SENATE FILE 476

BY  COMMITTEE ON AGRICULTURE

(SUCCESSOR TO SSB 1174)

A BILL FOR

An Act relating to motor fuel, including ethanol and biodiesel used in the formulation of motor fuel, by providing for related infrastructure, tax credits, and appropriations, and including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

REGULATION OF MOTOR FUEL
   Section 1.  Section 214A.1, Code 2011, is amended by adding the following new subsections:
   NEW SUBSECTION.  11A.  “Flexible fuel vehicle” means a motor vehicle which is powered by an engine capable of operating using E-85 gasoline.
   NEW SUBSECTION.  16A.  “Nonblended gasoline” means gasoline other than ethanol blended gasoline.
   Sec. 2.  Section 214A.2, subsection 4, paragraph b, Code 2011, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (4)  Biodiesel blended fuel classified as from B-6 through B-20 must conform to A.S.T.M. international specification D7467 or a successor A.S.T.M. international specification as established by rules adopted by the department.
   Sec. 3.  Section 214A.16, subsection 1, Code 2011, is amended by striking the subsection and inserting in lieu thereof the following:
   1.  A motor fuel pump shall be affixed with a decal identifying the motor fuel that it dispenses, as required in this subsection.
   a.  If the motor fuel is gasoline, the following shall apply:
   (1)  For gasoline not blended with ethanol, the decal shall identify it as nonblended gasoline.
   (2)  For gasoline classified as higher than standard ethanol blended gasoline pursuant to section 214A.2, the decal shall identify it as being for use in flexible fuel vehicles only.
   b.  If the motor fuel is biodiesel fuel, the decal shall identify the biodiesel fuel as provided in 16 C.F.R. pt. 306.
   Sec. 4.  Section 422.11N, subsection 1, paragraph a, Code 2011, is amended to read as follows:
   a.  “E-85 gasoline”, “ethanol”, “ethanol blended gasoline”, “gasoline”, “flexible fuel vehicle”, and“retail dealer” mean the same as defined in section 214A.1.
   Sec. 5.  Section 422.11N, subsection 1, paragraph b, Code 2011, is amended by striking the paragraph.
   Sec. 6.  Section 452A.2, subsection 18, Code 2011, is amended to read as follows:
   18.  “Flexible fuel vehicle” means a motor vehicle as defined in section 321M.1 which is powered by an engine capable of operating using E-85 gasoline the same as defined in section 214A.1.

DIVISION II

LIMITING LIABILITY OF

RETAIL DEALERS
   Sec. 7.  NEW SECTION.  214A.20  Retail dealers —— limitation on liability.
   1.  A retail dealer is not liable for damages caused to a motor by the use of incompatible motor fuel dispensed at the retail dealer’s retail motor fuel site, if all of the following applies:
   a.  The incompatible motor fuel complies with the specifications for a type of motor fuel as provided in section 214A.2.
   b.  The incompatible motor fuel is selected by a person other than the retail dealer, including an employee or agent of the retail dealer.
   c.  The incompatible motor fuel is dispensed from a motor fuel pump that correctly labels the type of fuel dispensed.
   2.  For purposes of this section, a motor fuel is incompatible with a motor according to the manufacturer of the motor.

DIVISION III

INFRASTRUCTURE
   Sec. 8.  Section 15G.205, subsection 4, paragraph c, Code 2011, is amended to read as follows:
   c.  Notwithstanding section 8.33, unencumbered and unobligated moneys remaining in the infrastructure fund at the close of each fiscal year shall not revert but shall remain available in the infrastructure fund for expenditure for the same purposes until the end of the fiscal year that begins July 1, 2011, at which time the unencumbered and unobligated moneys remaining shall revert to the funds from which appropriated provided in this section.
   Sec. 9.  NEW SECTION.  15G.207  Motor fuel blender pump installation project.
   1.  A motor fuel blender pump installation project is established in the department under the direction of the renewable fuel infrastructure board created pursuant to section 15G.202.
   2.  Notwithstanding sections 15G.203, 15G.204, and 15G.205, or any other provision to the contrary, the department of economic development shall support the project by using all available moneys deposited in the renewable fuel infrastructure fund to award financial incentives to retail dealers as provided in this section. All moneys in the fund which are not otherwise obligated or unencumbered on the effective date of this Act are available for the purposes of this section.
   3.  The project shall be administered by the department and moneys shall be awarded by the board in the same manner as the renewable fuel infrastructure program for retail motor fuel sites as provided in section 15G.203.
   4.  The purpose of the project is to improve retail motor fuel sites located in this state by installing motor fuel blender pumps capable of dispensing different classifications of ethanol blended gasoline or capable of dispensing different classifications of biodiesel blended fuel. The improvements may include installing, replacing, or converting related infrastructure used to store, blend, or dispense ethanol blended fuel or biodiesel blended fuel from a motor fuel blender pump. A motor fuel blender pump dispensing ethanol blended gasoline under the project must dispense different classifications of ethanol blended gasoline, including E-15 gasoline to be dispensed at all times that the blender pump is operating. Nothing in this section prevents the installation of a blender pump which is also capable of dispensing E-85 gasoline.
   5.  The renewable fuel infrastructure board shall submit a report to the general assembly not later than January 1 of each year of the project, including findings regarding the progress of the project. 
   6.  This section is repealed on July 1, 2014.
   Sec. 10.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.

DIVISION IV

ETHANOL BLENDED GASOLINE

TAX CREDIT
   Sec. 11.  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. 12.  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. 13.  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. 14.  Section 422.11N, subsection 4, paragraph d, Code 2011, is amended by striking the paragraph.
   Sec. 15.  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. 16.  Section 422.11N, subsection 5, paragraph a, subparagraph (1), Code 2011, is amended to read as follows:
   (1)  For any tax year in which the retail dealer has attained a biofuel threshold percentage for the determination period, the tax credit rate is six sixteen and one-half cents.
   Sec. 17.  Section 422.11N, subsection 5, paragraph a, subparagraph (2), subparagraph divisions (a) and (b), Code 2011, are amended to read as follows:
   (a)  If the retail dealer’s biofuel threshold percentage disparity equals two percent or less, the tax credit rate is four fourteen and one-half cents.
   (b)  If the retail dealer’s biofuel threshold percentage disparity equals more than two percent but not more than four percent, the tax credit rate is two twelve and one-half cents.
   Sec. 18.  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. 19.  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. 20.  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. 21.  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. 22.  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. 23.  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. 24.  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. 25.  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. 26.  EFFECTIVE DATE.  This division of this Act takes effect January 1, 2012.
   Sec. 27.  APPLICABILITY.  The sections of this division of this Act amending section 422.11N and section 422.33, subsection 11A, and the section of this division 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.

DIVISION V

TAXES IMPOSED UPON BIODIESEL FUEL
   Sec. 28.  Section 452A.2, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  9A.  “Diesel fuel” means the same as defined in section 214A.1.
   Sec. 29.  Section 452A.2, subsection 29, Code 2011, is amended to read as follows:
   29.  “Nonterminal storage facility” means a facility where motor fuel or special fuel, other than liquefied petroleum gas, is stored that is not supplied by a pipeline or a marine vessel.“Nonterminal storage facility” includes a facility that manufactures products such asethanol as defined in section 214A.1, biofuel, blend stocks, or additives which may be used as motor fuel or special fuel, other than liquefied petroleum gas, for operating motor vehicles or aircraft.
   Sec. 30.  Section 452A.3, subsection 3, Code 2011, is amended to read as follows:
   3.
  a.  For the privilege of operating motor vehicles or aircraft in this state, there is imposed an excise tax on the use of special fuel in a motor vehicle or aircraft.
   (1)  The tax rate on special fuel for diesel engines of motor vehicles is twenty-two and one-half cents per gallon.  The tax rate on biodiesel for diesel engines of motor vehicles shall be determined on a volume basis with the gross metered gallons adjusted to sixty degrees Fahrenheit.
   (2)  The rate of tax on special fuel for aircraft is three cents per gallon.
   (3)  On all other special fuel, unless otherwise specified in this section, the per gallon rate is the same as the motor fuel tax.
    b.  Indelible dye meeting United States environmental protection agency and internal revenue service regulations must be added to special fuel before or upon withdrawal at a terminal or refinery rack for that special fuel to be exempt from tax and the dyed special fuel may be used only for an exempt purpose.
   Sec. 31.  Section 452A.17, subsection 1, paragraph a, Code 2011, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (11)  Diesel fuel used by a nonterminal storage facility to blend with biodiesel to produce biodiesel blended fuel, if the biodiesel blended fuel is distributed to a blender licensed pursuant to section 452A.6 who is also required to pay the excise tax on the same diesel fuel.
   Sec. 32.  Section 452A.86, Code 2011, is amended to read as follows:
   452A.86  Method of determining gallonage.
   1.  The exclusive method of determining gallonage of any purchases or sales of motor fuel, undyed special fuel, compressed natural gas, or liquefied petroleum gas as defined in this chapter and distillate fuels shall be on a gross volume basis. A temperature-adjusted or other method shall not be used, except as it applies to biodiesel, liquefied petroleum gas,and or the sale or exchange of petroleum products between petroleum refiners. All invoices, bills of lading, or other records of sale or purchase and all returns or records required to be made, kept, and maintained by a supplier, restrictive supplier, importer, exporter, blender, or compressed natural gas or liquefied petroleum gas dealer or user shall be made, kept, and maintained on the gross volume basis.
   2.  For purposes of this section,“distillate fuels” means any fuel oil, gas oil, topped crude oil, or other petroleum oils derived by refining or processing crude oil or unfinished oils which have a boiling range at atmospheric pressure which falls completely or in part between five hundred fifty and twelve hundred degrees Fahrenheit.

DIVISION VI

INCOME TAX CREDITS FOR RETAIL

DEALERS OF RENEWABLE FUEL
   Sec. 33.  Section 422.11N, subsection 3, Code 2011, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  c.  The department has received the retail dealer’s motor fuel gallonage report for the immediately prior determination period beginning January 1 and ending December 31, as required in section 452A.33. The report must have been received by the department on or before the report’s due date. If the retail dealer submits the report on a quarterly or monthly basis as provided in that section, the department must have received all such reports by the same due date. 
   Sec. 34.  Section 422.11O, subsection 2, Code 2011, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  c.  The department has received the retail dealer’s motor fuel gallonage report for the immediately prior determination period beginning January 1 and ending December 31, as required in section 452A.33. The report must have been received by the department on or before the report’s due date. If the retail dealer submits the report on a quarterly or monthly basis as provided in that section, the department must have received all such reports by the same due date. 
   Sec. 35.  Section 422.11P, subsection 2, paragraph a, Code 2011, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (4)  The department has received the retail dealer’s motor fuel gallonage report for the immediately prior determination period beginning January 1 and ending December 31, as required in section 452A.33. The report must have been received by the department on or before the report’s due date. If the retail dealer submits the report on a quarterly or monthly basis as provided in that section, the department must have received all such reports by the same due date. 
   Sec. 36.  Section 452A.33, subsection 1, paragraph a, unnumbered paragraph 1, Code 2011, is amended to read as follows:
   Each retail dealer shall submit a motor fuel gallonage report, detailing its total motor fuel gallonage for a determination period as follows:
EXPLANATION
   GENERALLY. This bill relates to motor fuel regulated by the department of agriculture and land stewardship (DALS) pursuant to Code chapter 214A and classified according to the percentage of biofuel blended into the motor fuel (e.g., E-10 means a gallon of gasoline containing 10 percent ethanol and B-5 means a gallon of diesel fuel containing 5 percent biodiesel). Both ethanol blended gasoline and biodiesel blended fuel are subject to promotional programs and tax incentives.
   GENERAL —— REGULATION OF MOTOR FUEL. The bill amends several provisions in Code chapter 214A, which regulates the sale of motor fuel by DALS. The bill establishes a standard for biodiesel blended fuel based on A.S.T.M. international specifications. It also rewrites a provision that requires that a motor fuel pump be affixed with a decal (label) informing the traveling public whether it is dispensing a motor fuel containing ethanol or biodiesel. It retains the label requirement for a motor fuel pump dispensing E-85 gasoline for flexible fuel vehicles or biodiesel blended fuel for diesel-powered motor vehicles, removes a provision requiring a label for a motor fuel pump dispensing other types of ethanol blended fuel (standard ethanol blended gasoline), and requires a label for a motor fuel pump dispensing gasoline without an ethanol component (nonblended gasoline). 
   LIMITING LIABILITY OF RETAIL DEALERS. The bill amends Code chapter 214A, which provides for motor fuel, including gasoline or ethanol blended gasoline, E-85 gasoline, diesel fuel, and biodiesel fuel. The bill provides that a retail dealer is not liable for damages caused to a motor by the use of an incompatible motor fuel (e.g., the use of E-85 gasoline in a conventional gasoline-powered motor). The bar against liability depends upon the satisfaction of certain conditions: (1) the motor fuel must meet legal specifications, (2) the retail dealer cannot have selected it for use in the motor, and (3) the dispensing pump must be correctly labeled.
   INFRASTRUCTURE. The bill suspends the operation of two current programs providing incentives for the installation of renewable fuel infrastructure. The programs are supported from moneys deposited in the renewable fuel infrastructure fund. The bill provides that the department of economic development and the renewable fuel infrastructure board must use all available moneys deposited in the fund to award financial incentives to retail dealers participating in a project to install infrastructure associated with dispensing renewable fuel from motor fuel blender pumps. The board must report to the general assembly regarding the project. The project is eliminated on July 1, 2014.
   The bill eliminates a provision which provides that moneys in the fund revert at the end of the fiscal year beginning July 1, 2011.
   This division of the bill takes effect upon enactment.
   ETHANOL BLENDED GASOLINE TAX CREDIT AND REPORTING. 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 that are part 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.
   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.
   This division of the bill is effective on January 1, 2012, and tax credit provisions are applicable to the tax years beginning on or after that date.
   EXCISE TAXES IMPOSED UPON BIODIESEL FUEL. The bill amends provisions in Code chapter 452A which relate to an excise tax imposed upon biodiesel fuel. Generally, an excise tax is imposed on each gallon of motor fuel, including biodiesel fuel (Code section 452A.3) based on a gross volume basis without adjustment (Code section 452A.86). The bill does not directly change the excise tax imposed on biodiesel fuel, but changes how the gallonage is calculated at the meter, by requiring that the excise tax be assessed after adjusting the biodiesel’s temperature to 60 degrees Fahrenheit.
   The bill also provides for a refund of excise taxes paid on diesel fuel by nonterminal storage facilities. A person who manufactures a biofuel, including ethanol or biodiesel for distribution, is classified as a nonterminal storage facility (Code section 452A.2). A nonterminal storage facility is required to pay an excise tax on diesel fuel used in producing biodiesel blended fuel. The bill provides that the nonterminal storage facility is entitled to a refund of the excise tax paid on diesel fuel if the biodiesel blended fuel is distributed to a licensed blender (Code section 452A.6) who must pay the excise tax on that same diesel fuel.
   INCOME TAX CREDITS FOR RETAIL DEALERS OF MOTOR FUEL WHICH CONTAINS ETHANOL OR BIODIESEL. Code chapter 422 establishes a tax credit for the promotion of ethanol blended gasoline (Code sections 422.11N and 422.33(11A)), E-85 gasoline (Code sections 422.11O and 422.33(11B)), and biodiesel blended motor fuel (Code sections 422.11P and 422.33(11C)). The bill provides that in order for a retail dealer to claim a tax credit, it must comply with an existing statute that requires a retail dealer submit a motor fuel gallonage report (Code section 452A.33) for its latest determination period (calendar year). The report includes the retail dealer’s total gasoline gallonage, ethanol gallonage, ethanol blended gasoline gallonage, E-85 gasoline gallonage, diesel gallonage, and biodiesel gallonage for each motor fuel site or other permanent or temporary location owned or operated by the retail dealer.