Bio Fuel Tax Credit Changes Measure Passes Both Chambers

On Wednesday, May 4, 2011, the House passed Senate File 531 without amendment by an 81-aye to 13-nay vote. It finalizes legislative action on this bill. Earlier in the week on, the Senate passed Senate File 531 by a 48-aye to 1-nay vote. SF 531 makes a number of biofuels tax credit program changes. These include:

  • Increase the incentive rates under Iowa Renewable Fuel Standard (RFS) from the existing 6.5/4/2.5-cent rates to 8/6/4 rate for renewable fuel sales: at or above the scheduled RFS/below, but within 2% of the scheduled RFS/ more than 2% below but within 4% of the RFS;
  • Change and truncate the E-85 tax credit: initially 25-cents (calendar years 2006-2008), 20-cents (2009-2010), and currently 10-cents for calendar year 2011 and declining a penny a year to 1-cent in 2020; to establish a new constant 16-cent rate, but ends this tax credit three year earlier (12/312017 instead of 12/31/2020);
  • Creates a mid-ethanol blend tax credit of 3-cents per gallon for E-15 Plus for calendar years 2012-2014 and 2-cents for calendar year 2015-2017;
  • Transfer each year up to $3-million per year of moneys previously being deposited in to the UST (reduces UST transfer from $17-million annually to $14-million) to the Renewable Fuels Infrastructure Fund.
  • Provide broad liability protection for retailers who properly label and dispense biofuels;
  • Modifies the existing biodiesel tax credit earned for B-2 sales when a threshold of 50% of diesel sales is biodiesel to eliminate the minimum threshold. Additionally, SF 531 changes the B2 tax credit to 2-cent for calendar year 2012, and institutes a 4.5-cent B-5 or higher tax credit beginning 1/1/2012 through 12/31//2017;
  • Permits retailer flexibility in calculating RFS and tax credits to allow them the choice of existing law (on a company-wide basis or on a site-by-site basis;
  • Creates a 3-year Refundable Biodiesel Producer Sales/Use Tax Credit of 3-cents per gallon of biodiesel for calendar year 2012, 2.5-cents in 2013, and 2-cents in 2014 for up to 25-million gallons per year that is produced at Iowa biodiesel facilities.