House File 2147 - Introduced HOUSE FILE 2147 BY HEIN A BILL FOR An Act relating to funding for Iowa roads by providing for an 1 annual transfer of revenue from the Iowa economic emergency 2 fund to the road use tax fund and for adjustments to the 3 rate of the excise taxes on motor fuel and certain special 4 fuel used in motor vehicles. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5389YH (5) 85 dea/sc

H.F. 2147 Section 1. Section 8.55, subsection 2, Code 2014, is amended 1 by adding the following new paragraph: 2 NEW PARAGRAPH . 0b. The remaining revenues not to exceed 3 two hundred twenty million dollars for the fiscal year shall 4 be transferred to the road use tax fund. The department of 5 management shall certify to the department of revenue the 6 amount transferred under this paragraph. 7 Sec. 2. Section 8.55, subsection 2, paragraph b, Code 2014, 8 is amended to read as follows: 9 b. The remainder of the excess, if any, Any excess remaining 10 after the transfers required in paragraphs “a” and “0b” shall be 11 transferred to the general fund of the state. 12 Sec. 3. Section 452A.3, subsections 1 and 1A, Code 2014, 13 are amended by striking the subsections and inserting in lieu 14 thereof the following: 15 1. a. Except as otherwise provided in this section and in 16 this division, this subsection shall apply to the excise tax 17 imposed on each gallon of motor fuel used for any purpose for 18 the privilege of operating motor vehicles in this state. 19 b. Until December 31, 2014, an excise tax of twenty cents is 20 imposed on each gallon of motor fuel used for any purpose for 21 the privilege of operating motor vehicles in this state. For 22 the calendar year beginning January 1, 2015, and each calendar 23 year thereafter, if the amount transferred to the road use 24 tax fund for the fiscal year ending during the immediately 25 preceding calendar year pursuant to section 8.55, subsection 2, 26 is less than two hundred twenty million dollars, the rate of 27 the tax shall be the sum of twenty cents plus the amount of the 28 increase determined by the department pursuant to subsection 29 1A. 30 1A. If the amount transferred to the road use tax fund 31 for the fiscal year ending during the immediately preceding 32 calendar year pursuant to section 8.55, subsection 2, is less 33 than two hundred twenty million dollars, the amount of the 34 increase to be applied to the tax rates under subsection 1 35 -1- LSB 5389YH (5) 85 dea/sc 1/ 6

H.F. 2147 and subsection 3, paragraph “b” , subparagraph (1), shall be 1 an amount equal to the difference between two hundred twenty 2 million dollars and the amount transferred, divided by the 3 number of gallons of motor fuel and special fuel for diesel 4 engines of motor vehicles distributed in this state during the 5 fiscal year ending during the immediately preceding calendar 6 year, rounded to the nearest one-half cent. For purposes of 7 this subsection, only ethanol blended gasoline and gasoline 8 other than ethanol blended gasoline, not including aviation 9 gasoline, shall be used in determining the number of gallons of 10 motor fuel distributed. 11 Sec. 4. Section 452A.3, subsection 1C, Code 2014, is amended 12 to read as follows: 13 1C. The rate of the excise tax on E-85 gasoline imposed 14 in subsection 1B shall be determined based on the number of 15 gallons of E-85 gasoline that are distributed in this state 16 during the previous calendar year. The department shall 17 determine the actual tax paid for E-85 gasoline for each period 18 beginning January 1 and ending December 31. The amount of 19 the tax paid on E-85 gasoline during the past calendar year 20 shall be compared to the amount of tax on E-85 gasoline that 21 would have been paid using the tax rate for gasoline imposed 22 in subsection 1 or 1A and a difference shall be established. 23 If this difference is equal to or greater than twenty-five 24 thousand dollars, the tax rate for E-85 gasoline for the period 25 beginning July 1 following the end of the determination period 26 shall be the rate in effect as stated in subsection 1 or 1A . 27 Sec. 5. Section 452A.3, subsection 3, Code 2014, is amended 28 to read as follows: 29 3. a. For the privilege of operating motor vehicles or 30 aircraft in this state, there is imposed an excise tax on the 31 use of special fuel in a motor vehicle or aircraft. The 32 b. (1) Until December 31, 2014, the tax rate on special 33 fuel for diesel engines of motor vehicles is twenty-two and 34 one-half cents per gallon. For the calendar year beginning 35 -2- LSB 5389YH (5) 85 dea/sc 2/ 6

H.F. 2147 January 1, 2015, and each calendar year thereafter, if the 1 amount transferred to the road use tax fund for the fiscal year 2 ending during the immediately preceding calendar year pursuant 3 to section 8.55, subsection 2, is less than two hundred twenty 4 million dollars, the rate of the tax shall be the sum of 5 twenty-two and one-half cents plus the amount of the increase 6 determined by the department pursuant to subsection 1A. 7 (2) The rate of tax on special fuel for aircraft is three 8 cents per gallon. 9 (3) On all other special fuel, unless otherwise specified in 10 this section , the per gallon rate is the same as the motor fuel 11 tax. 12 c. Indelible dye meeting United States environmental 13 protection agency and internal revenue service regulations must 14 be added to fuel before or upon withdrawal at a terminal or 15 refinery rack for that fuel to be exempt from tax and the dyed 16 fuel may be used only for an exempt purpose. 17 Sec. 6. Section 452A.3, Code 2014, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 8. Annually by December 15, the director 20 shall cause an advisory notice to be published in the Iowa 21 administrative bulletin and in a newspaper of general 22 circulation in this state, stating the rate of taxes to be 23 in effect on or after January 1 of the following year, as 24 established pursuant to subsection 1, subsection 1A, and 25 subsection 3, paragraph “b” . The publication of the rate of tax 26 by the director is exempt from chapter 17A. 27 Sec. 7. APPLICABILITY —— INVENTORY TAX. Notwithstanding 28 section 452A.85, persons who have title to motor fuel, ethanol 29 blended gasoline, undyed special fuel, compressed natural gas, 30 or liquefied petroleum gas in storage and held for sale on 31 the effective date of an increase in the rate of excise tax 32 imposed on motor fuel, ethanol blended gasoline, or special 33 fuel pursuant to this Act shall not be subject to an inventory 34 tax on the gallonage in storage as provided in section 452A.85 35 -3- LSB 5389YH (5) 85 dea/sc 3/ 6

H.F. 2147 as a result of the tax increases provided in this Act. 1 EXPLANATION 2 The inclusion of this explanation does not constitute agreement with 3 the explanation’s substance by the members of the general assembly. 4 This bill provides additional funding annually for Iowa 5 roads. 6 Currently, when the amount of moneys in the Iowa economic 7 emergency fund is equal to the maximum balance allowed by law, 8 the first $60 million of the difference between the actual 9 net revenue for the general fund of the state for the fiscal 10 year and the adjusted revenue estimate for the fiscal year is 11 transferred to the taxpayers trust fund, and any remaining 12 excess funds are transferred to the general fund of the state. 13 This bill provides that after the transfer of $60 million 14 to the taxpayers trust fund, any remaining revenues, up to 15 a maximum of $220 million, shall be transferred to the road 16 use tax fund, and any excess remaining after that shall be 17 transferred to the general fund of the state. The department 18 of management is required to certify to the department of 19 revenue the amount transferred to the road use tax fund. For 20 years in which the amount transferred to the road use tax fund 21 from the economic emergency fund is less than $220 million, 22 the bill provides for an automatic temporary increase in the 23 excise taxes on motor fuel and special fuel for diesel engines 24 of motor vehicles to supplement the amount transferred. 25 Under current law, the rate of the excise tax on ethanol 26 blended gasoline and motor fuel other than ethanol blended 27 gasoline is determined according to a distribution percentage 28 formula that expires on June 30, 2014. After that, the rate of 29 the excise tax on all motor fuel will be 20 cents per gallon. 30 The rate of the excise tax on special fuel used in diesel 31 engines of motor vehicles is currently 22.5 cents per gallon. 32 Under the bill, the rate of the excise taxes on motor fuel 33 and special fuel used in diesel engines of motor vehicles 34 will remain at 20 cents per gallon and 22.5 cents per gallon, 35 -4- LSB 5389YH (5) 85 dea/sc 4/ 6

H.F. 2147 respectively, provided the amount transferred from the economic 1 emergency fund to the road use tax fund for the fiscal year 2 ending during the immediately preceding calendar year equals 3 $220 million. Beginning January 1, 2015, and each January 4 1 thereafter, if the amount transferred for the fiscal year 5 ending during the immediately preceding calendar year is less 6 than $220 million, the excise taxes on motor fuel and special 7 fuel for diesel engines of motor vehicles will be temporarily 8 increased for one calendar year at a rate calculated to reach 9 the $220 million target. The department of revenue shall 10 determine the rate of the increase in the excise taxes by 11 calculating the difference between $220 million and the actual 12 amount transferred, dividing the difference by the number of 13 gallons of motor fuel and special fuel for diesel engines of 14 motor vehicles distributed in the state during the fiscal year 15 ending during the immediately preceding calendar year, and 16 rounding that result to the nearest one-half cent. The bill 17 specifies that aviation gasoline is not to be included for 18 purposes of calculating the number of gallons of motor fuel 19 distributed. By operation of law, the rate determined under 20 the bill for motor fuel is also the rate for special fuel that 21 is not for diesel engines of motor vehicles or for aircraft, 22 and under specified circumstances, the rate determined under 23 the bill for motor fuel may also be the rate for E-85 gasoline. 24 The bill requires the director of revenue to have an advisory 25 notice published in the Iowa administrative bulletin and in a 26 newspaper of general circulation in the state by December 15 27 annually stating the rate of the taxes on motor fuel, special 28 fuel for diesel engines of motor vehicles, and other affected 29 fuels to be in effect the following January 1. 30 Pursuant to current law, when the rate of excise tax on 31 motor fuel, ethanol blended gasoline, undyed special fuel, 32 compressed natural gas, or liquefied petroleum gas is increased 33 by more than one-half cent per gallon, a person who has title 34 to such fuel held in storage for eventual sale is subject to an 35 -5- LSB 5389YH (5) 85 dea/sc 5/ 6

H.F. 2147 inventory tax based on the gallonage in storage at the close of 1 the business day preceding the effective date of the increase. 2 The bill waives that requirement by stating that the inventory 3 tax shall not be imposed as a result of the tax increases 4 provided in the bill. 5 -6- LSB 5389YH (5) 85 dea/sc 6/ 6