Providing for the marketing of grain by licensed warehouse operators and grain dealers, including by providing for indemnity fees and the indemnification of grain depositors and sellers for losses following the cessation of a license or bankruptcy

Normally, a grain dealer’s financial statement must be accompanied by an unqualified opinion based upon an audit performed by a certified public accountant licensed in this state. However, DALS may accept a qualification in an opinion because of the audit procedures used. DALS may also accept a review by a certified public accountant in lieu of an unqualified opinion. BACKGROUND —— CREDIT-SALE CONTRACTS. A credit-sale contract (also referred to as deferred-payment contract, deferred-pricing contract, or price-later contract) involves a transaction for the sale of grain in which the grain’s producer is the seller and the licensed grain dealer is the buyer.8). _____ Generally, there are two types of credit-sale contracts, a deferred-pricing contract and a deferred-payment contract. In both cases, the seller’s payment amount is delayed until after the sale (transfer of title) and delivery. Under a deferred-pricing contract, the payment amount is unknown at the time of sale and delivery, with the expectation that the seller will receive a higher price in the future. Under a deferred-payment contract, the purchase price has been determined upon, or within a short time after, the grain’s sale and delivery., expecting a reduction in farm income). BACKGROUND —— GRAIN DEPOSITORS AND SELLERS INDEMNITY FUND.6). A payment is made from the grain depositors and sellers indemnity fund (indemnity fund) upon a determination that the claim is eligible for indemnification by the Iowa grain indemnity fund board (indemnity board) acting in cooperation with DALS. To be timely, a claim must be filed within a claim period. The claim period begins on either of two incurrence dates and ends 120 days later. An incurrence date is either when the license of the grain dealer or warehouse operator’s license ceases (is revoked or voluntarily canceled) or the date a petition is filed in bankruptcy. BACKGROUND —— FEES.33), each licensee may be required to remit either one or two special fees (indemnity fees) deposited in the indemnity fund, referred to as a participation fee and per-bushel fee.014 multiplied by all bushels of purchased grain during the grain dealer’s prior fiscal year with a minimum of $50 and no maximum limit.25 multiplied by all bushels of purchased grain for the grain dealer’s assessment year with no minimum and a $500 maximum limit.1).1).5).5). The assessment year is further divided into four three-month assessment quarters. A grain dealer or warehouse operator may remit a participation fee annually (with an application for an initial license or the renewal of a license) or on a quarterly basis.3A). BACKGROUND —— INDEMNITY BOARD REVIEW OF INDEMNITY FUND. The indemnity board must annually review the debits of and credits to the indemnity fund and by May determine whether to impose the indemnity fees, make adjustments to the existing indemnity fees, or waive the existing indemnity fees as necessary to comply with two triggers.5). When the balance in the indemnity fund reaches $8 million, the indemnity fees are automatically waived.5). _____ effective on the first day of the following assessment year (September 1). A licensee is required to remit the outstanding amount of the waived participation fee that is otherwise owing for the current assessment year.5). BACKGROUND —— INDEMNITY FUND —— VALUE OF LOSS. Generally, a loss incurred by a depositor (holding a warehouse receipt or scale weight ticket) or seller who is a party to a sale may be determined using several methods of valuation. For a depositor, it may be a court order hearing a matter in receivership. Otherwise, the loss is based on the fair market price paid to producer sellers at a nearby terminal on an incurrence date. For a seller, it may be the sales price agreed to by the parties. If the grain has not yet been priced, the loss is again based on the fair market price paid at the terminal on one of those incurrence dates.6). BACKGROUND —— INDEMNITY FUND —— PAYMENT OF CLAIMS. A claim must meet eligibility requirements, including that it is timely filed, there is evidence of a loss incurred by a claimant, and the claim derives from a covered transaction. For a claimant who is a depositor, a covered transaction requires that the grain must have been delivered to a licensed warehouse operator. For a claimant who is a seller, a covered transaction requires that title be transferred within six months of the incurrence date. A covered transaction excludes sale by credit-sale contract. A seller or depositor is entitled to be reimbursed percent of a loss but not more than $300,000. BILL’S PROVISIONS —— LICENSE REQUIREMENT FOR GRAIN DEALERS. _____ credit-sale contract and is issued a class license must submit to DALS a financial statement that is accompanied by an unqualified opinion based upon an audit performed by a certified public accountant licensed in this state. DALS cannot accept a qualification in an opinion or a review performed by the certified public accountant. BILL’S PROVISIONS —— INDEMNITY FEES —— PAYMENT SCHEDULE. The bill provides that a grain dealer or warehouse operator may pay the participation fee in one installment as part of the license renewal or on four successive installment dates on December 15, March 15, June 15, and September 15. The bill provides that the grain dealer must pay the per-bushel fee on the same installment dates. BILL’S PROVISIONS —— INDEMNITY FEES —— TRIGGERS. The bill adjusts both triggers waiving or reinstating the two indemnity fees. The bill increases from $8 million to $16 million the balance in the indemnity fund required to trigger a waiver and increases from $3 million to $8 million the balance in the indemnity fund required to trigger a reinstatement. BILL’S PROVISIONS —— INDEMNITY FEES IMPOSED ON CREDIT-SALE CONTRACT TRANSACTIONS. The bill provides that grain sold by deferred-pricing contract is considered purchased grain and grain sold by deferred-payment contract is not. Therefore, a licensed grain dealer is only assessed an indemnity fee on the deferred-pricing contract grain. BILL’S PROVISIONS —— INDEMNITY FUND —— DOLLAR VALUE OF LOSS. The bill provides special valuation rules for losses involving corn or soybeans.S. yellow corn according to grain standards adopted by the federal grain inspection service of the United States department of agriculture.S. yellow soybeans according to grain standards adopted by that same agency., determined by the fair market price at the nearest terminal on the incurrence date). BILL’S PROVISIONS —— INDEMNITY FUND —— PAYMENT OF CLAIMS. The bill provides that the sale of grain by deferred-pricing contract is no longer excluded from the meaning of a covered transaction and a seller may therefore claim a dollar loss resulting from the grain dealer’s default. The bill provides for the payment to claimants based on an order of priority. The first priority is provided to a depositor or seller, other than a seller who sold grain by credit-sale contract. The payout remains the same: percent of the loss but not more than $300,000. The second priority is provided to a seller who sold grain pursuant to a deferred-pricing contract. In that case, the payout is reduced to percent of the loss but not more than $210,000. A deferred-payment contract remains ineligible for payment. BILL’S PROVISIONS —— INDEMNITY FUND —— ORDER OF PAYMENTS. The board may determine when payments are to be made depending upon moneys in the indemnity fund. Payments are to be made on an equal basis between depositors and sellers with one exception. A seller whose grain was sold under a deferred-pricing contract is indemnified after depositors and other sellers.