SENATE FILE 284

BY  KIBBIE and HOUSER

A BILL FOR

An Act relating to motor fuel by establishing standards for the sale of such fuel, providing tax credits for ethanol blended gasoline, and making penalties applicable.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

STANDARDS
   Section 1.  Section 214A.1, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  23A.  “Unblended gasoline” means gasoline other than any of the following:
   a.  Standard ethanol blended gasoline.
   b.  E-85 gasoline.
   Sec. 2.  NEW SECTION.  214A.2C  Gasoline advertised, sold, or dispensed by a retail dealer —— ethanol blend requirement and exceptions —— applicability.
   1.  Except as otherwise provided in this section, a retail dealer shall not advertise, sell, or dispense unblended gasoline in this state.
   2.  A retail dealer may advertise, sell, or dispense unblended gasoline in this state if all of the following apply:
   a.  The unblended gasoline is used to operate a motor which powers a qualified motor vehicle which is any one of the following:
   (1)  An aircraft as defined in section 328.1.
   (2)  A motor vehicle used exclusively for motor sports, including on a raceway, if the motor vehicle cannot operate on a highway as provided in chapter 321 or rules adopted by the state department of transportation.
   (3)  A 1985 or older model vehicle that is registered as an antique vehicle under section 321.115.
   (4)  A snowmobile as defined in section 321G.1.
   (5)  An all-terrain vehicle as defined in section 321I.1.
   (6)  A watercraft as defined in section 462A.2.
   (7)  A lawn mower or other implement powered by a small motor.
   b.  The retail dealer does not use more than one metered pump located at a retail motor fuel site to advertise, sell, or dispense unblended gasoline.
   3.  A retail dealer may advertise, sell, or dispense unblended gasoline at a retail motor fuel site owned or operated by the retail dealer pursuant to a waiver issued by the department to the retail dealer.
   a.  The department shall only issue a waiver to a retail dealer after approving an application submitted to the department by the retail dealer in a manner and according to procedures required by the department which application demonstrates that the retail dealer is not able to reasonably obtain ethanol blended gasoline for sale at the retail motor fuel site.
   b.  A waiver issued under this subsection expires six months from the date of issuance. However, a retail dealer who has been issued a waiver may apply for and be issued any number of subsequent waivers.
   4.
  a.  A retail dealer may advertise, sell, or dispense unblended gasoline at a retail motor fuel site owned or operated by the retail dealer without restriction as otherwise provided in this section until January 1, 2012.
   b.  This subsection is repealed on January 1, 2012.
   Sec. 3.  Section 214A.3, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  3.  A retail dealer who advertises the sale of gasoline that is not ethanol blended gasoline shall refer to the gasoline as unblended gasoline.
   Sec. 4.  Section 214A.16, Code 2011, is amended to read as follows:
   214A.16  Notice of renewable biodiesel fuel or unblended gasoline —— decal.
   1.
  a.  If ethanol blended gasoline is sold from a motor fuel pump a motor fuel pump dispenses unblended gasoline, the motor fuel pump shall have affixed a decal identifying the ethanol blended gasoline motor fuel as unblended gasoline. If the motor fuel pump dispenses ethanol blended gasoline classified as higher than standard ethanol blended gasoline pursuant to section 214A.2, the decal shall contain the following notice:  “FOR FLEXIBLE FUEL VEHICLES ONLY” identify the ethanol blended gasoline as for flexible fuel vehicles only.
   b.  If biodiesel fuel is sold from a motor fuel pump, the motor fuel pump shall have affixed a decal identifying the biodiesel fuel as provided in 16 C.F.R. pt. 306.
   2.  The design and location of the decal shall be prescribed by rules adopted by the department. A decal identifying a renewable biodiesel fuel shall be consistent with standards adopted pursuant to section 159A.6. The department may approve an application to place a decal in a special location on a pump or container or use a decal with special lettering or colors, if the decal appears clear and conspicuous to the consumer. The application shall be made in writing pursuant to procedures adopted by the department.

DIVISION II

E-15 PROMOTION TAX CREDIT
   Sec. 5.  Section 2.48, subsection 3, paragraph d, subparagraph (5), Code 2011, is amended to read as follows:
   (5)  The ethanol E-15 promotion tax credits available under section 422.11N.
   Sec. 6.  Section 422.11N, subsection 1, paragraph f, Code 2011, is amended to read as follows:
   f.  “Tax credit” means the ethanol E-15 promotion tax credit as provided in this section.
   Sec. 7.  Section 422.11N, subsection 3, Code 2011, is amended to read as follows:
   3.  The taxes imposed under this division, less the tax credits allowed under section 422.12, shall be reduced by an ethanol E-15 gasoline promotion tax credit for each tax year that the taxpayer is eligible to claim the tax credit under this section. In order to be eligible, all of the following must apply:
   a.  The taxpayer is a retail dealer who sells and dispenses ethanol blended gasoline designated as E-15 or higher pursuant to section 214A.2 through a motor fuel pump in the tax year in which the tax credit is claimed.
   b.  The retail dealer complies with requirements of the department to administer this section.
   Sec. 8.  Section 422.11N, subsection 5, paragraph a, unnumbered paragraph 1, Code 2011, is amended to read as follows:
   For a retail dealer whose tax year is the same as a determination period beginning on January 1 and ending on December 31, the retail dealer’s tax credit is calculated by multiplying the retail dealer’s total ethanol gallonage from ethanol blended gasoline designated as E-15 or higher, pursuant to section 214A.2, by a tax credit rate, which may be adjusted based on the retail dealer’s biofuel threshold percentage disparity. The tax credit rate is as follows:
   Sec. 9.  Section 422.11N, subsection 6, Code 2011, is amended to read as follows:
   6.  A retail dealer is eligible to claim an ethanol E-15 gasoline promotion tax credit as provided in this section even though the retail dealer claims an E-85 gasoline promotion tax credit pursuant to section 422.11O for the same tax year and for the same ethanol gallonage.
   Sec. 10.  Section 422.11O, subsection 5, Code 2011, is amended to read as follows:
   5.  A retail dealer is eligible to claim an E-85 gasoline promotion tax credit as provided in this section even though the retail dealer claims an ethanol E-15 gasoline promotion tax credit pursuant to section 422.11N for the same tax year for the same ethanol gallonage.
   Sec. 11.  Section 422.33, subsection 11A, unnumbered paragraph 1, Code 2011, is amended to read as follows:
   The taxes imposed under this division shall be reduced by an ethanol E-15 promotion tax credit for each tax year that the taxpayer is eligible to claim the tax credit under this subsection.
   Sec. 12.  Section 422.33, subsection 11A, paragraphs a and b, Code 2011, are amended to read as follows:
   a.  The taxpayer shall claim the tax credit in the same manner as provided in section 422.11N. The taxpayer may claim the tax credit according to the same requirements, for the same amount, and calculated in the same manner, as provided for the ethanol E-15 promotion tax credit pursuant to section 422.11N.
   b.  Any ethanol E-15 promotion tax credit which is in excess of the taxpayer’s tax liability shall be refunded or may be shown on the taxpayer’s final, completed return credited to the tax liability for the following tax year in the same manner as provided in section 422.11N.
   Sec. 13.  Section 452A.31, subsection 2, paragraph a, subparagraph (1), Code 2011, is amended to read as follows:
   (1)  The total ethanol blended gasoline gallonage which is the retail dealer’s total number of gallons of ethanol blended gasoline and which includes any subclassification required by the department. However, the total ethanol blended gasoline gallonage must at least include all of the following subclassifications:
   (a)  The total E-xx E-10 gasoline gallonage which is the total number of gallons of ethanol blended gasoline other than E-85 gasoline designated as E-9 or E-10.
   (b)  The total E-15 gasoline gallonage which is the total number of gallons of ethanol blended gasoline designated as E-11 to E-15.
   (c)  The total E-85 flexible fuel gasoline gallonage which is the total number of gallons of ethanol blended gasoline designated as E-16 to E-85 gasoline.
   Sec. 14.  Section 452A.31, subsection 4, paragraph a, subparagraph (1), Code 2011, is amended by striking the subparagraph and inserting in lieu thereof the following:
   (1)  The aggregate ethanol blended gasoline gallonage which is the aggregate total number of gallons of ethanol blended gasoline and which includes the aggregate ethanol blended gasoline gallonage for each subclassification provided for in subsection 2.
   Sec. 15.  NEW SECTION.  452A.34  Classification of ethanol blended fuel.
   For purposes of this division, ethanol blended fuel shall be classified in the same manner as provided in section 214A.2.
   Sec. 16.  2006 Iowa Acts, chapter 1142, section 49, subsection 2, as amended by 2006 Iowa Acts, chapter 1175, section 17, is amended to read as follows:
   2.  For a retail dealer who may claim an ethanol E-15 promotion tax credit under section 422.11N or 422.33, subsection 11A, as enacted in this Act and amended in subsequent Acts, in calendar year 2020 and whose tax year ends prior to December 31, 2020, the retail dealer may continue to claim the tax credit in the retail dealer’s following tax year. In that case, the tax credit shall be calculated in the same manner as provided in section 422.11N or 422.33, subsection 11A, as enacted in this Act and amended in subsequent Acts, for the remaining period beginning on the first day of the retail dealer’s new tax year until December 31, 2020. For that remaining period, the tax credit shall be calculated in the same manner as a retail dealer whose tax year began on the previous January 1 and who is calculating the tax credit on December 31, 2020.
   Sec. 17.  EFFECTIVE DATE.  This division takes effect January 1, 2012.
   Sec. 18.  APPLICABILITY.  The sections of this division amending section 422.11N and section 422.33, subsection 11A, and the section of this Act amending 2006 Iowa Acts, chapter 1142, section 49, subsection 2, as amended by 2006 Iowa Acts, chapter 1175, section 17, apply to tax years beginning on or after January 1, 2012.
EXPLANATION
   REGULATION OF ETHANOL BLENDED GASOLINE. This bill amends Code chapter 214A, which provides authority to the department of agriculture and land stewardship (department) to regulate the sale of motor fuel, including renewable fuel such as ethanol blended gasoline. Code section 214A.2 provides for different types of gasoline and establishes standards or specifications for gasoline in conformance with federal law and specifically regulations promulgated by the Unites States environmental protection agency (EPA), and in part based on standards published by the American society for testing and materials (A.S.T.M.) international. The Code section provides that standard ethanol blended gasoline is classified by its percent volume of ethanol, referred to as “E-xx” where “xx” designates the percentage (e.g., E-10 or E-15).
   ETHANOL BLENDED GASOLINE REQUIREMENT. The bill creates a new requirement that a retail dealer cannot advertise, sell, or dispense gasoline other than ethanol blended gasoline; either standard ethanol blended gasoline or so-called E-85 gasoline. Gasoline which does not contain the requisite percentage of ethanol is referred to as “unblended gasoline”.
   EXCEPTIONS. Notwithstanding the prohibition, the bill allows a retail dealer to continue to advertise, sell, or dispense unblended gasoline in limited circumstances. First, the prohibition does not apply to gasoline used to operate aircraft, or motor vehicles involved exclusively in motor sports events. The requirement also does not apply to gasoline for use in certain vehicles such as antique vehicles, snowmobiles, all-terrain vehicles, watercraft, and small motors. The bill prohibits a retail dealer from using more than one metered pump to dispense unblended gasoline. Second, the prohibition does not apply to a retail dealer who has been issued a waiver by the department because the retail dealer has not been able to reasonably obtain ethanol blended gasoline for sale at the retail motor fuel site. The waiver expires six months from the date of issuance. However, a retail dealer who has been issued a waiver may apply for any number of subsequent waivers. Third, a retail dealer may continue to advertise, sell, or dispense unblended gasoline from one or more metered pumps located at a retail motor fuel site until January 1, 2012.
   ADVERTISING. The bill provides that a retail dealer must affix a decal on each metered pump which dispenses unblended gasoline, notifying the public of its designation and any restricted use. The bill eliminates a requirement that a metered pump dispensing ethanol blended gasoline be affixed with a decal.
   APPLICABLE PENALTIES. Code section 214A.11 provides that a person who violates a provision of Code chapter 214A is guilty of a serious misdemeanor, and that each day that a continuing violation occurs is considered a separate offense. A serious misdemeanor is punishable by confinement for no more than one year and a fine of at least $315 but not more than $1,875. The Code section also provides that in lieu of seeking a prosecution, the state may proceed against the person by initiating an alternative civil enforcement action as a contested case proceeding by the department under Code chapter 17A or as a civil judicial proceeding by the attorney general upon referral by the department. The applicable civil penalty is at least $100 but not more than $1,000 for each violation. Each day that a continuing violation occurs shall be considered a separate offense.
   E-15 PROMOTION TAX CREDIT. The bill amends the ethanol promotion tax credit which is calculated separately for each retail motor fuel site from which the retail dealer sells and dispenses ethanol blended gasoline (Code sections 422.11N and 422.33, subsection 11A). The tax credit rate depends upon the number of gallons of ethanol blended gasoline and biodiesel blended fuel that a retail dealer sold throughout a calendar year (referred to as a determination period). The amount of the tax credit depends upon whether the retail dealer met that biofuel threshold. This bill renames the tax credit as the E-15 promotion tax credit, and provides that the tax credit applies only to those gallons of ethanol blended gasoline designated as E-15 or higher. It also allows a retail dealer filing a tax return on a noncalendar year basis to claim the tax credit. The tax credit is eliminated on January 1, 2021.
   REPORTING. The bill also amends reporting requirements by retail dealers and the department of revenue. A retail dealer’s report calculates the total motor fuel gallonage, and further divides that number based on a number of classifications depending upon the type of motor fuel sold, including ethanol blended gasoline gallonage. The department then calculates the aggregate total for the motor fuel gallonage including by classification for the determination period. The bill revises the reporting classifications for ethanol blended gasoline, by including subclassifications for E-9 and E-10, E-11 to E-15, and E-16 to E-85. It provides that the department may establish additional subclassifications.
   The bill’s provisions related to tax credit and reporting requirements are effective on January 1, 2012, and tax credit provisions are applicable to the tax years beginning on or after that date.