H.F. 2462 DIVISION I 1 INCOME TAX —— E-15 PLUS GASOLINE PROMOTION TAX CREDIT 2 Section 1. Section 422.11Y, subsection 9, Code 2016, is 3 amended to read as follows: 4 9. This section is repealed on January 1, 2018 2025 . 5 Sec. 2. Section 422.33, subsection 11D, paragraph c, Code 6 2016, is amended to read as follows: 7 c. This subsection is repealed on January 1, 2018 2025 . 8 Sec. 3. 2011 Iowa Acts, chapter 113, section 37, is amended 9 to read as follows: 10 SEC. 37. TAX CREDIT AVAILABILITY. For a retail dealer who 11 may claim an E-15 plus gasoline promotion tax credit under 12 section 422.11Y or 422.33, subsection 11D , as enacted in this 13 Act and amended in subsequent Acts, in calendar year 2017 14 2024 , and whose tax year ends prior to December 31, 2017 2024 , 15 the retail dealer may continue to claim the tax credit in the 16 retail dealer’s following tax year. In that case, the tax 17 credit shall be calculated in the same manner as provided in 18 section 422.11Y or 422.33, subsection 11D , as enacted in this 19 Act and amended in subsequent Acts, for the remaining period 20 beginning on the first day of the retail dealer’s new tax year 21 until December 31, 2017 2024 . For that remaining period, the 22 tax credit shall be calculated in the same manner as a retail 23 dealer whose tax year began on the previous January 1 and who 24 is calculating the tax credit on December 31, 2017 2024 . 25 DIVISION II 26 INCOME TAX —— E-85 GASOLINE PROMOTION TAX CREDIT 27 Sec. 4. Section 422.11O, subsection 8, Code 2016, is amended 28 to read as follows: 29 8. This section is repealed on January 1, 2018 2025 . 30 Sec. 5. Section 422.33, subsection 11B, paragraph c, Code 31 2016, is amended to read as follows: 32 c. This subsection is repealed on January 1, 2018 2025 . 33 Sec. 6. 2006 Iowa Acts, chapter 1142, section 49, subsection 34 3, as amended by 2011 Iowa Acts, chapter 113, section 20, is 35 -1- LSB 5598HZ (2) 86 da/rj 1/ 7

H.F. 2462 amended to read as follows: 1 3. For a retail dealer who may claim an E-85 gasoline 2 promotion tax credit under section 422.11O or 422.33, 3 subsection 11B , as enacted in this Act and amended in 4 subsequent Acts, in calendar year 2017 2024 and whose tax 5 year ends prior to December 31, 2017 2024 , the retail dealer 6 may continue to claim the tax credit in the retail dealer’s 7 following tax year. In that case, the tax credit shall be 8 calculated in the same manner as provided in section 422.11O 9 or 422.33, subsection 11B , as enacted in this Act and amended 10 in subsequent Acts, for the remaining period beginning on the 11 first day of the retail dealer’s new tax year until December 12 31, 2017 2024 . For that remaining period, the tax credit shall 13 be calculated in the same manner as a retail dealer whose tax 14 year began on the previous January 1 and who is calculating the 15 tax credit on December 31, 2017 2024 . 16 DIVISION III 17 INCOME TAX —— BIODIESEL BLENDED FUEL TAX CREDIT 18 Sec. 7. Section 422.11P, subsection 3, paragraph b, Code 19 2016, is amended to read as follows: 20 b. The tax credit shall apply to biodiesel blended fuel 21 classified as provided in this section , if the classification 22 meets the standards provided in section 214A.2 . In ensuring 23 that biodiesel blended fuel meets the classification 24 requirements of this section , the department shall take 25 into account reasonable variances due to testing and other 26 limitations. The department shall adopt rules to provide that 27 where a blending error occurs and an insufficient amount of 28 biodiesel has inadvertently been blended with petroleum-based 29 diesel fuel so that the mixture fails to qualify as B-11 or 30 higher a one percent tolerance applies when classifying the 31 biodiesel blended fuel. 32 Sec. 8. Section 422.11P, subsections 4 and 8, Code 2016, are 33 amended to read as follows: 34 4. For a retail dealer whose tax year is on a calendar year 35 -2- LSB 5598HZ (2) 86 da/rj 2/ 7

H.F. 2462 basis, the retail dealer shall calculate the amount of the tax 1 credit by multiplying a designated rate by the retail dealer’s 2 total biodiesel blended fuel gallonage as provided in section 3 452A.31 which qualifies under this subsection . 4 a. In calendar year 2012, in order to qualify for the tax 5 credit, the biodiesel blended fuel must be classified as B-2 6 B-5 or higher as provided in paragraph “b” . 7 (1) For biodiesel blended fuel classified as B-2 or higher 8 but not as high as B-5, the designated rate is two cents. 9 (2) b. (1) (a) For Until December 31, 2017, for biodiesel 10 blended fuel classified as B-5 or higher, the designated rate 11 is four and one-half cents. 12 (b) This subparagraph (1) is repealed on January 1, 2019. 13 b. (2) In calendar year 2013 and for each subsequent 14 calendar year, in order to qualify for the tax credit, the 15 Beginning January 1, 2018, the designated rate is determined 16 as follows: 17 (a) For biodiesel blended fuel must be classified as B-5 18 or higher . The but not as high as B-11, the designated rate 19 for the qualifying biodiesel blended fuel is four and one-half 20 three and one-half cents. 21 (b) For biodiesel blended fuel classified as B-11 or higher, 22 the designated rate is five and one-half cents. 23 8. This section is repealed January 1, 2018 2025 . 24 Sec. 9. Section 422.33, subsection 11C, paragraph c, Code 25 2016, is amended to read as follows: 26 c. This subsection is repealed on January 1, 2018 2025 . 27 Sec. 10. 2011 Iowa Acts, chapter 113, section 31, is amended 28 to read as follows: 29 SEC. 31. TAX CREDIT AVAILABILITY. For a retail dealer 30 who may claim a biodiesel blended fuel promotion tax credit 31 under section 422.11P or 422.33, subsection 11C , as amended 32 in this Act and amended in subsequent Acts, in calendar year 33 2017 2024 , and whose tax year ends prior to December 31, 2017 34 2024 , the retail dealer may continue to claim the tax credit in 35 -3- LSB 5598HZ (2) 86 da/rj 3/ 7

H.F. 2462 the retail dealer’s following tax year. In that case, the tax 1 credit shall be calculated in the same manner as provided in 2 section 422.11P or 422.33, subsection 11C , as amended in this 3 Act and amended in subsequent Acts, for the remaining period 4 beginning on the first day of the retail dealer’s new tax year 5 until December 31, 2017 2024 . For that remaining period, the 6 tax credit shall be calculated in the same manner as a retail 7 dealer whose tax year began on the previous January 1 and who 8 is calculating the tax credit on December 31, 2017 2024 . 9 DIVISION IV 10 SALES AND USE TAX —— BIODIESEL PRODUCTION REFUND 11 Sec. 11. Section 423.4, subsection 9, paragraph e, Code 12 2016, is amended to read as follows: 13 e. This subsection is repealed on January 1, 2018 2025 . 14 DIVISION V 15 FUTURE REPEALS 16 Sec. 12. Section 422.11O, subsection 5, Code 2016, is 17 amended to read as follows: 18 5. a. A retail dealer is eligible to claim an E-85 gasoline 19 promotion tax credit as provided in this section even though 20 the retail dealer claims one or all of the following related 21 tax credits: 22 (1) The ethanol promotion tax credit pursuant to section 23 422.11N . 24 (2) The an E-15 plus gasoline promotion tax credit pursuant 25 to section 422.11Y . 26 b. (1) The retail dealer may claim the E-85 gasoline 27 promotion tax credit and one or more of the related tax credits 28 as provided in paragraph “a” for the same tax year. 29 (2) The retail dealer may claim the ethanol promotion 30 tax credit as provided in paragraph “a” for the same ethanol 31 gallonage used to calculate and claim the E-85 gasoline 32 promotion tax credit. 33 Sec. 13. Section 422.11Y, subsection 6, Code 2016, is 34 amended to read as follows: 35 -4- LSB 5598HZ (2) 86 da/rj 4/ 7

H.F. 2462 6. a. A retail dealer is eligible to claim an E-15 plus 1 gasoline promotion tax credit as provided in this section even 2 though the retail dealer claims one or all of the following 3 related tax credits: 4 (1) The ethanol promotion tax credit pursuant to section 5 422.11N . 6 (2) The an E-85 gasoline promotion tax credit pursuant to 7 section 422.11O . 8 b. (1) The retail dealer may claim the E-15 plus gasoline 9 promotion tax credit and one or more of the related tax credits 10 as provided in paragraph “a” for the same tax year. 11 (2) The retail dealer may claim the ethanol promotion 12 tax credit as provided in paragraph “a” for the same ethanol 13 gallonage used to calculate and claim the E-15 plus gasoline 14 promotion tax credit. 15 Sec. 14. REPEAL. Any intervening provision effective prior 16 to the effective date of this division of this Act that amends 17 section 422.11O, subsection 5, or section 422.11Y, subsection 18 6, as amended in this division of this Act, is repealed, unless 19 that Act or another Act specifically provides otherwise. 20 Sec. 15. EFFECTIVE DATE. This division of this Act takes 21 effect January 1, 2021. 22 EXPLANATION 23 The inclusion of this explanation does not constitute agreement with 24 the explanation’s substance by the members of the general assembly. 25 BIOFUELS TAX CREDIT AND REFUND EXTENSIONS. This bill 26 extends the expiration date of four biofuel tax programs from 27 January 1, 2018, to January 1, 2025, including three income tax 28 credits and one sales and use tax refund. 29 BIODIESEL FUEL TAX CREDIT —— INCREASED TAX CREDIT RATE FOR 30 B-11 OR HIGHER. Beginning January 1, 2018, the bill decreases 31 the designated tax credit rate for the sale of biodiesel 32 blended fuel classified as B-5 or higher but not as high as 33 B-11 from 4.5 to 3.5 cents per gallon and correspondingly the 34 designated tax credit rate for the sale of biodiesel blended 35 -5- LSB 5598HZ (2) 86 da/rj 5/ 7

H.F. 2462 fuel classified as B-11 or higher is increased from 4.5 cents 1 to 5.5 cents per gallon. The bill also provides that the 2 department of revenue is required to adopt rules to account for 3 errors in the blending of diesel fuel and biodiesel. 4 BACKGROUND. A biofuel is a substance blended with motor fuel 5 (gasoline or diesel fuel) and includes either ethanol (ethyl 6 alcohol) or biodiesel (a substance derived from vegetable 7 oils or animal fats) meeting state standards (Code section 8 214A.2). A motor fuel blended with a biofuel is referred to 9 as a renewable fuel. The amount of the tax credit or refund 10 is claimed by a taxpayer on a tax or calendar year basis after 11 multiplying the total gallonage of a qualifying renewable fuel 12 or biofuel times a designated monetary rate. 13 CURRENT INCOME TAX CREDITS. The income tax credits may 14 be claimed by a retail dealer operating a retail motor fuel 15 site and the amount of each tax credit is based on the total 16 number of gallons of a renewable fuel sold. The E-15 plus 17 gasoline promotion tax credit requires an ethanol content of 18 between 15 and 69 percent per gallon and the designated rate 19 equals 3 cents except between June 1 and September 15 when 20 the designated rate increases to 10 cents. The E-85 gasoline 21 promotion tax credit requires an ethanol content of between 22 70 and 85 percent per gallon and the designated rate equals 23 16 cents. The biodiesel blended fuel tax credit requires a 24 biodiesel content of at least 5 percent per gallon (B-5) and 25 the designated rate equals 4.5 cents. 26 SALES AND USE TAX REFUND. The sales and use tax refund may 27 be claimed by a biodiesel producer who manufactures biodiesel 28 for use in biodiesel blended fuel. The amount of the refund 29 equals the total number of gallons of biodiesel produced during 30 each calendar year quarter multiplied by a designated rate 31 of 2 cents. However, a producer cannot claim the refund on 32 more than 25 million gallons produced at any one manufacturing 33 facility. 34 FUTURE REPEAL OF REFERENCES TO THE ETHANOL PROMOTION TAX 35 -6- LSB 5598HZ (2) 86 da/rj 6/ 7

H.F. 2462 CREDIT. The bill amends Code sections creating the E-85 1 gasoline promotion tax credit and the E-15 plus gasoline 2 promotion tax credit by repealing references to another tax 3 credit referred to as the ethanol promotion tax credit claimed 4 by a retail dealer who attains a certain threshold number of 5 all biofuels sold during a determination period and which is 6 based on the number of gallons of pure ethanol sold during that 7 period. The amendments become effective on January 1, 2021, 8 which is the date that the ethanol promotion tax credit is due 9 to expire. 10 -7- LSB 5598HZ (2) 86 da/rj 7/ 7