Senate File 2344 - Introduced SENATE FILE 2344 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SF 2333) A BILL FOR An Act relating to renewable fuels, by providing for biobutanol 1 and biobutanol blended gasoline, modifying the rate of 2 the E-15 plus gasoline promotion tax credit and extending 3 provisions for a biodiesel production refund, and including 4 effective date and retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5886SV (3) 85 da/nh

S.F. 2344 DIVISION I 1 BIOBUTANOL AND BIOBUTANOL BLENDED GASOLINE 2 Section 1. Section 159A.2, subsection 1, Code 2014, is 3 amended to read as follows: 4 1. “Biodiesel” and “Biobutanol” , “biobutanol blended 5 gasoline” , “biodiesel” , “biodiesel blended fuel” , “ethanol” , 6 “ethanol blended gasoline” , and “renewable fuel” mean the same 7 as defined in section 214A.1 . 8 Sec. 2. Section 159A.2, subsections 5 and 8, Code 2014, are 9 amended by striking the subsections. 10 Sec. 3. Section 159A.3, subsection 3, paragraph a, Code 11 2014, is amended to read as follows: 12 a. A chief purpose of the office is to further the 13 production and consumption of ethanol blended gasoline and 14 biobutanol blended gasoline in this state. The office shall 15 be the primary state agency charged with the responsibility 16 to promote public consumption of ethanol blended gasoline and 17 biobutanol blended gasoline . 18 Sec. 4. Section 159A.6, subsection 1, paragraph d, Code 19 2014, is amended to read as follows: 20 d. Promote the advantages related to the use of coproducts 21 derived from the production of renewable fuels, including the 22 use of coproducts used as livestock feed or meal. Promotions 23 shall be designed to inform the potential purchasers of the 24 advantages associated with using coproducts. The office shall 25 promote advantages associated with using coproducts of ethanol 26 and biobutanol production as livestock feed or meal to cattle 27 producers in this state. 28 Sec. 5. Section 214.1, subsection 1, Code 2014, is amended 29 to read as follows: 30 1. “Biodiesel” , “biodiesel fuel” , “biofuel” , “ethanol” , 31 “motor fuel” , “Motor fuel” , “retail dealer” , “retail motor 32 fuel site” , and “wholesale dealer” mean the same as defined in 33 section 214A.1 . 34 Sec. 6. Section 214A.1, Code 2014, is amended by adding the 35 -1- LSB 5886SV (3) 85 da/nh 1/ 7

S.F. 2344 following new subsections: 1 NEW SUBSECTION . 2A. “Biobutanol” means isobutyl alcohol 2 that is to be blended with gasoline if it meets the standards 3 provided in section 214A.2. 4 NEW SUBSECTION . 2B. “Biobutanol blended gasoline” means a 5 formulation of gasoline which is a liquid petroleum product 6 blended with biobutanol, if the formulation meets the standards 7 provided in section 214A.2. 8 Sec. 7. Section 214A.1, subsections 6 and 23, Code 2014, are 9 amended to read as follows: 10 6. “Biofuel” means ethanol, biobutanol, or biodiesel. 11 23. “Renewable fuel” means a combustible liquid derived 12 from grain starch, oilseed, animal fat, or other biomass; or 13 produced from a biogas source, including any nonfossilized 14 decaying organic matter which is capable of powering machinery, 15 including but not limited to an engine or power plant. 16 Renewable fuel includes but is not limited to biofuel, ethanol 17 blended gasoline, biobutanol blended gasoline, or biodiesel 18 blended fuel meeting the standards provided in section 214A.2 . 19 Sec. 8. Section 214A.1, subsection 32, unnumbered paragraph 20 1, Code 2014, is amended to read as follows: 21 “Unleaded gasoline” means gasoline, including ethanol 22 blended gasoline or biobutanol blended gasoline , if all of the 23 following applies: 24 Sec. 9. Section 214A.2, subsection 1, Code 2014, is amended 25 to read as follows: 26 1. The department shall adopt rules pursuant to chapter 27 17A for carrying out this chapter . The rules may include but 28 are not limited to specifications relating to motor fuel, 29 including but not limited to renewable fuel such as ethanol 30 blended gasoline, biobutanol blended gasoline, biodiesel, 31 biodiesel blended fuel, and motor fuel components such as an 32 oxygenate. In the interest of uniformity, the department shall 33 adopt by reference other specifications relating to tests and 34 standards for motor fuel, including renewable fuel and motor 35 -2- LSB 5886SV (3) 85 da/nh 2/ 7

S.F. 2344 fuel components, established by the United States environmental 1 protection agency and A.S.T.M. international. 2 Sec. 10. Section 214A.2, subsection 3, Code 2014, is amended 3 by adding the following new paragraph: 4 NEW PARAGRAPH . c. If the motor fuel is advertised for sale 5 or sold as biobutanol blended gasoline, the motor fuel must 6 comply with departmental standards which shall meet all of the 7 following requirements: 8 (1) Biobutanol must be an agriculturally derived isobutyl 9 alcohol that meets A.S.T.M. international specification 10 D7862 for butanol for blending with gasoline for use as 11 automotive spark-ignition engine fuel, or a successor A.S.T.M. 12 international specification, as established by rules adopted 13 by the department. 14 (2) Gasoline blended with biobutanol must meet requirements 15 established by rules adopted in part or in whole based on 16 A.S.T.M. international specification D4814. 17 Sec. 11. Section 214A.2, subsection 5, Code 2014, is amended 18 to read as follows: 19 5. a. Ethanol blended gasoline shall be designated E-xx 20 where “xx” is the volume percent of ethanol in the ethanol 21 blended gasoline and biodiesel . 22 b. Biobutanol blended gasoline shall be designated 23 Bu-xx where “xx” is the volume percent of biobutanol in the 24 biobutanol blended gasoline. 25 c. Biodiesel fuel shall be designated B-xx where “xx” is the 26 volume percent of biodiesel. 27 Sec. 12. Section 214A.3, subsection 2, paragraph b, Code 28 2014, is amended by adding the following new subparagraph: 29 NEW SUBPARAGRAPH . (02) A person shall not knowingly falsely 30 advertise biobutanol blended gasoline by using an inaccurate 31 designation as provided in section 214A.2. 32 Sec. 13. Section 214A.5, subsection 2, Code 2014, is amended 33 to read as follows: 34 2. A wholesale dealer selling ethanol blended gasoline , 35 -3- LSB 5886SV (3) 85 da/nh 3/ 7

S.F. 2344 biobutanol blended gasoline, or biodiesel blended fuel to 1 a purchaser shall provide the purchaser with a statement 2 indicating its designation as provided in section 214A.2 . The 3 statement may be on the sales slip provided in this section 4 or a similar document, including but not limited to a bill of 5 lading or invoice. 6 Sec. 14. Section 214A.16, subsection 1, Code 2014, is 7 amended by adding the following new paragraph: 8 NEW PARAGRAPH . 0d. If biobutanol blended gasoline is sold 9 from a motor fuel pump, the motor fuel pump shall have affixed 10 a decal identifying the biobutanol blended gasoline. 11 DIVISION II 12 E-15 PLUS GASOLINE PROMOTION TAX CREDIT 13 Sec. 15. Section 422.11Y, subsection 4, paragraph b, Code 14 2014, is amended to read as follows: 15 b. The designated rate of the tax credit for the following 16 three periods within each calendar year is as follows: 17 (1) For calendar year 2012, calendar year 2013, and calendar 18 year 2014 19 (1) For the first period beginning January 1 and ending May 20 31 , three cents. 21 (2) For the second period beginning June 1 and ending 22 September 15, ten cents. 23 (3) For calendar year 2015, calendar year 2016, and calendar 24 year 2017 the third period beginning September 16 and ending 25 December 31 , two three cents. 26 Sec. 16. EFFECTIVE DATE. This division of this Act, being 27 deemed of immediate importance, takes effect upon enactment. 28 Sec. 17. RETROACTIVE APPLICABILITY. Section 422.11Y, 29 as amended in this division of this Act, and section 422.33, 30 subsection 11D, as applied through section 422.11Y, as amended 31 in this division of this Act, apply retroactively to tax years 32 beginning on and after January 1, 2014. 33 DIVISION III 34 BIODIESEL PRODUCTION REFUND 35 -4- LSB 5886SV (3) 85 da/nh 4/ 7

S.F. 2344 Sec. 18. Section 423.4, subsection 9, paragraphs b and e, 1 Code 2014, are amended to read as follows: 2 b. The amount of the refund shall be calculated by 3 multiplying a designated rate by the total number of gallons 4 of biodiesel produced by the biodiesel producer in this state 5 during each quarter of a calendar year. The designated rate 6 shall be as follows : 7 (1) For the calendar year 2012, three cents. 8 (2) For the calendar year 2013, two and one-half cents. 9 (3) For the calendar year 2014, two cents. 10 e. This subsection is repealed on January 1, 2015 2020 . 11 EXPLANATION 12 The inclusion of this explanation does not constitute agreement with 13 the explanation’s substance by the members of the general assembly. 14 GENERAL. This bill provides for the regulation and 15 promotion of renewable fuel, including by creating a new class 16 of biofuel referred to as biobutanol and the corresponding 17 biobutanol blended gasoline (Code chapter 214A). The bill 18 also amends provisions establishing an E-15 plus promotion tax 19 credit due to expire on January 1, 2018 (Code sections 422.11Y 20 and 422.33(11D)), and a biodiesel producer refund which is due 21 to expire on January 1, 2015 (Code Section 423.4(a)). 22 BIOBUTANOL AND BIOBUTANOL BLENDED GASOLINE —— REGULATION. 23 The bill amends provisions regarding the regulation of 24 motor fuel, including biofuels and renewable fuel, by the 25 department of agriculture and land stewardship. It classifies 26 biobutanol as a biofuel (together with ethanol and biodiesel) 27 and biobutanol blended gasoline as a renewable fuel (together 28 with ethanol blended gasoline and biodiesel blended fuel). 29 Biobutanol is isobutyl alcohol that is blended with gasoline. 30 The bill establishes specifications for biobutanol and 31 biobutanol blended gasoline, including specifications based on 32 A.S.T.M. international standards, similar to specifications 33 for ethanol, ethanol blended gasoline, biodiesel, and 34 biodiesel blended fuel. The bill amends related provisions for 35 -5- LSB 5886SV (3) 85 da/nh 5/ 7

S.F. 2344 designating biobutanol blended gasoline (Code section 214A.2), 1 the advertising of biobutanol blended gasoline (Code section 2 214A.3), documentation required to be maintained by wholesale 3 and retail dealers (Code section 214A.5), and the labeling of 4 motor fuel pumps (Code section 214A.16). Other provisions in 5 the Code chapter refer to biofuels, including those regulating 6 testing procedures (Code sections 214A.2B and 214A.7). The 7 bill requires that the office of renewable fuels and coproducts 8 promote the use of biobutanol and biobutanol blended gasoline 9 (Code chapter 159A). In addition, a number of other Code 10 chapters refer to biofuel or renewable fuel as defined in Code 11 section 214A.1, including provisions that are administered 12 by the department of agriculture and land stewardship (Code 13 chapters 159 and 203), that regulate certain supply agreements 14 (Code section 323.4A), and that are administered by the 15 department of revenue (Code chapters 422 and 452A). 16 E-15 TAX CREDIT. The E-15 plus gasoline promotion tax 17 credit is calculated on the total gallons of ethanol blended 18 gasoline, classified as E-15 and higher, and sold and dispensed 19 by a retail dealer (see Code section 214A.1) during each 20 quarter. The amount of the tax credit equals a constant 21 (designated) rate multiplied by the total number of gallons of 22 E-15 or higher sold and dispensed by the retail dealer during 23 a calendar year assuming the retail dealer’s tax year is on a 24 calendar year basis. A designated rate of 3 cents applies to 25 each calendar year from 2012 through 2014. The designated rate 26 is then reduced to 2 cents which will apply to each calendar 27 year from 2015 through 2017 when the tax credit expires. The 28 same calculations are applied to retail dealers whose tax 29 years are not based on a calendar year (701 IAC 42.46). The 30 bill revises the designated rate for three periods of time 31 within a tax year (either based on a calendar or alternative 32 fiscal year). For the first period (January 1 through May 31), 33 the rate is 3 cents; for the second period (June 1 through 34 September 15), the rate is 10 cents; and for the third period 35 -6- LSB 5886SV (3) 85 da/nh 6/ 7

S.F. 2344 (September 16 through December 31), the rate returns to 3 1 cents. This revision takes effect upon enactment of the bill 2 and applies retroactively to January 1, 2014. 3 BIODIESEL PRODUCER REFUND. A biodiesel producer is 4 engaged in the manufacture of biodiesel which is a renewable 5 fuel derived from vegetable oils or animal fats for use in 6 biodiesel blended fuel; an alternative to diesel fuel (Code 7 section 214A.1). The amount of the refund equals a constant 8 (designated) rate multiplied by the total number of gallons 9 of biodiesel produced by the biodiesel producer in this state 10 during each quarter of a calendar year. The biodiesel producer 11 receives the refund amount after subtracting any amount of 12 sales or use tax owed by the biodiesel producer (701 IAC 13 12.18). In addition, a biodiesel producer cannot claim a 14 refund on more than 25 million gallons of biodiesel produced 15 during a calendar year at any one manufacturing facility. A 16 designated rate of 3 cents applied to calendar year 2012. The 17 designated rate was reduced to 2.5 cents for calendar year 2013 18 and to 2 cents for calendar year 2014 after which it expires. 19 The bill extends the period in which the 2-cent rate applies 20 for five additional calendar years through 2019. 21 -7- LSB 5886SV (3) 85 da/nh 7/ 7