SF 2344 (LSB 5886SV (3) 85)

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 and biobutanol blended gasoline, modifying the rate of the E-15 plus gasoline promotion tax credit and extending provisions for a biodiesel production refund, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

BIOBUTANOL AND BIOBUTANOL BLENDED GASOLINE
    Section 1.  Section 159A.2, subsection 1, Code 2014, is amended to read as follows:
   1.  “Biodiesel” and “Biobutanol”, “biobutanol blended gasoline”, “biodiesel”, “biodiesel blended fuel”, “ethanol”, “ethanol blended gasoline”, and “renewable fuel” mean the same as defined in section 214A.1.
    Sec. 2.  Section 159A.2, subsections 5 and 8, Code 2014, are amended by striking the subsections.
    Sec. 3.  Section 159A.3, subsection 3, paragraph a, Code 2014, is amended to read as follows:
   a.  A chief purpose of the office is to further the production and consumption of ethanol blended gasoline and biobutanol blended gasoline in this state. The office shall be the primary state agency charged with the responsibility to promote public consumption of ethanol blended gasoline and biobutanol blended gasoline.
    Sec. 4.  Section 159A.6, subsection 1, paragraph d, Code 2014, is amended to read as follows:
   d.   Promote the advantages related to the use of coproducts derived from the production of renewable fuels, including the use of coproducts used as livestock feed or meal. Promotions shall be designed to inform the potential purchasers of the advantages associated with using coproducts. The office shall promote advantages associated with using coproducts of ethanol and biobutanol production as livestock feed or meal to cattle producers in this state.
    Sec. 5.  Section 214.1, subsection 1, Code 2014, is amended to read as follows:
   1.  “Biodiesel”, “biodiesel fuel”, “biofuel”, “ethanol”, “motor fuel”, “Motor fuel”, “retail dealer”, “retail motor fuel site”, and “wholesale dealer” mean the same as defined in section 214A.1.
    Sec. 6.  Section 214A.1, Code 2014, is amended by adding the following new subsections:
   NEW SUBSECTION.  2A.  “Biobutanol” means isobutyl alcohol that is to be blended with gasoline if it meets the standards provided in section 214A.2.
   NEW SUBSECTION.  2B.  “Biobutanol blended gasoline” means a formulation of gasoline which is a liquid petroleum product blended with biobutanol, if the formulation meets the standards provided in section 214A.2.
    Sec. 7.  Section 214A.1, subsections 6 and 23, Code 2014, are amended to read as follows:
   6.  “Biofuel” means ethanol, biobutanol, or biodiesel.
   23.  “Renewable fuel” means a combustible liquid derived from grain starch, oilseed, animal fat, or other biomass; or produced from a biogas source, including any nonfossilized decaying organic matter which is capable of powering machinery, including but not limited to an engine or power plant. Renewable fuel includes but is not limited to biofuel, ethanol blended gasoline, biobutanol blended gasoline, or biodiesel blended fuel meeting the standards provided in section 214A.2.
    Sec. 8.  Section 214A.1, subsection 32, unnumbered paragraph 1, Code 2014, is amended to read as follows:

   “Unleaded gasoline” means gasoline, including ethanol blended gasoline or biobutanol blended gasoline, if all of the following applies:
    Sec. 9.  Section 214A.2, subsection 1, Code 2014, is amended to read as follows:
   1.  The department shall adopt rules pursuant to chapter 17A for carrying out this chapter. The rules may include but are not limited to specifications relating to motor fuel, including but not limited to renewable fuel such as ethanol blended gasoline, biobutanol blended gasoline, biodiesel, biodiesel blended fuel, and motor fuel components such as an oxygenate. In the interest of uniformity, the department shall adopt by reference other specifications relating to tests and standards for motor fuel, including renewable fuel and motor fuel components, established by the United States environmental protection agency and A.S.T.M. international.
    Sec. 10.  Section 214A.2, subsection 3, Code 2014, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  c.  If the motor fuel is advertised for sale or sold as biobutanol blended gasoline, the motor fuel must comply with departmental standards which shall meet all of the following requirements:
   (1)  Biobutanol must be an agriculturally derived isobutyl alcohol that meets A.S.T.M. international specification D7862 for butanol for blending with gasoline for use as automotive spark-ignition engine fuel, or a successor A.S.T.M. international specification, as established by rules adopted by the department.
   (2)  Gasoline blended with biobutanol must meet requirements established by rules adopted in part or in whole based on A.S.T.M. international specification D4814.
    Sec. 11.  Section 214A.2, subsection 5, Code 2014, is amended to read as follows:
   5.  a.  Ethanol blended gasoline shall be designated E-xx where “xx” is the volume percent of ethanol in the ethanol blended gasoline and biodiesel.
   b.  Biobutanol blended gasoline shall be designated Bu-xx where “xx” is the volume percent of biobutanol in the biobutanol blended gasoline.
   c.  Biodiesel fuel shall be designated B-xx where “xx” is the volume percent of biodiesel.
    Sec. 12.  Section 214A.3, subsection 2, paragraph b, Code 2014, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (02)  A person shall not knowingly falsely advertise biobutanol blended gasoline by using an inaccurate designation as provided in section 214A.2.
    Sec. 13.  Section 214A.5, subsection 2, Code 2014, is amended to read as follows:
   2.  A wholesale dealer selling ethanol blended gasoline, biobutanol blended gasoline, or biodiesel blended fuel to a purchaser shall provide the purchaser with a statement indicating its designation as provided in section 214A.2. The statement may be on the sales slip provided in this section or a similar document, including but not limited to a bill of lading or invoice.
    Sec. 14.  Section 214A.16, subsection 1, Code 2014, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  0d.  If biobutanol blended gasoline is sold from a motor fuel pump, the motor fuel pump shall have affixed a decal identifying the biobutanol blended gasoline.

DIVISION II

E-15 PLUS GASOLINE PROMOTION TAX CREDIT
    Sec. 15.  Section 422.11Y, subsection 4, paragraph b, Code 2014, is amended to read as follows:
   b.  The designated rate of the tax credit for the following three periods within each calendar year is as follows:
   (1)  For calendar year 2012, calendar year 2013, and calendar year 2014
   (1)  For the first period beginning January 1 and ending May 31, three cents.
   (2)  For the second period beginning June 1 and ending September 15, ten cents.
   (3)  For calendar year 2015, calendar year 2016, and calendar year 2017 the third period beginning September 16 and ending December 31, two three cents.
    Sec. 16.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 17.  RETROACTIVE APPLICABILITY.  Section 422.11Y, as amended in this division of this Act, and section 422.33, subsection 11D, as applied through section 422.11Y, as amended in this division of this Act, apply retroactively to tax years beginning on and after January 1, 2014.

DIVISION III

BIODIESEL PRODUCTION REFUND
    Sec. 18.  Section 423.4, subsection 9, paragraphs b and e, Code 2014, are amended to read as follows:
   b.  The amount of the refund shall be calculated by multiplying a designated rate by the total number of gallons of biodiesel produced by the biodiesel producer in this state during each quarter of a calendar year. The designated rate shall be as follows:
   (1)  For the calendar year 2012, three cents.
   (2)  For the calendar year 2013, two and one-half cents.
   (3)  For the calendar year 2014, two cents.
   e.  This subsection is repealed on January 1, 2015 2020.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   GENERAL. This bill provides for the regulation and promotion of renewable fuel, including by creating a new class of biofuel referred to as biobutanol and the corresponding biobutanol blended gasoline (Code chapter 214A). The bill also amends provisions establishing an E-15 plus promotion tax credit due to expire on January 1, 2018 (Code sections 422.11Y and 422.33(11D)), and a biodiesel producer refund which is due to expire on January 1, 2015 (Code Section 423.4(a)).
   BIOBUTANOL AND BIOBUTANOL BLENDED GASOLINE —— REGULATION.  The bill amends provisions regarding the regulation of motor fuel, including biofuels and renewable fuel, by the department of agriculture and land stewardship. It classifies biobutanol as a biofuel (together with ethanol and biodiesel) and biobutanol blended gasoline as a renewable fuel (together with ethanol blended gasoline and biodiesel blended fuel). Biobutanol is isobutyl alcohol that is blended with gasoline. The bill establishes specifications for biobutanol and biobutanol blended gasoline, including specifications based on A.S.T.M. international standards, similar to specifications for ethanol, ethanol blended gasoline, biodiesel, and biodiesel blended fuel. The bill amends related provisions for designating biobutanol blended gasoline (Code section 214A.2), the advertising of biobutanol blended gasoline (Code section 214A.3), documentation required to be maintained by wholesale and retail dealers (Code section 214A.5), and the labeling of motor fuel pumps (Code section 214A.16). Other provisions in the Code chapter refer to biofuels, including those regulating testing procedures (Code sections 214A.2B and 214A.7). The bill requires that the office of renewable fuels and coproducts promote the use of biobutanol and biobutanol blended gasoline (Code chapter 159A). In addition, a number of other Code chapters refer to biofuel or renewable fuel as defined in Code section 214A.1, including provisions that are administered by the department of agriculture and land stewardship (Code chapters 159 and 203), that regulate certain supply agreements (Code section 323.4A), and that are administered by the department of revenue (Code chapters 422 and 452A).
   E-15 TAX CREDIT. The E-15 plus gasoline promotion tax credit is calculated on the total gallons of ethanol blended gasoline, classified as E-15 and higher, and sold and dispensed by a retail dealer (see Code section 214A.1) during each quarter. The amount of the tax credit equals a constant (designated) rate multiplied by the total number of gallons of E-15 or higher sold and dispensed by the retail dealer during a calendar year assuming the retail dealer’s tax year is on a calendar year basis. A designated rate of 3 cents applies to each calendar year from 2012 through 2014. The designated rate is then reduced to 2 cents which will apply to each calendar year from 2015 through 2017 when the tax credit expires. The same calculations are applied to retail dealers whose tax years are not based on a calendar year (701 IAC 42.46). The bill revises the designated rate for three periods of time within a tax year (either based on a calendar or alternative fiscal year). For the first period (January 1 through May 31), the rate is 3 cents; for the second period (June 1 through September 15), the rate is 10 cents; and for the third period (September 16 through December 31), the rate returns to 3 cents. This revision takes effect upon enactment of the bill and applies retroactively to January 1, 2014.
   BIODIESEL PRODUCER REFUND. A biodiesel producer is engaged in the manufacture of biodiesel which is a renewable fuel derived from vegetable oils or animal fats for use in biodiesel blended fuel; an alternative to diesel fuel (Code section 214A.1). The amount of the refund equals a constant (designated) rate multiplied by the total number of gallons of biodiesel produced by the biodiesel producer in this state during each quarter of a calendar year. The biodiesel producer receives the refund amount after subtracting any amount of sales or use tax owed by the biodiesel producer (701 IAC 12.18). In addition, a biodiesel producer cannot claim a refund on more than 25 million gallons of biodiesel produced during a calendar year at any one manufacturing facility. A designated rate of 3 cents applied to calendar year 2012. The designated rate was reduced to 2.5 cents for calendar year 2013 and to 2 cents for calendar year 2014 after which it expires. The bill extends the period in which the 2-cent rate applies for five additional calendar years through 2019.