S.F. 284 DIVISION I 1 STANDARDS 2 Section 1. Section 214A.1, Code 2011, is amended by adding 3 the following new subsection: 4 NEW SUBSECTION . 23A. “Unblended gasoline” means gasoline 5 other than any of the following: 6 a. Standard ethanol blended gasoline. 7 b. E-85 gasoline. 8 Sec. 2. NEW SECTION . 214A.2C Gasoline advertised, sold, or 9 dispensed by a retail dealer —— ethanol blend requirement and 10 exceptions —— applicability. 11 1. Except as otherwise provided in this section, a retail 12 dealer shall not advertise, sell, or dispense unblended 13 gasoline in this state. 14 2. A retail dealer may advertise, sell, or dispense 15 unblended gasoline in this state if all of the following apply: 16 a. The unblended gasoline is used to operate a motor which 17 powers a qualified motor vehicle which is any one of the 18 following: 19 (1) An aircraft as defined in section 328.1. 20 (2) A motor vehicle used exclusively for motor sports, 21 including on a raceway, if the motor vehicle cannot operate on 22 a highway as provided in chapter 321 or rules adopted by the 23 state department of transportation. 24 (3) A 1985 or older model vehicle that is registered as an 25 antique vehicle under section 321.115. 26 (4) A snowmobile as defined in section 321G.1. 27 (5) An all-terrain vehicle as defined in section 321I.1. 28 (6) A watercraft as defined in section 462A.2. 29 (7) A lawn mower or other implement powered by a small 30 motor. 31 b. The retail dealer does not use more than one metered 32 pump located at a retail motor fuel site to advertise, sell, 33 or dispense unblended gasoline. 34 3. A retail dealer may advertise, sell, or dispense 35 -1- LSB 2156XS (7) 84 da/rj 1/ 9

S.F. 284 unblended gasoline at a retail motor fuel site owned or 1 operated by the retail dealer pursuant to a waiver issued by 2 the department to the retail dealer. 3 a. The department shall only issue a waiver to a retail 4 dealer after approving an application submitted to the 5 department by the retail dealer in a manner and according 6 to procedures required by the department which application 7 demonstrates that the retail dealer is not able to reasonably 8 obtain ethanol blended gasoline for sale at the retail motor 9 fuel site. 10 b. A waiver issued under this subsection expires six months 11 from the date of issuance. However, a retail dealer who has 12 been issued a waiver may apply for and be issued any number of 13 subsequent waivers. 14 4. a. A retail dealer may advertise, sell, or dispense 15 unblended gasoline at a retail motor fuel site owned or 16 operated by the retail dealer without restriction as otherwise 17 provided in this section until January 1, 2012. 18 b. This subsection is repealed on January 1, 2012. 19 Sec. 3. Section 214A.3, Code 2011, is amended by adding the 20 following new subsection: 21 NEW SUBSECTION . 3. A retail dealer who advertises the sale 22 of gasoline that is not ethanol blended gasoline shall refer to 23 the gasoline as unblended gasoline. 24 Sec. 4. Section 214A.16, Code 2011, is amended to read as 25 follows: 26 214A.16 Notice of renewable biodiesel fuel or unblended 27 gasoline —— decal. 28 1. a. If ethanol blended gasoline is sold from a motor fuel 29 pump a motor fuel pump dispenses unblended gasoline , the motor 30 fuel pump shall have affixed a decal identifying the ethanol 31 blended gasoline motor fuel as unblended gasoline . If the 32 motor fuel pump dispenses ethanol blended gasoline classified 33 as higher than standard ethanol blended gasoline pursuant 34 to section 214A.2 , the decal shall contain the following 35 -2- LSB 2156XS (7) 84 da/rj 2/ 9

S.F. 284 notice: “FOR FLEXIBLE FUEL VEHICLES ONLY” identify the ethanol 1 blended gasoline as for flexible fuel vehicles only . 2 b. If biodiesel fuel is sold from a motor fuel pump, the 3 motor fuel pump shall have affixed a decal identifying the 4 biodiesel fuel as provided in 16 C.F.R. pt. 306. 5 2. The design and location of the decal shall be prescribed 6 by rules adopted by the department. A decal identifying a 7 renewable biodiesel fuel shall be consistent with standards 8 adopted pursuant to section 159A.6 . The department may approve 9 an application to place a decal in a special location on a pump 10 or container or use a decal with special lettering or colors, 11 if the decal appears clear and conspicuous to the consumer. 12 The application shall be made in writing pursuant to procedures 13 adopted by the department. 14 DIVISION II 15 E-15 PROMOTION TAX CREDIT 16 Sec. 5. Section 2.48, subsection 3, paragraph d, 17 subparagraph (5), Code 2011, is amended to read as follows: 18 (5) The ethanol E-15 promotion tax credits available under 19 section 422.11N . 20 Sec. 6. Section 422.11N, subsection 1, paragraph f, Code 21 2011, is amended to read as follows: 22 f. “Tax credit” means the ethanol E-15 promotion tax credit 23 as provided in this section . 24 Sec. 7. Section 422.11N, subsection 3, Code 2011, is amended 25 to read as follows: 26 3. The taxes imposed under this division , less the tax 27 credits allowed under section 422.12 , shall be reduced by an 28 ethanol E-15 gasoline promotion tax credit for each tax year 29 that the taxpayer is eligible to claim the tax credit under 30 this section . In order to be eligible, all of the following 31 must apply: 32 a. The taxpayer is a retail dealer who sells and dispenses 33 ethanol blended gasoline designated as E-15 or higher pursuant 34 to section 214A.2 through a motor fuel pump in the tax year in 35 -3- LSB 2156XS (7) 84 da/rj 3/ 9

S.F. 284 which the tax credit is claimed. 1 b. The retail dealer complies with requirements of the 2 department to administer this section . 3 Sec. 8. Section 422.11N, subsection 5, paragraph a, 4 unnumbered paragraph 1, Code 2011, is amended to read as 5 follows: 6 For a retail dealer whose tax year is the same as a 7 determination period beginning on January 1 and ending on 8 December 31, the retail dealer’s tax credit is calculated by 9 multiplying the retail dealer’s total ethanol gallonage from 10 ethanol blended gasoline designated as E-15 or higher, pursuant 11 to section 214A.2, by a tax credit rate, which may be adjusted 12 based on the retail dealer’s biofuel threshold percentage 13 disparity. The tax credit rate is as follows: 14 Sec. 9. Section 422.11N, subsection 6, Code 2011, is amended 15 to read as follows: 16 6. A retail dealer is eligible to claim an ethanol E-15 17 gasoline promotion tax credit as provided in this section even 18 though the retail dealer claims an E-85 gasoline promotion tax 19 credit pursuant to section 422.11O for the same tax year and 20 for the same ethanol gallonage. 21 Sec. 10. Section 422.11O, subsection 5, Code 2011, is 22 amended to read as follows: 23 5. A retail dealer is eligible to claim an E-85 gasoline 24 promotion tax credit as provided in this section even though 25 the retail dealer claims an ethanol E-15 gasoline promotion tax 26 credit pursuant to section 422.11N for the same tax year for 27 the same ethanol gallonage. 28 Sec. 11. Section 422.33, subsection 11A, unnumbered 29 paragraph 1, Code 2011, is amended to read as follows: 30 The taxes imposed under this division shall be reduced by 31 an ethanol E-15 promotion tax credit for each tax year that 32 the taxpayer is eligible to claim the tax credit under this 33 subsection . 34 Sec. 12. Section 422.33, subsection 11A, paragraphs a and b, 35 -4- LSB 2156XS (7) 84 da/rj 4/ 9

S.F. 284 Code 2011, are amended to read as follows: 1 a. The taxpayer shall claim the tax credit in the same 2 manner as provided in section 422.11N . The taxpayer may claim 3 the tax credit according to the same requirements, for the same 4 amount, and calculated in the same manner, as provided for the 5 ethanol E-15 promotion tax credit pursuant to section 422.11N . 6 b. Any ethanol E-15 promotion tax credit which is in excess 7 of the taxpayer’s tax liability shall be refunded or may be 8 shown on the taxpayer’s final, completed return credited to the 9 tax liability for the following tax year in the same manner as 10 provided in section 422.11N . 11 Sec. 13. Section 452A.31, subsection 2, paragraph a, 12 subparagraph (1), Code 2011, is amended to read as follows: 13 (1) The total ethanol blended gasoline gallonage which 14 is the retail dealer’s total number of gallons of ethanol 15 blended gasoline and which includes any subclassification 16 required by the department. However, the total ethanol blended 17 gasoline gallonage must at least include all of the following 18 subclassifications: 19 (a) The total E-xx E-10 gasoline gallonage which is the 20 total number of gallons of ethanol blended gasoline other than 21 E-85 gasoline designated as E-9 or E-10 . 22 (b) The total E-15 gasoline gallonage which is the total 23 number of gallons of ethanol blended gasoline designated as 24 E-11 to E-15. 25 (c) The total E-85 flexible fuel gasoline gallonage which 26 is the total number of gallons of ethanol blended gasoline 27 designated as E-16 to E-85 gasoline . 28 Sec. 14. Section 452A.31, subsection 4, paragraph a, 29 subparagraph (1), Code 2011, is amended by striking the 30 subparagraph and inserting in lieu thereof the following: 31 (1) The aggregate ethanol blended gasoline gallonage which 32 is the aggregate total number of gallons of ethanol blended 33 gasoline and which includes the aggregate ethanol blended 34 gasoline gallonage for each subclassification provided for in 35 -5- LSB 2156XS (7) 84 da/rj 5/ 9

S.F. 284 subsection 2. 1 Sec. 15. NEW SECTION . 452A.34 Classification of ethanol 2 blended fuel. 3 For purposes of this division, ethanol blended fuel shall be 4 classified in the same manner as provided in section 214A.2. 5 Sec. 16. 2006 Iowa Acts, chapter 1142, section 49, 6 subsection 2, as amended by 2006 Iowa Acts, chapter 1175, 7 section 17, is amended to read as follows: 8 2. For a retail dealer who may claim an ethanol E-15 9 promotion tax credit under section 422.11N or 422.33, 10 subsection 11A, as enacted in this Act and amended in 11 subsequent Acts , in calendar year 2020 and whose tax year ends 12 prior to December 31, 2020, the retail dealer may continue to 13 claim the tax credit in the retail dealer’s following tax year. 14 In that case, the tax credit shall be calculated in the same 15 manner as provided in section 422.11N or 422.33, subsection 16 11A, as enacted in this Act and amended in subsequent Acts , 17 for the remaining period beginning on the first day of the 18 retail dealer’s new tax year until December 31, 2020. For 19 that remaining period, the tax credit shall be calculated in 20 the same manner as a retail dealer whose tax year began on the 21 previous January 1 and who is calculating the tax credit on 22 December 31, 2020. 23 Sec. 17. EFFECTIVE DATE. This division takes effect January 24 1, 2012. 25 Sec. 18. APPLICABILITY. The sections of this division 26 amending section 422.11N and section 422.33, subsection 11A, 27 and the section of this Act amending 2006 Iowa Acts, chapter 28 1142, section 49, subsection 2, as amended by 2006 Iowa Acts, 29 chapter 1175, section 17, apply to tax years beginning on or 30 after January 1, 2012. 31 EXPLANATION 32 REGULATION OF ETHANOL BLENDED GASOLINE. This bill amends 33 Code chapter 214A, which provides authority to the department 34 of agriculture and land stewardship (department) to regulate 35 -6- LSB 2156XS (7) 84 da/rj 6/ 9

S.F. 284 the sale of motor fuel, including renewable fuel such as 1 ethanol blended gasoline. Code section 214A.2 provides for 2 different types of gasoline and establishes standards or 3 specifications for gasoline in conformance with federal law 4 and specifically regulations promulgated by the Unites States 5 environmental protection agency (EPA), and in part based on 6 standards published by the American society for testing and 7 materials (A.S.T.M.) international. The Code section provides 8 that standard ethanol blended gasoline is classified by its 9 percent volume of ethanol, referred to as “E-xx” where “xx” 10 designates the percentage (e.g., E-10 or E-15). 11 ETHANOL BLENDED GASOLINE REQUIREMENT. The bill creates a 12 new requirement that a retail dealer cannot advertise, sell, or 13 dispense gasoline other than ethanol blended gasoline; either 14 standard ethanol blended gasoline or so-called E-85 gasoline. 15 Gasoline which does not contain the requisite percentage of 16 ethanol is referred to as “unblended gasoline”. 17 EXCEPTIONS. Notwithstanding the prohibition, the bill 18 allows a retail dealer to continue to advertise, sell, or 19 dispense unblended gasoline in limited circumstances. First, 20 the prohibition does not apply to gasoline used to operate 21 aircraft, or motor vehicles involved exclusively in motor 22 sports events. The requirement also does not apply to 23 gasoline for use in certain vehicles such as antique vehicles, 24 snowmobiles, all-terrain vehicles, watercraft, and small 25 motors. The bill prohibits a retail dealer from using more 26 than one metered pump to dispense unblended gasoline. Second, 27 the prohibition does not apply to a retail dealer who has been 28 issued a waiver by the department because the retail dealer has 29 not been able to reasonably obtain ethanol blended gasoline for 30 sale at the retail motor fuel site. The waiver expires six 31 months from the date of issuance. However, a retail dealer who 32 has been issued a waiver may apply for any number of subsequent 33 waivers. Third, a retail dealer may continue to advertise, 34 sell, or dispense unblended gasoline from one or more metered 35 -7- LSB 2156XS (7) 84 da/rj 7/ 9

S.F. 284 pumps located at a retail motor fuel site until January 1, 1 2012. 2 ADVERTISING. The bill provides that a retail dealer must 3 affix a decal on each metered pump which dispenses unblended 4 gasoline, notifying the public of its designation and any 5 restricted use. The bill eliminates a requirement that a 6 metered pump dispensing ethanol blended gasoline be affixed 7 with a decal. 8 APPLICABLE PENALTIES. Code section 214A.11 provides that 9 a person who violates a provision of Code chapter 214A is 10 guilty of a serious misdemeanor, and that each day that a 11 continuing violation occurs is considered a separate offense. 12 A serious misdemeanor is punishable by confinement for no 13 more than one year and a fine of at least $315 but not more 14 than $1,875. The Code section also provides that in lieu of 15 seeking a prosecution, the state may proceed against the person 16 by initiating an alternative civil enforcement action as a 17 contested case proceeding by the department under Code chapter 18 17A or as a civil judicial proceeding by the attorney general 19 upon referral by the department. The applicable civil penalty 20 is at least $100 but not more than $1,000 for each violation. 21 Each day that a continuing violation occurs shall be considered 22 a separate offense. 23 E-15 PROMOTION TAX CREDIT. The bill amends the ethanol 24 promotion tax credit which is calculated separately for each 25 retail motor fuel site from which the retail dealer sells and 26 dispenses ethanol blended gasoline (Code sections 422.11N and 27 422.33, subsection 11A). The tax credit rate depends upon the 28 number of gallons of ethanol blended gasoline and biodiesel 29 blended fuel that a retail dealer sold throughout a calendar 30 year (referred to as a determination period). The amount of 31 the tax credit depends upon whether the retail dealer met that 32 biofuel threshold. This bill renames the tax credit as the 33 E-15 promotion tax credit, and provides that the tax credit 34 applies only to those gallons of ethanol blended gasoline 35 -8- LSB 2156XS (7) 84 da/rj 8/ 9

S.F. 284 designated as E-15 or higher. It also allows a retail dealer 1 filing a tax return on a noncalendar year basis to claim the 2 tax credit. The tax credit is eliminated on January 1, 2021. 3 REPORTING. The bill also amends reporting requirements 4 by retail dealers and the department of revenue. A retail 5 dealer’s report calculates the total motor fuel gallonage, 6 and further divides that number based on a number of 7 classifications depending upon the type of motor fuel sold, 8 including ethanol blended gasoline gallonage. The department 9 then calculates the aggregate total for the motor fuel 10 gallonage including by classification for the determination 11 period. The bill revises the reporting classifications for 12 ethanol blended gasoline, by including subclassifications for 13 E-9 and E-10, E-11 to E-15, and E-16 to E-85. It provides that 14 the department may establish additional subclassifications. 15 The bill’s provisions related to tax credit and reporting 16 requirements are effective on January 1, 2012, and tax credit 17 provisions are applicable to the tax years beginning on or 18 after that date. 19 -9- LSB 2156XS (7) 84 da/rj 9/ 9