoline gallonages and biodiesel blended fuel gallonages for each reported determination period submitted to DOR to allow a retail dealer to calculate a promotional tax credit and DOR to calculate the promotional excise tax imposed on ethanol blended gasoline and biodiesel blended fuel. The bill provides that DOR may require reports by retail dealers to be submitted by electronic transmission and that DOR may grant an extension to a retail dealer to submit a report. Otherwise, a retail dealer who does not submit a timely report is subject to a $100 civil penalty. The bill extends the expiration of the promotional excise tax rates for both ethanol blended gasoline and biodiesel blended fuel to July 1, 2030. It also increases the threshold classification for biodiesel blended fuel to B-20 beginning July 1, 2024. BILL IN SUMMARY —— PROMOTION —— EXCISE TAX PAID BY LICENSED BLENDERS SUBJECT TO DEDUCTION IN LIEU OF REFUND (DOR). The bill provides that a licensed blender is no longer required to apply for a refund for an overpayment amount.8). This provision is repealed July 1, 2030. BILL IN SUMMARY —— PROMOTION —— SALES AND USE TAXES PAID BY BIODIESEL PRODUCER SUBJECT TO PROMOTIONAL REFUND (DOR).4). BILL IN SUMMARY —— PROMOTION —— FINANCING RETAIL SITE INFRASTRUCTURE (DALS).15). The infrastructure board may establish a system to rank applications to participate in the infrastructure program for approval. In ranking applications, the infrastructure board may provide special priority to a retail motor fuel site that has been constructed and is operating. It may also provide special priority to a retail dealer who was not eligible to receive an E-15 incompatible infrastructure class waiver because the total estimated cost of improvement does not exceed the E-15 improvement base amount (assigned special status). An award of financial incentives must be based on a five-year agreement with the state’s cost share limited to percent or $50,000, whichever is less. However, in the case of a special status retail dealer who DALS determines is ineligible to be issued an E-15 incompatible infrastructure class waiver order, the limits for financing an improvement to the retail dealer’s retail site are subject to the percent or $50,000 regardless of whether the infrastructure board awarded financing to improve that retail site prior to the determination. A retail dealer installing, replacing, or converting ethanol infrastructure must agree to advertise and sell ethanol blended gasoline classified at an E-15 threshold for all months of the year rather than seasonally. _____ exception. The threshold is increased to B-11 from April to October 31.25 million may be allocated to support biodiesel infrastructure under the renewable fuel infrastructure program for retail motor fuel sites. The bill does not limit the amount that may be allocated to support the renewable fuel infrastructure program for biodiesel terminal facilities.

Changed since by amendments S-5143, H-8005; see Amendments.

Full bill text · What changed before it passed²

Senate subcommittee

Named January 31, 2022. On February 2, 2022 it recommended passage.

Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part

Fiscal note

AI summary This bill changes requirements for selling ethanol and biodiesel blends, modifies various tax credits, and updates infrastructure grant eligibility. The fiscal impact of these changes cannot be estimated.³

Read the fiscal note

Description

House File 2128 relates to ethanol and biodiesel blended motor fuels by establishing retail dealer requirements related to fuel products advertised and offered for sale, enhancing and extending State tax credits, modifying motor fuel infrastructure grant eligibility requirements, extending the motor fuel tax differential for ethanol and biodiesel blends, and requiring State vehicles to be able to use and to use certain types of biofuel blends. Division I establishes a new requirement that retail motor fuel sites that sell gasoline products must advertise and offer for sale an E-15 ethanol blend. If the motor fuel site has more than one functioning gasoline dispenser, the motor fuel site may also sell unblended gasoline and/or blended ethanol below E-15. The requirement is effective January 1, 2023. The requirement applies to all retail motor fuel sites that install, replace, or convert a motor fuel storage tank located at the site on or after January 1, 2023, and to every motor fuel site on or after January 1, 2026.

The Secretary of Agriculture is granted authority to refuse to issue or renew a commercial weighing and measuring device license issued to a retail motor fuel dealer if the dealer does not comply with the new E-15 advertising and sales requirements. The Secretary may also suspend or revoke an existing license for noncompliance with the requirement. Several potential exceptions to the new advertising and sales requirements are provided:

Motor fuel dispensers at a retail motor fuel site that dispense aviation fuel, diesel fuel, or kerosene.
Motor fuel dispensers that are located at a commercial marina or are attached to a mobile tank vehicle used for off-site dispensing of motor fuel.
During periods associated with installation or repair of the fuel dispensing infrastructure at the motor fuel site.
During periods in which the requirement is suspended through an Executive Order issued by the Governor. Suspensions by the Governor may apply on a statewide or regional basis.
During periods of E-15 unavailability in which the Secretary of Agriculture has temporarily waived the requirement for a specific motor fuel site through an administrative order.
During periods in which the Secretary of Agriculture has temporarily waived the requirement for a specific motor fuel site through an administrative order based on a finding by the Secretary that the motor fuel dispensing infrastructure at the motor fuel site is incompatible with E-15 blends. Waivers of the requirement are based on an application by the retail site owner and one of the following findings by the Department of Agriculture and Land Stewardship (DALS):
Class 1 waiver — A finding that all motor fuel storage tanks at the retail site were installed prior to specified years. All tanks installed prior to 1986, as well as double walled fiberglass tanks installed prior to 1992 and single walled fiberglass tanks installed prior to 1997, are eligible for the waiver.
Class 2 waiver — A finding by the DALS that some portion of the motor fuel dispensing infrastructure at the site is not compatible with E-15 blends, and additionally, that the portion of the cost of assessing and replacing the incompatible infrastructure that is the responsibility of the motor fuel site owner exceeds a calculated amount.
Retail locations where gasoline sales averaged 300,000 gallons or less over a qualifying period.

Division II prohibits a retail motor fuel dealer from installing, replacing, or converting gasoline storage and dispensing infrastructure at a motor fuel site unless the resulting infrastructure is compatible with E-85 ethanol blends. The Division also prohibits a retail motor fuel dealer from installing, replacing, or converting diesel storage and dispensing infrastructure unless the resulting infrastructure is compatible with B-20 or higher biodiesel blends. Both prohibitions are effective beginning January 1, 2023.

Division III establishes new requirements for motor fuel and motor vehicles purchased by the State of Iowa. Furthermore, it requires the Department of Administrative Services to compile a State Fleet Qualified Renewable Fuels Compliance Report that includes information from the Commission for the Blind, Board of Regents institutions, Department of Transportation, and Department of Corrections, with the report due to the Governor and General Assembly by March 1 of each year. The Bill requires the Director of the Department of Administrative Services, as part of any competitive bidding procedure for the purchase of a motor vehicle using diesel fuel, to require the bidder to certify that the vehicle’s manufacturer expressly states that the vehicle is able to use B-20 or higher blends. Division III takes effect on July 1, 2022. Division IV modifies the existing E-85 Gasoline Promotion Tax Credit, Biodiesel Blended Fuel Tax Credit, and E-15 Plus Gasoline Promotion Tax Credit. The changes extend the availability of the tax credits beyond current sunset dates by one to three calendar years. The changes also:

E-85 — Repeal a provision that allows a retail motor fuel dealer to claim both E-15 and E-85 Gasoline Promotion Tax Credits for the sale of the same gallons. This change is effective after CY 2025.
Biodiesel — Replace the current 3.5 cent and 5.5 cent per gallon tax credit for B-5 and higher biodiesel blends with a tax credit equal to 5.0 cents, 7.0 cents, or 10.0 cents for B-11 and higher blends.
E-15 — Modifies the tax credit rate from 3.0 cents or 10.0 cents per gallon, depending on the time of year of the sale, to a tax credit of 9.0 cents regardless of the date of the sale. Division V extends the preferential motor fuel tax schedule for E-15 and higher blends for four years, to June 30, 2030. The preferential motor fuel tax schedule for biodiesel blends is also extended to June 30, 2030, but the threshold blend needed to receive the reduced tax rate is increased from the current B-11 level to B-20. Both changes are effective beginning July 1, 2024. Division V also amends retail dealer motor fuel reporting requirements retroactively to January 1, 2022.

Division VI extends the existing Biodiesel Production Credit through CY 2027 (three years) and doubles the tax credit rate to 4.0 cents per gallon of biodiesel produced. Both changes are effective beginning CY 2023.

Division VII makes changes to the Renewable Fuel Infrastructure Program (RFIP) created in Iowa Code section 159A.14. The RFIP provides cost share grants to install, replace, or convert motor fuel infrastructure at motor fuel sites. Under current law, to be eligible for grants through the RFIP, the new motor fuel infrastructure must be compatible with E-15 or biodiesel as applicable.

Under the Bill, the new motor fuel infrastructure must be compatible with E-85 or B-20 fuels as applicable. The maximum infrastructure grant available for a single site ranges from 90.0% of eligible costs or $63,900, whichever is lower, to 70.0% or $50,000, whichever is lower. Further supplemental grants are available for additional sites owned by the same retail dealer. The Bill gives grant prioritization to applications for existing motor fuel sites and for sites where the owner’s portion of the required cost is not high enough for a Class 2 E-15 advertising and selling requirement waiver to be granted by the Secretary of Agriculture. During a five-year compliance period, ethanol infrastructure grant beneficiaries are required to sell E-15 fuel. Biodiesel infrastructure grant beneficiaries are required to sell B-5 fuel during the November through March period and B-11 fuel for the remainder of the year. Current Iowa Code section 159A.17 provides a $5.0 million annual General Fund standing appropriation to the RFIP. For FY 2023 only, HF 2579 (Rebuild Iowa Infrastructure Appropriations Bill) replaces the General Fund appropriation to the RFIP with a $10.0 million appropriation from the Rebuild Iowa Infrastructure Fund.

Criminal Penalty — Section 20 of the Bill creates a new action that is subject to a criminal penalty. An application by a retail dealer, or an inspection report by an installer, for a Class 1 or Class 2 waiver that the dealer or installer knows contains information that is not true and correct is defined as perjury. Perjury is a Class D felony that upon conviction is punishable by confinement for no more than five years and a fine of at least $1,025 but not more than $10,245. This Section takes effect January 1, 2023.

Civil Penalty — Section 71 of the Bill creates a new action that is subject to a civil penalty. A retail dealer who does not submit a required annual fuel gallons report to the Department of Revenue, or fails to maintain records related to the report, may incur a $100 civil penalty for each occurrence.

Assumptions

Blended and Unblended Gasoline Sales, Tax Credits, and Motor Fuel Tax Revenue

The projected annual retail sales of blended and unblended gasoline are based on the Retailers Fuel Gallons Annual Reports filed by Iowa fuel retailers with the State. The Department of Revenue produces an annual summary that provides the number of gallons sold in Iowa, both in total and by specific blend (E-0, E-10, E-15, E-20, and E-85). The CY 2019 report concludes that 1,565 million gallons of blended and unblended gasoline motor fuel were sold by retailers who filed 2019 reports with the Department. Due to the impact of COVID-19 on CY 2020 travel and therefore fuel purchases, the CY 2020 version of the report is not used for this projection.
The Department’s Fuel Tax Monthly Report for the 12 months that represent CY 2019 indicates that fuel tax was paid on 1,657.6 million gallons of gasoline fuel for the year. Therefore, the number of gallons represented in the annual retailers’ report is 94.4% of the gallons sold at retail over the period. To adjust for the missing gallons, the gallons of each blend category are divided by 94.4% so that total retail gallons equal taxed gallons for the year. The CY 2019 gasoline gallons reported by retailers and the adjusted gallons are presented in Table 1.
Gasoline (E-0) and pure ethanol (E-100) have different energy content by volume. Gasoline contains 115,400 BTU (British Thermal Units) per gallon, while E-100 contains 75,670 BTU per gallon. A vehicle that travels a given distance on E-0 will require a greater volume of fuel to travel the same distance on an ethanol blend. This estimate assumes the same number of miles driven by Iowa retail fuel purchasers under the Bill as is assumed under current law. In order to account for the miles per gallon difference between blends, this projection adjusts the overall fuel volume using the following energy content factors:
E-0 = 1.000
E-10 = 1.036
E-15 = 1.054
E-20 = 1.074
E-85 (calculated as E-79) = 1.374
Using the adjusted fuel gallons sold by ethanol content as provided in the Retailers Fuel Gallons Annual Reports for CY 2016 through CY 2019 and the per-gallon energy content factors listed for each blend in the previous assumption, it is calculated for this projection that the miles traveled using taxed gasoline gallons purchased at Iowa retail locations decreased at an average annual rate of 2.2% over the period. For this projection, this same annual rate of decline in miles driven using gasoline as the fuel is assumed for CY 2020 through CY 2030.
In recent years, the mix of blended and unblended gasoline purchased at Iowa retail locations has been changing modestly, with unblended and E-10 blend gallons decreasing and E-15 and E85 blends increasing. For this projection, the fuel mix trends for unblended (decreasing), E-15, and E-85 (both increasing) are assumed to continue through CY 2030 at the same average annual gallon change experienced from CY 2016 to CY 2019. To incorporate this assumption and maintain the miles-driven assumption, the gallons of E-10 are reduced by a factor that results in an overall calculated decline in miles driven of 2.2% each year.
Motor fuel tax is deposited in the Road Use Tax Fund, where it is used for road purposes. The motor fuel tax rate for unblended and E-10 is $0.300 per gallon and E-15 and higher blends are currently taxed at $0.240 per gallon. The tax rate for E-15 is designed to change as E-15 and above gallons increase as a percent of total gasoline gallons sold. Current law ends the preferential tax rates for higher blend ethanol starting FY 2027. The assumptions concerning the mix of gasoline blends result in projected E-15 and above motor fuel tax rates of $0.240 per gallon through FY 2025 and $0.245 per gallon for FY 2026.
The Bill has several provisions that are designed to increase the amount of ethanol consumed as a component of gasoline motor fuel and thereby alter the mix of fuel blends sold in Iowa when compared to current law. The Bill:
Requires, beginning January 1, 2023, that any gasoline retail site that installs, replaces, or converts a motor fuel storage tank must advertise for sale and sell E-15. In addition,E-0 E-10 E-15 E-20 E-85 Total CY 2019 211.5 1,284.3 49.0 1.1 19.0 1,564.9

Adjusted CY 2019 * 224.0 1,360.4 51.9 1.2 20.1 1,657.6 * Adjusted so total retail gallons match annual taxable gallons.

2019 Iowa Gasoline Retail Sales — Reported and Adjusted

Fuel Gallons in Millions

Table 1 beginning January 1, 2026, all gasoline retail sites are required to advertise for sale and sell E-15 unless granted a temporary waiver from the requirement.

Requires that any time a retail motor fuel dealer installs, replaces, or converts motor fuel storage and dispensing infrastructure, the resulting infrastructure must be capable of storing and dispensing fuel classified as E-85 or higher.
Extends existing retail tax incentives for the sale of E-15 and E-85, set to expire at the conclusion of CY 2024, by one and three calendar years respectively.
Increases the tax credit for E-15 blends to 9.0 cents per gallon, starting with CY 2023.
Extends the current motor fuel tax schedule that taxes E-15 and higher blends at a rate of up to 6.0 cents per gallon below that of unblended gasoline and E-10 for four fiscal years.
The current income tax credit for E-15 sales equals 10.0 cents per gallon for the summer period and 3.0 cents for the winter period. The Department of Revenue reports that 39.4% of E-15 gallons are sold during the summer period and 60.6% are sold during the winter period. This equates to an average tax credit of 5.8 cents per gallon across a full year. The Bill changes the E-15 credit to 9.0 cents per gallon for all sales, beginning January 1, 2023. Therefore, the estimated average change in the credit across an entire year is an increase of 3.2 cents per gallon. In addition to this change, the E-15 tax credit is extended for one year.
The current income tax credit for E-85 sales equals 16.0 cents per gallon, and the credit remains at that level under the Bill. The Bill extends the credit for an additional three years beyond its current sunset date of December 31, 2024.
E-15 and E-85 tax credits are refundable, and therefore 100.0% of earned credits are assumed to be redeemed. It is further assumed that tax credits earned for a calendar year are redeemed in the fiscal year that follows the end of the calendar year in which the tax credits were earned.

Blended and Unblended Diesel Sales, Tax Credits, and Motor Fuel Tax Revenue

Projected annual retail sales of blended and unblended diesel fuel are based on the Retailers Fuel Gallons Annual Reports filed by Iowa motor fuel retailers with the State. The Department of Revenue produces an annual summary that provides the number of gallons sold in Iowa, both in total and by specific blend (B-0, B-01 to B-04, B-5 to B-10, B-11 to B-19, B-20 to B-49, and B-50 to B-100). The CY 2019 report concludes that 636.9 million gallons (blended and unblended) of taxed diesel fuel and 200.7 million gallons of tax-exempt diesel fuel were sold by retailers who filed 2019 reports with the Department. Due to the impact of COVID-19 on CY 2020 travel and therefore fuel purchases, the CY 2020 version of the report is not used for this projection.
The Department of Revenue’s Fuel Tax Monthly Report for the 12 months that represent CY 2019 indicates that fuel tax was paid on 756.2 million gallons of taxed diesel fuel for the year. Therefore, the number of taxed gallons represented in the annual retailers’ report is 84.2% of the taxed gallons sold at retail over the period. To adjust for the missing gallons, each blend category of diesel fuel is divided by 84.2% so that total retail gallons equals taxed gallons for the year. Since tax-exempt diesel gallons sold are not included in the Fuel Tax Monthly Report, the number of tax-exempt gallons cannot be accurately adjusted for gallons missing from the retailer report. The CY 2019 diesel gallons reported by retailers and the adjusted gallons are presented in Table 2.
Retail diesel fuel sales increased between CY 2016 and CY 2019, and the mix of fuel sold increased in average biodiesel content. The current-law projection of gallons sold by biodiesel blend level assumes a continuation of this trend towards higher biodiesel blends, with the annual growth or contraction in each blend equal to 50.0% of the annual gallon change over the CY 2016 through CY 2019 period.
The Bill has several provisions that are expected to alter the mix of diesel fuel blends sold in Iowa when compared to current law, including additional equipment and higher blend requirements that must be met to receive grant funding from the RFIP. The Bill also focuses the Biodiesel Blended Fuel Tax Credit on higher biodiesel blends. These new provisions are assumed to increase the sale of higher blend biodiesel categories by 1.0 percentage point each year above the levels assumed under current law (8.0% above current law by CY 2030).
Diesel (B-0) and pure biodiesel (B-100) have different energy contents by volume. Diesel contains 128,700 BTU per gallon, while B-100 contains 117,093 BTU per gallon. A vehicle that travels a given distance on B-0 will require a greater volume of fuel to travel the same distance on a biodiesel blend. This estimate assumes the same number of miles driven by Iowa retail fuel purchasers under the Bill as is assumed under current law. In order to account for the miles per gallon difference between fuel blends, this projection adjusts the overall fuel volume using the following energy factors listed below.
B-0 = 1.000
B-5 = 1.005
B-11 = 1.010
B-20 = 1.018
B-30 = 1.067
B-100 = 1.099
Tax-Exempt (Dyed) Gallons — Tax-exempt gallons are assumed to remain at the CY 2019 level for all blends for all years, and the dyed gallons are not included in the tax credit change calculations.
Biodiesel tax credits are refundable, and therefore 100.0% of earned credits are assumed to be redeemed. It is further assumed that tax credits earned for a calendar year are redeemed in the fiscal year that follows the end of the calendar year in which the tax credits were earned.
Current Iowa law provides a Biodiesel Production Credit equal to 2.0 cents for every gallon of biodiesel produced in the State. A single production facility is limited to no more than $500,000 (25.0 million gallons) in credits each calendar year. The credit sunsets at the end of CY 2024 under current law. At 2.0 cents per gallon, credit redemptions equal a projected $4.2 million each year. This Bill doubles the tax credit rate to 4.0 cents and also extends the availability of the credit three calendar years.
The projected change in the mix of diesel fuel blends has a modest impact on diesel motor fuel tax receipts. Positive impacts are projected to result from excluding B-20 gallons fromB-0 B-1 to B-4 B-5 to B-10 B-11 to B-19 B-20 to B-49 B-50 to B-100 Total CY 2019, Taxed 191.7 7.0 69.5 291.2 76.9 0.5 636.8

CY 2019, Tax Exempt 150.8 0.7 40.7 7.0 1.5 0.0 200.7 CY 2019, Adjusted * 227.7 8.3 82.5 345.8 91.3 0.6 756.2 CY 2019, Tax Exempt 150.8 0.7 40.7 7.0 1.5 0.0 200.7 * Adjusted so total retail gallons match annual taxable gallons.

Table 2 2019 Iowa Diesel Retail Sales — Reported and Adjusted