S.F. 2359 Section 1. Section 214A.1, Code 2009, is amended by adding 1 the following new subsections: 2 NEW SUBSECTION . 13A. “High ethanol blended gasoline” means 3 ethanol blended gasoline classified as E-11 or higher pursuant 4 to section 214A.2. 5 NEW SUBSECTION . 17A. “Nonblended gasoline” means gasoline 6 other than ethanol blended gasoline. 7 Sec. 2. Section 214A.2, subsection 3, paragraph b, 8 subparagraph (4), subparagraph division (b), Code Supplement 9 2009, is amended by striking the subparagraph division and 10 inserting in lieu thereof the following: 11 (b) High ethanol blended gasoline other than E-85 gasoline, 12 to the extent authorized by the department pursuant to approval 13 for the use of that classification of ethanol blended gasoline 14 in this state by the United States environmental protection 15 agency. 16 Sec. 3. NEW SECTION . 214A.2C Motor fuel quality standard 17 for gasoline. 18 Except as expressly provided otherwise in section 214A.2D, a 19 retail dealer shall not advertise, sell, or dispense nonblended 20 gasoline in this state. 21 Sec. 4. NEW SECTION . 214A.2D Motor fuel quality standard 22 for gasoline —— exceptions and conditions. 23 1. Notwithstanding section 214A.2C, a retail dealer may 24 advertise, sell, or dispense nonblended gasoline in this state 25 used to operate a motor which powers a qualified motor vehicle 26 which is any one of the following: 27 a. An aircraft as defined in section 328.1. 28 b. A motor vehicle used exclusively for motor sports, 29 including on a raceway, if the motor vehicle cannot operate on 30 a highway as provided in chapter 321 or rules adopted by the 31 state department of transportation. 32 c. An antique vehicle registered under section 321.115. 33 d. A snowmobile as defined in section 321G.1. 34 e. An all-terrain vehicle as defined in section 321I.1. 35 -1- LSB 5250SV (3) 83 da/rj 1/ 10

S.F. 2359 f. A watercraft as defined in section 462A.2. 1 g. A lawnmower or other yard or garden implement powered by 2 a small motor. 3 2. a. A retail dealer that advertises, sells, or dispenses 4 nonblended gasoline in this state as provided in subsection 1 5 shall not use more than one motor fuel pump located at a retail 6 motor fuel site to advertise, sell, or dispense nonblended 7 gasoline. 8 b. Paragraph “a” does not apply to a motor fuel site that 9 dispenses fuel only to qualified motor vehicles as described 10 in subsection 1, including but not limited to any of the 11 following: 12 (1) An airport or other landing area, including hangers and 13 appurtenant buildings used by aircraft. 14 (2) A raceway or other area where motor vehicles used 15 exclusively for motor sports operate, if such motor vehicles 16 cannot operate on a highway as provided in chapter 321 or rules 17 adopted by the state department of transportation. 18 (3) A marina where watercraft are customarily secured to 19 moorings or docks during climatic seasons. 20 3. Notwithstanding section 214A.2C, a retail dealer may 21 advertise, sell, or dispense nonblended gasoline at a retail 22 motor fuel site owned or operated by the retail dealer pursuant 23 to a waiver issued by the department to the retail dealer. 24 Notwithstanding subsection 2, the retail dealer who is granted 25 a waiver may advertise, sell, or dispense nonblended gasoline 26 from any number of motor fuel pumps located at the retail motor 27 fuel site. 28 a. The department shall only issue a waiver to a retail 29 dealer after approving an application submitted to the 30 department by the retail dealer in a manner and according 31 to procedures required by the department which application 32 demonstrates that the retail dealer is not able to reasonably 33 obtain ethanol blended gasoline for sale at the retail motor 34 fuel site. 35 -2- LSB 5250SV (3) 83 da/rj 2/ 10

S.F. 2359 b. A waiver issued under this subsection expires thirty days 1 from the date of issuance. However, a retail dealer who has 2 been issued a waiver may apply for and be issued any number of 3 subsequent waivers. 4 4. a. Notwithstanding section 214A.2C, a retail dealer may 5 advertise, sell, or dispense nonblended gasoline at a retail 6 motor fuel site owned or operated by the retail dealer until 7 January 1, 2011. 8 b. This subsection is repealed on January 1, 2011. 9 Sec. 5. Section 214A.3, subsection 1, Code Supplement 2009, 10 is amended by adding the following new paragraph: 11 NEW PARAGRAPH . d. Falsely advertise that a motor fuel is a 12 renewable fuel or is not a renewable fuel. 13 Sec. 6. Section 214A.3, subsection 2, Code Supplement 2009, 14 is amended to read as follows: 15 2. For a renewable fuel, all of the following apply: 16 a. A person shall not knowingly falsely advertise that 17 a motor fuel is a renewable fuel or is not a renewable 18 fuel ethanol blended gasoline by using an inaccurate 19 designation as provided in section 214A.2 . However, all of the 20 following apply: 21 b. (1) Ethanol blended gasoline sold by a dealer shall 22 be designated according to its classification as provided in 23 section 214A.2 . However, a A person advertising E-9 or E-10 24 gasoline may only designate it as ethanol blended gasoline. 25 (2) A person advertising ethanol blended gasoline 26 formulated with a percentage of between seventy and eighty-five 27 percent by volume of ethanol shall designate it as E-85. A 28 person shall not knowingly falsely advertise ethanol blended 29 gasoline by using an inaccurate designation in violation of 30 this subparagraph. 31 (3) A person advertising ethanol blended gasoline dispensed 32 from a motor fuel blender pump may designate it according to 33 a variance to the designation as may be established by rules 34 adopted by the department. 35 -3- LSB 5250SV (3) 83 da/rj 3/ 10

S.F. 2359 (2) b. A person shall not knowingly falsely advertise 1 biodiesel fuel by using an inaccurate designation as provided 2 in section 214A.2. 3 3. A person who advertises the sale of gasoline that is 4 not ethanol blended gasoline shall refer to the gasoline as 5 nonblended gasoline. 6 Sec. 7. Section 214A.16, Code Supplement 2009, is amended 7 to read as follows: 8 214A.16 Notice of renewable fuel —— decal Motor fuel pump 9 labels . 10 1. a. If ethanol blended gasoline is sold from a motor 11 fuel pump, the motor fuel pump shall have affixed a decal 12 identifying the ethanol blended gasoline. If the motor fuel 13 pump dispenses ethanol blended gasoline classified as higher 14 than standard ethanol blended gasoline pursuant to section 15 214A.2, the decal shall contain the following notice: “FOR 16 FLEXIBLE FUEL VEHICLES ONLY” identify the ethanol blended 17 gasoline for flexible fuel vehicles only . 18 b. If nonblended gasoline is sold from a motor fuel pump, 19 the motor fuel pump shall have affixed a decal specifying that 20 state law prohibits dispensing nonblended gasoline for use in 21 motor vehicles except as allowed in section 214A.2C. 22 c. If biodiesel fuel is sold from a motor fuel pump, the 23 motor fuel pump shall have affixed a decal identifying the 24 biodiesel fuel as provided in 16 C.F.R. pt. 306. 25 2. The design and location of the a decal shall be 26 prescribed by rules adopted by the department. A decal 27 identifying a renewable fuel shall be consistent with standards 28 adopted pursuant to section 159A.6. The department may approve 29 an application to place a decal in a special location on a 30 motor fuel pump or container or use a decal with special 31 lettering or colors, if the decal appears clear and conspicuous 32 to the consumer. The application shall be made in writing 33 pursuant to procedures adopted by the department. 34 Sec. 8. Section 422.11N, subsection 1, paragraph a, Code 35 -4- LSB 5250SV (3) 83 da/rj 4/ 10

S.F. 2359 2009, is amended to read as follows: 1 a. “E-85 gasoline” , “ethanol” , “ethanol blended gasoline” , 2 “gasoline” , “high ethanol blended gasoline” , and “retail dealer” 3 mean the same as defined in section 214A.1. 4 Sec. 9. Section 422.11N, subsection 5, paragraph a, 5 unnumbered paragraph 1, Code 2009, is amended to read as 6 follows: 7 For a retail dealer whose tax year is the same as a 8 determination period beginning on January 1 and ending on 9 December 31, the retail dealer’s tax credit is calculated by 10 multiplying the retail dealer’s total ethanol gallonage for 11 high ethanol blended gasoline by a tax credit rate, which may 12 be adjusted based on the retail dealer’s biofuel threshold 13 percentage disparity. The tax credit rate is as follows: 14 Sec. 10. Section 422.11O, subsection 3, paragraphs a 15 through l, Code 2009, are amended to read as follows: 16 a. For calendar year 2006, calendar year 2007, and calendar 17 year 2008, twenty-five cents. 18 b. For calendar year 2009 and calendar year 2010, twenty 19 cents. 20 c. b. For calendar year 2011, ten twenty cents. 21 d. c. For calendar year 2012, nine nineteen cents. 22 e. d. For calendar year 2013, eight eighteen cents. 23 f. e. For calendar year 2014, seven seventeen cents. 24 g. f. For calendar year 2015, six sixteen cents. 25 h. g. For calendar year 2016, five fifteen cents. 26 i. h. For calendar year 2017, four fourteen cents. 27 j. i. For calendar year 2018, three thirteen cents. 28 k. j. For calendar year 2019, two twelve cents. 29 l. k. For calendar year 2020, one cent ten cents . 30 Sec. 11. Section 452A.31, subsection 2, Code 2009, is 31 amended to read as follows: 32 2. a. A retail dealer’s total gasoline gallonage is the 33 total number of gallons of gasoline which the retail dealer 34 sells and dispenses from all motor fuel pumps operated by 35 -5- LSB 5250SV (3) 83 da/rj 5/ 10

S.F. 2359 the retail dealer in this state during a twelve-month period 1 beginning January 1 and ending December 31. The retail 2 dealer’s total gasoline gallonage is divided into the following 3 classifications: 4 (1) The total ethanol blended gasoline gallonage which 5 is the retail dealer’s total number of gallons of ethanol 6 blended gasoline and which includes all of the following 7 subclassifications: 8 (a) The total E-xx E-9 and E-10 ethanol blended gasoline 9 gallonage which is the total number of gallons of ethanol 10 blended gasoline other than E-85 gasoline designated as E-9 or 11 E-10 pursuant to section 214A.2 . 12 (b) The total high ethanol blended gasoline gallonage which 13 is the total number of gallons of ethanol blended gasoline 14 designated as E-11 or higher pursuant to section 214A.2. 15 (c) The total high ethanol blended gasoline gallonage not 16 counting the total E-85 gasoline gallonage. 17 (d) The total E-85 gasoline gallonage which is the total 18 number of gallons of E-85 gasoline. 19 (2) The total nonblended gasoline gallonage which is the 20 total number of gallons of nonblended ethanol gasoline. 21 b. A retail dealer’s total ethanol gallonage is the total 22 number of gallons of ethanol which is a component of ethanol 23 blended gasoline which the retail dealer sells and dispenses 24 from motor fuel pumps as provided in paragraph “a” during a 25 twelve-month period beginning January 1 and ending December 31. 26 The retail dealer’s total ethanol gallonage includes all of the 27 following classifications: 28 (1) The total ethanol gallonage for ethanol blended 29 gasoline other than high ethanol blended gasoline which is the 30 total number of gallons of ethanol which is a component of 31 ethanol blended gasoline designated as E-9 or E-10 pursuant to 32 section 214A.2. 33 (2) The total ethanol gallonage for high ethanol blended 34 gasoline which is the total number of gallons of ethanol which 35 -6- LSB 5250SV (3) 83 da/rj 6/ 10

S.F. 2359 is a component of ethanol blended gasoline designated as E-11 1 or higher pursuant to section 214A.2. 2 Sec. 12. Section 452A.31, subsection 4, Code 2009, is 3 amended to read as follows: 4 4. a. The aggregate gasoline gallonage is the total 5 number of gallons of gasoline which all retail dealers sell 6 and dispense from all motor fuel pumps operated by the retail 7 dealers in this state during a twelve-month period beginning 8 January 1 and ending December 31. The aggregate gasoline 9 gallonage is divided into the following classifications: 10 (1) The aggregate ethanol blended gasoline gallonage 11 which is the aggregate total number of gallons of ethanol 12 blended gasoline and which includes all of the following 13 subclassifications: 14 (a) The aggregate E-xx E-9 and E-10 gasoline gallonage which 15 is the aggregate total number of gallons of ethanol blended 16 gasoline other than E-85 gasoline designated as E-9 or E-10 17 pursuant to section 214A.2 . 18 (b) The aggregate high ethanol blended gasoline gallonage 19 which is the aggregate number of gallons of ethanol blended 20 gasoline designated as E-11 or higher pursuant to section 21 214A.2. 22 (c) The aggregate high ethanol blended gasoline gallonage 23 not counting the aggregate E-85 gasoline gallonage. 24 (d) The aggregate E-85 gasoline gallonage which is the 25 aggregate total number of gallons of E-85 gasoline. 26 (2) The aggregate nonblended gasoline gallonage, which is 27 the aggregate number of gallons of nonblended ethanol gasoline. 28 b. The aggregate ethanol gallonage is the total number of 29 gallons of ethanol which is a component of ethanol blended 30 gasoline which all retail dealers sell and dispense from motor 31 fuel pumps as provided in paragraph “a” during a twelve-month 32 period beginning January 1 and ending December 31. The 33 aggregate ethanol gallonage includes all of the following 34 classifications: 35 -7- LSB 5250SV (3) 83 da/rj 7/ 10

S.F. 2359 (1) The aggregate ethanol gallonage for ethanol blended 1 gasoline other than high ethanol blended gasoline which is the 2 aggregate number of gallons of ethanol which is a component of 3 ethanol blended gasoline designated as E-9 or E-10 pursuant to 4 section 214A.2. 5 (2) The aggregate ethanol gallonage for high ethanol 6 blended gasoline which is the aggregate number of gallons 7 of ethanol which is a component of ethanol blended gasoline 8 designated as E-11 or higher pursuant to section 214A.2. 9 Sec. 13. EFFECTIVE AND APPLICABILITY DATES. This Act is 10 effective on January 1, 2011, and the amendments to sections 11 422.11N and 422.11O, and application of those amendments to 12 sections 422.33, subsection 11A, and 422.33, subsection 11B, 13 are applicable to tax years beginning on or after that date. 14 EXPLANATION 15 REGULATION OF ETHANOL BLENDED GASOLINE. This bill amends 16 Code chapter 214A, which provides authority to the department 17 of agriculture and land stewardship (department) to regulate 18 the sale of motor fuel, including renewable fuel such as 19 ethanol blended gasoline. Code section 214A.2 provides for 20 different types of gasoline and establishes standards or 21 specifications for gasoline in conformance with federal law and 22 specifically with regulations promulgated by the Unites States 23 environmental protection agency (EPA), and in part based on 24 standards published by the American society for testing and 25 materials (A.S.T.M.) international. The Code section provides 26 that standard ethanol blended gasoline is classified by its 27 percent volume of ethanol, referred to as “E-xx” where “xx” 28 designates the percentage (e.g., E-10). 29 ETHANOL BLENDED GASOLINE REQUIREMENT. The bill creates a 30 new requirement that a retail dealer cannot advertise, sell, 31 or dispense gasoline other than ethanol blended gasoline which 32 is either standard ethanol blended gasoline or so-called E-85 33 gasoline. Gasoline which does not contain the requisite 34 percentage of ethanol is referred to as “nonblended gasoline”. 35 -8- LSB 5250SV (3) 83 da/rj 8/ 10

S.F. 2359 The bill also creates a new designation for high ethanol 1 blended gasoline which is E-11 or higher. 2 EXCEPTIONS. Notwithstanding the prohibition, the bill 3 allows a retail dealer to continue to advertise, sell, or 4 dispense nonblended gasoline in limited circumstances. First, 5 the prohibition does not apply to gasoline used to operate 6 certain qualified motor vehicles, including aircraft, motor 7 vehicles involved exclusively in motor sports events, antique 8 vehicles, snowmobiles, all-terrain vehicles, watercraft, and 9 lawnmowers. The bill prohibits a retail dealer from using 10 more than one motor fuel pump to dispense nonblended gasoline, 11 unless the motor fuel site primarily serves qualified motor 12 vehicles. Second, the prohibition does not apply to a retail 13 dealer who has been issued a waiver by the department because 14 the retail dealer has not been able to reasonably obtain 15 ethanol blended gasoline for sale at the retail motor fuel 16 site. The waiver expires 30 days from the date of issuance. 17 However, a retail dealer who has been issued a waiver may apply 18 for any number of subsequent waivers. Third, a retail dealer 19 may continue to advertise, sell, or dispense unblended gasoline 20 from one or more metered pumps located at a retail motor fuel 21 site until January 1, 2011. 22 ADVERTISING. The bill allows a person advertising ethanol 23 blended gasoline from a blender pump to designate it according 24 to a variance established by the department. The bill provides 25 that a person who advertises the sale of gasoline that is 26 not ethanol blended gasoline must refer to it as nonblended 27 gasoline. 28 MOTOR FUEL PUMPS. The bill provides that nonblended 29 gasoline sold from a motor fuel must have affixed a decal 30 specifying that state law prohibits dispensing nonblended 31 gasoline for use in motor vehicles other than qualifying motor 32 vehicles. 33 ETHANOL PROMOTION TAX CREDIT. The bill amends the ethanol 34 promotion tax credit which allows retail dealers to claim a tax 35 -9- LSB 5250SV (3) 83 da/rj 9/ 10

S.F. 2359 credit based on the dealer’s biofuel distribution percentage, 1 which is the sum of the retail dealer’s total ethanol gallonage 2 plus the retail dealer’s total biodiesel gallonage expressed as 3 a percentage of the retail dealer’s total gasoline gallonage in 4 the retail dealer’s applicable determination period (calendar 5 year). The retail dealer’s total ethanol gallonage must meet a 6 biofuel threshold percentage which increases each year until 7 it reaches 25 percent for the determination period beginning 8 on and after January 1, 2021. For any tax year in which the 9 retail dealer has attained a biofuel threshold percentage for a 10 determination period, the tax credit rate is 6.5 cents for each 11 gallon of ethanol sold (the total ethanol gallonage). For any 12 tax year in which the retail dealer has not attained a biofuel 13 threshold percentage for a determination period, the tax credit 14 rate must be adjusted lower based on the disparity. The bill 15 provides that the tax credit is based on the total ethanol 16 gallonage only for high ethanol blended gasoline (it does not 17 include ethanol contained in E-9 or E-10 but does include 18 ethanol contained in E-85 gasoline). 19 E-85 GASOLINE PROMOTION TAX CREDIT. A retail dealer who 20 sells and dispenses E-85 gasoline from motor fuel pumps is 21 eligible to receive a tax credit. The tax credit rate is 22 calculated on each gallon of E-85 gasoline which is sold and 23 dispensed by the retail dealer on a calendar year basis, 24 regardless of the number of gallons of ethanol used to 25 blend the motor fuel (between 70 and 85 percent ethanol) and 26 decreases each year based on a schedule that ends on December 27 2020. The bill increases the amount of the tax credit for each 28 year of the schedule. 29 EFFECTIVE DATE. The bill takes effect on January 1, 2011, 30 and applies to tax years beginning on or after that date. 31 -10- LSB 5250SV (3) 83 da/rj 10/ 10