Section 1. NEW SECTION 15E.113 BIODIESEL BLENDING EQUIPMENT PROGRAM.

1. The department shall establish a biodiesel blending

equipment program. The department shall consult with the Iowa

soybean association in administering the program. The purpose

of the program is to provide financing to eligible persons

engaged in the processing of biodiesel fuel as defined in

section 159A.2. The financial assistance shall be used for

the acquisition of equipment necessary to blend soybean oil

with diesel fuel to produce biodiesel fuel according to

standards promulgated by the department of agriculture and

land stewardship pursuant to section 214A.2.

2. A person is eligible to receive financial assistance

under the biodiesel blending equipment program if all of the

following apply:

a. The person is issued a license to blend special fuels

by the department of revenue and finance, if the person is

required to be issued the license pursuant to section 452A.6.

b. The person is an established business engaged in the

marketing of special fuels.

c. The person has technical expertise necessary to process

biodiesel fuel.

d. The person applies to the department in a manner and

according to procedures required by the department.

3. The department may provide financial assistance to an

eligible person upon review and evaluation of the person's

application according to procedures adopted by the department.

Financial assistance shall be in the form of a grant, loan,

forgivable loan, loan guarantee, cost share, indemnification

of costs, or any combination of such financing deemed

appropriate by the department. The department shall not

approve an application to refinance an existing loan. If

moneys are repaid to the department pursuant to a loan

agreement, the moneys shall be deposited into the biodiesel

fuel promotion fund.

Sec. 2. NEW SECTION 15E.113A SOYBEAN OIL PROCESSING FOR BLENDING STOCK PROGRAM.

1. The department shall establish a soybean oil processing

for blending stock program. The department shall consult with

the Iowa soybean association in administering the program.

The purpose of the program is to provide financing to eligible

persons engaged in the processing of soybean oil into a

blending stock to be used for the production of biodiesel fuel

according to standards promulgated by the department of

agriculture and land stewardship pursuant to section 214A.2.

This section does not require that a person eligible to

receive financial assistance obtain a license to blend special

fuels as required by the department of revenue and finance

pursuant to section 452A.6.

2. A person is eligible to receive financial assistance

under the soybean oil processing for blending stock program if

all of the following apply:

a. The person is a business association organized as a

cooperative association under chapter 499 or 501, or a limited

liability company organized under chapter 490A. Qualified

persons as defined in section 10.1 must hold at least fifty-

one percent of the cooperative association, including fifty-

one percent of each class of or groups of members' equity. As

used in this paragraph, "members' equity" includes but is not

limited to issued shares, including common stock or preferred

stock, regardless of distributions, and membership interests.

However, "members' equity" does not include nonvoting

interests such as nonvoting common stock or nonvoting

membership interests. A security such as a warrant or option

that may be converted to voting stock shall be considered

members' equity.

b. The person demonstrates financial capability and

technical expertise necessary to processing of soybean oil

into a blending stock used to produce biodiesel fuel. The

department may require that the person submit a business plan

which includes a description of how the financial assistance

will be used, and a description of how the person expects to

become profitable.

c. The person applies to the department according to

procedures required by the department.

3. The department may provide for financial assistance to

an eligible person upon review and evaluation of the person's

application according to procedures adopted by the department.

Financial assistance shall be in the form of a grant, loan,

forgivable loan, loan guarantee, cost share, indemnification

of costs, or any combination of such financing deemed

appropriate by the department. The department shall not

approve an application to refinance an existing loan. If

moneys are repaid to the department pursuant to a loan

agreement, the moneys shall be deposited into the biodiesel

fuel promotion fund.

Sec. 3. NEW SECTION 15E.114 BIODIESEL FUEL PROMOTION FUND.

1. A biodiesel fuel promotion fund is created in the state

treasury under the control of the department.

2. The biodiesel fuel promotion fund shall include any

moneys appropriated to the fund by the general assembly,

payments of interest earned, recaptures of awards, repayments

of moneys loaned or expended by the biodiesel fuel equipment

program as provided in section 15E.113, the repossession and

sale of assets securing a loan made under the program, and any

other moneys available to and obtained or accepted by the

department from the federal government or private sources for

placement in the fund.

3. The biodiesel fuel promotion fund is composed of two

accounts, the tax credit account and the financial assistance

account.

a. The tax credit account shall be used to support

biodiesel fuel tax credits as provided in sections 422.11H and

422.33.

b. The financial assistance account shall be used to

support the biodiesel blending equipment program as provided

in section 15E.113 and the soybean oil processing for blending

stock program as provided in section 15E.113A.

a. The department shall not use more than two percent

of all moneys deposited and required to be deposited in the

fund as calculated on July 1 of each year for departmental

administrative expenses. In administering the fund, the

department may contract, sue and be sued, and adopt

administrative rules necessary to carry out the provisions of

this section and section 15E.113. However, the department

shall not in any manner directly or indirectly pledge the

credit of the state.

b. Moneys shall not be transferred, used, obligated,

appropriated, or otherwise encumbered except as provided in

this section.

a. A taxpayer who may claim a biodiesel fuel tax

credit as provided in section 422.11H or 422.33 must apply to

the department by a date designated by the department in

consultation with the department of revenue and finance.

After verifying the eligibility of a taxpayer for the tax

credit, the department shall issue a tax credit certificate to

the taxpayer to be attached to the taxpayer's tax return. The

tax credit certificate shall contain the taxpayer's name,

address, tax identification number, the amount of credit, the

name of each qualifying business location, and other

information required by the department of revenue and finance.

The tax credit certificate, unless rescinded by the

department, shall be accepted by the department of revenue and

finance as payment for taxes imposed pursuant to chapter 422,

division II or division III, subject to any conditions or

restrictions placed by the department of economic development

upon the face of the tax credit certificate.

b. The department shall determine any amount of moneys

that are to be allocated to support the tax credit account by

a date determined by the department in consultation with the

department of revenue and finance. The department shall also

consult with the department of revenue and finance when making

the determination. The remaining moneys shall be retained in

the financial assistance account.

c. The department shall provide for the allocation of

moneys deposited into the tax credit account to the general

fund of the state as required by the department of revenue and

finance in order to support the biodiesel fuel tax credits for

each tax year.

6. Section 8.33 does not apply to any moneys in the fund.

Notwithstanding section 12C.7, interest earned on moneys in

the fund shall be credited to the fund.

7. The fund is subject to an annual audit by the auditor

of state. Moneys in the fund, which may be subject to

warrants written by the director of revenue and finance, shall

be drawn upon the written requisition of the director of the

department of economic development or an authorized

representative of the director.

Sec. 4. Section 159A.2, subsections 6 and 8, Code 2003, are amended to read as follows:

6. "Renewable fuel" means an energy source at least in

part derived from an organic compound capable of powering

machinery, including an engine or power plant. A renewable

fuel includes but is not limited to ethanol-blended or

soydieselbiodiesel fuel.

8. "Soydiesel"Biodiesel fuel" means a fuel which is a

mixture of diesel fuel and processed soybean oil, if at least

twentytwo percent of the mixed fuel by volume is processed

soybean oil which meets American society for testing and

materials standards.

Sec. 5. Section 159A.3, subsection 3, paragraph b, Code 2003, is amended to read as follows:

b. The office shall promote the production and consumption

of soydieselbiodiesel fuel in this state.

Sec. 6. Section 307.20, subsection 3, paragraph a, Code 2003, is amended to read as follows:

a. "Biodiesel fuel" means soydiesel fuelthe same as

defined in section 159A.2.

Sec. 7. NEW SECTION 422.11H BIODIESEL FUEL TAX CREDIT.

1. As used in this section, unless the context otherwise

requires:

a. "Biodiesel fuel" means the same as defined in section

159A.2.

b. "Bulk sales service" means a retail dealer who sells

and delivers special fuel to the premises of the final or

ultimate consumer.

c. "Business location" means each permanent geographic

location in this state where a retail dealer operates a

service station or bulk sales service.

d. "Metered pump" means a motor vehicle fuel pump licensed

by the department of agriculture and land stewardship pursuant

to chapter 214.

e. "Retail dealer" means a retail dealer as defined in

section 214A.1.

f. "Sell" means to sell on a retail basis.

g. "Service station" means each permanent geographic

location in this state where a retail dealer sells and

dispenses special fuel through one or more metered pumps as

regulated under chapter 214A.

h. "Special fuel" means special fuel as defined in section

452A.2.

i. "Tax credit" means the designated biodiesel fuel tax

credit as provided in this section.

2. The taxes imposed under this division, less the credits

allowed under sections 422.12 and 422.12B, shall be reduced by

a biodiesel fuel 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.

b. The taxpayer operates at least one business location at

which more than five percent of the total gallons of special

fuel for diesel engines sold and dispensed through metered

pumps and delivered in bulk by the taxpayer in the tax year is

biodiesel fuel.

c. The taxpayer's tax return is attached with a

certificate issued by the department of economic development

pursuant to section 15E.114.

d. The taxpayer complies with requirements of the

department required to administer this section.

e. The taxpayer reports information to the department of

natural resources as provided in section 473.7.

3. The tax credit shall be calculated separately for each

business location operated by the taxpayer. The amount of the

tax credit for each eligible business location is two and one-

half cents multiplied by the total number of gallons of

biodiesel fuel sold by the taxpayer operating the business

location during the tax year that is in excess of five percent

of all special fuel for diesel engines sold by the taxpayer

operating the business location during the tax year.

4. Each tax year the total amount of tax credit claims

that shall be paid pursuant to this section shall not exceed

the amount deposited in the tax credit account of the

biodiesel fuel promotion fund created pursuant to section

15E.114 on and after November 1 of each year. If the

department receives applications for tax credits in excess of

the amount of the tax credit account, the applicants shall

receive certificates for a prorated amount.

5. Any credit in excess of the taxpayer's tax liability

shall be refunded. In lieu of claiming a refund, the taxpayer

may elect to have the overpayment shown on the taxpayer's

final, completed return credited to the tax liability for the

following tax year.

6. An individual may claim the tax credit allowed a

partnership, limited liability company, S corporation, estate,

or trust electing to have the income taxed directly to the

individual. The amount claimed by the individual shall be

based upon the pro rata share of the individual's earnings of

a partnership, limited liability company, S corporation,

estate, or trust.

Sec. 8. Section 422.33, Code 2003, is amended by adding the following new subsection:

NEW SUBSECTION 14.

a. As used in this subsection,

unless the context otherwise requires:

(1) "Biodiesel fuel", "bulk sales service", "business

location", "metered pump", "retail dealer", "sell", "service

station", and "special fuel" mean the same as defined in

section 422.11H.

(2) "Tax credit" means the designated biodiesel fuel tax

credit as provided in this subsection.

b. The taxes imposed under this division shall be reduced

by a biodiesel fuel tax credit for each tax year that the

taxpayer is eligible to claim the tax credit under this

subsection. In order to be eligible, all of the following

must apply:

(1) The taxpayer is a retail dealer.

(2) The taxpayer operates at least one business location

at which more than five percent of the total gallons of

special fuel for diesel engines sold and dispensed through

metered pumps and delivered in bulk by the taxpayer in the tax

year is biodiesel fuel.

(3) The taxpayer's tax return is attached with a

certificate issued by the department of economic development

pursuant to section 15E.114.

(4) The taxpayer complies with requirements of the

department required to administer this subsection.

(5) The taxpayer reports information to the department of

natural resources as provided in section 473.7.

c. The tax credit shall be calculated separately for each

business location operated by the taxpayer. The amount of the

tax credit for each eligible business location is two and one-

half cents multiplied by the total number of gallons of

biodiesel fuel sold by the taxpayer operating the business

location during the tax year that is in excess of five percent

of all special fuel for diesel engines sold by the taxpayer

operating the business location during the tax year.

d. Each tax year the total amount of tax credit refund

claims that shall be paid pursuant to this subsection shall

not exceed the amount deposited in the tax credit account of

the biodiesel fuel promotion fund created pursuant to section

15E.114. If the department receives applications for tax

credits in excess of the amount in the tax credit account, the

applicants shall receive certificates for a prorated amount.

e. Any credit in excess of the taxpayer's tax liability

shall be refunded. In lieu of claiming a refund, the taxpayer

may elect to have the overpayment shown on the taxpayer's

final, completed return credited to the tax liability for the

following tax year.

Sec. 9. Section 473.7, Code 2003, is amended by adding the following new subsection:

NEW SUBSECTION 14A. Obtain information from retail

dealers as defined in section 422.11H and maintain records

regarding the market share and gallons purchased of special

fuels for diesel engines and biodiesel fuel as provided in

section 422.11H.

Sec. 10.

APPLICABILITY.

The biodiesel fuel tax credits

provided in sections 422.11H and 422.33 apply to tax years

beginning on or after January 1, 2004. The department of

revenue and finance shall perform functions, prior to the

beginning of that tax year, necessary in order to implement

the tax credits.

EXPLANATION

This bill provides for the promotion of biodiesel fuel

which is a mixture of diesel fuel and processed soybean oil.

The bill changes the term "soydiesel" fuel to "biodiesel" fuel

in Code chapter 159A providing for renewable fuels. Diesel

fuel, including biodiesel fuel, is defined as a "special fuel"

by the department of revenue and finance.

The bill establishes several programs within the department

of economic development. One program establishes a biodiesel

blending equipment program which provides financing to persons

for the acquisition of equipment necessary to blend soybean

oil with diesel fuel to produce biodiesel fuel. Another

program provides financing to persons who are engaged in the

processing of soybean oil into a blending stock to be used for

the ultimate production of biodiesel fuel.

The bill creates a biodiesel fuel promotion fund

administered by the department. The fund is split into two

accounts, including a financial assistance account which is

used to support the two programs, and a tax credit account

which is used to support biodiesel fuel tax credits.

The tax credits are patterned after the ethanol-blended

gasoline tax credit provisions creating a tax credit for

retail dealers of motor vehicle fuel who sell ethanol-blended

gasoline (gasoline containing at least 10 percent alcohol).

The ethanol-blended gasoline tax credit applies to both

taxpayers filing as individuals under Code chapter 422,

division II, and businesses under Code chapter 422, division

III. Under the bill, a retail dealer of biodiesel fuel may

claim the tax credit if the retail dealer operates a service

station or operates a bulk sales service. The bill provides

that the retail dealer must operate at least one business

location at which more than 5 percent of the total gallons of

special fuel for diesel engines sold is biodiesel fuel.

According to the bill, the amount of the tax credit for each

eligible service station is two and one-half cents multiplied

by the total number of gallons of biodiesel fuel sold at that

service station during the tax year in excess of 5 percent of

all special fuel for diesel engines sold at that business

location. The amount of the tax credit for each business

location is two and one-half cents multiplied by the total

number of gallons of biodiesel fuel sold by the retail dealer

operating the business location during the tax year that is in

excess of 5 percent of all special fuel for diesel engines

sold by the taxpayer operating the business location during

the tax year. The total amount of the tax credits cannot

exceed the amount in the tax credit account, and the amount

must be prorated if sufficient moneys are not available to pay

all claims. The tax credits apply to tax years beginning on

or after January 1, 2004.