Senate Study Bill 1168 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON TRANSPORTATION BILL BY CHAIRPERSON BOWMAN) A BILL FOR An Act relating to transportation funding by limiting the term 1 of indebtedness for certain county projects, modifying 2 certain permit fees, modifying the rate of the excise taxes 3 on motor fuel and certain special fuel, establishing a fuel 4 distribution percentage formula for certain special fuel 5 used in motor vehicles, requiring legislative review of 6 the fuel distribution percentage formulas, extending the 7 repeal date of the access Iowa highway plan, and including 8 effective date provisions. 9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 10 TLSB 1782XC (16) 86 ns/sc

S.F. _____ Section 1. NEW SECTION . 312.2A Restrictions on use. 1 Moneys credited pursuant to section 312.2, subsection 2 1, paragraphs “b” and “c” , and section 312.2, subsection 3 12, paragraph “a” , shall not be used for debt service or to 4 otherwise pay principal and interest on bonds, loans, or other 5 indebtedness issued or incurred on or after the effective date 6 of this section of this Act, including refunding, reissuance, 7 or other refinancing of such indebtedness, or refunding, 8 reissuance, or other refinancing of indebtedness issued or 9 incurred prior to the effective date of this section of this 10 Act, if the term for repayment of the indebtedness as financed 11 or refinanced would exceed the useful life of the asset being 12 constructed, reconstructed, improved, repaired, equipped, or 13 maintained. 14 Sec. 2. NEW SECTION . 315.4A Restrictions on use. 15 Moneys allocated pursuant to section 315.4, subsection 1, 16 paragraph “b” , and section 315.4, subsection 2, shall not 17 be used for debt service or to otherwise pay principal and 18 interest on bonds, loans, or other indebtedness issued or 19 incurred on or after the effective date of this section of this 20 Act, including refunding, reissuance, or other refinancing 21 of such indebtedness, or refunding, reissuance, or other 22 refinancing of indebtedness issued or incurred prior to 23 the effective date of this section of this Act, if the term 24 for repayment of the indebtedness as financed or refinanced 25 would exceed the useful life of the asset being constructed, 26 reconstructed, improved, repaired, equipped, or maintained. 27 Sec. 3. Section 321E.14, subsection 1, Code 2015, is amended 28 to read as follows: 29 1. Permit-issuing authorities may charge the following 30 fees: 31 a. Twenty-five Fifty dollars for an annual permit issued 32 pursuant to section 321E.8, subsection 1 , for the period 33 beginning January 1, 2016, and ending December 31, 2016, and 34 one hundred dollars thereafter . 35 -1- LSB 1782XC (16) 86 ns/sc 1/ 12

S.F. _____ b. Three Four hundred dollars for an annual permit issued 1 pursuant to section 321E.8, subsection 2 , for the period 2 beginning January 1, 2016, and ending December 31, 2016, and 3 five hundred dollars thereafter . 4 c. Two hundred dollars for a multi-trip permit issued 5 pursuant to section 321E.9A . 6 d. Six hundred dollars for a special alternative energy 7 multi-trip permit issued pursuant to section 321E.9B . 8 e. Ten Thirty-five dollars for a single-trip permit issued 9 pursuant to section 321E.9 for the period beginning January 1, 10 2016, and ending December 31, 2016, and seventy-five dollars 11 thereafter . 12 f. Twenty-five dollars for an annual permit for special 13 mobile equipment, as defined in section 321.1, subsection 14 74 , issued pursuant to section 321E.7, subsection 3 , with a 15 combined gross weight of not more than eighty thousand pounds. 16 g. Twenty-five dollars for a permit issued pursuant to 17 section 321E.29 or 321E.29A . 18 h. One hundred dollars for a permit issued pursuant to 19 section 321E.30 . 20 i. One hundred twenty sixty dollars for an annual 21 all-systems permit issued pursuant to section 321E.8 , which for 22 the period beginning January 1, 2016, and ending December 31, 23 2016, and two hundred dollars thereafter. Fees collected for 24 an all-systems permit shall be deposited in the road use tax 25 fund. 26 Sec. 4. NEW SECTION . 331.443A Restrictions on certain 27 projects. 28 The term of any indebtedness issued or incurred by a county 29 that will be paid in whole or in part with moneys from the 30 secondary road fund of the counties, the farm-to-market road 31 fund, the county bridge construction fund, or the revitalize 32 Iowa’s sound economy fund, or any other moneys that may be 33 allocated from the road use tax fund for use by counties, shall 34 be subject to the provisions of sections 312.2A and 315.4A. 35 -2- LSB 1782XC (16) 86 ns/sc 2/ 12

S.F. _____ Sec. 5. Section 452A.3, subsection 1, unnumbered paragraph 1 1, Code 2015, is amended to read as follows: 2 Except as otherwise provided in this section and in this 3 division , until June 30, 2015 2025 , this subsection shall apply 4 to the excise tax imposed on each gallon of motor fuel used for 5 any purpose for the privilege of operating motor vehicles in 6 this state. 7 Sec. 6. Section 452A.3, subsection 1, paragraph b, Code 8 2015, is amended to read as follows: 9 b. The rate for the excise tax shall be as follows: 10 (1) If the distribution percentage is not greater than 11 fifty percent, the rate shall be nineteen twenty-nine cents for 12 ethanol blended gasoline and twenty thirty cents for motor fuel 13 other than ethanol blended gasoline. 14 (2) If the distribution percentage is greater than fifty 15 percent but not greater than fifty-five percent, the rate shall 16 be nineteen twenty-nine cents for ethanol blended gasoline and 17 twenty thirty and one-tenth cents for motor fuel other than 18 ethanol blended gasoline. 19 (3) If the distribution percentage is greater than 20 fifty-five percent but not greater than sixty percent, the 21 rate shall be nineteen twenty-nine cents for ethanol blended 22 gasoline and twenty thirty and three-tenths cents for motor 23 fuel other than ethanol blended gasoline. 24 (4) If the distribution percentage is greater than sixty 25 percent but not greater than sixty-five percent, the rate shall 26 be nineteen twenty-nine cents for ethanol blended gasoline and 27 twenty thirty and five-tenths cents for motor fuel other than 28 ethanol blended gasoline. 29 (5) If the distribution percentage is greater than 30 sixty-five percent but not greater than seventy percent, the 31 rate shall be nineteen twenty-nine cents for ethanol blended 32 gasoline and twenty thirty and seven-tenths cents for motor 33 fuel other than ethanol blended gasoline. 34 (6) If the distribution percentage is greater than seventy 35 -3- LSB 1782XC (16) 86 ns/sc 3/ 12

S.F. _____ percent but not greater than seventy-five percent, the rate 1 shall be nineteen twenty-nine cents for ethanol blended 2 gasoline and twenty-one thirty-one cents for motor fuel other 3 than ethanol blended gasoline. 4 (7) If the distribution percentage is greater than 5 seventy-five percent but not greater than eighty percent, the 6 rate shall be nineteen twenty-nine and three-tenths cents for 7 ethanol blended gasoline and twenty thirty and eight-tenths 8 cents for motor fuel other than ethanol blended gasoline. 9 (8) If the distribution percentage is greater than eighty 10 percent but not greater than eighty-five percent, the rate 11 shall be nineteen twenty-nine and five-tenths cents for ethanol 12 blended gasoline and twenty thirty and seven-tenths cents for 13 motor fuel other than ethanol blended gasoline. 14 (9) If the distribution percentage is greater than 15 eighty-five percent but not greater than ninety percent, the 16 rate shall be nineteen twenty-nine and seven-tenths cents for 17 ethanol blended gasoline and twenty thirty and four-tenths 18 cents for motor fuel other than ethanol blended gasoline. 19 (10) If the distribution percentage is greater than ninety 20 percent but not greater than ninety-five percent, the rate 21 shall be nineteen twenty-nine and nine-tenths cents for ethanol 22 blended gasoline and twenty thirty and one-tenth cents for 23 motor fuel other than ethanol blended gasoline. 24 (11) If the distribution percentage is greater than 25 ninety-five percent, the rate shall be twenty thirty cents for 26 ethanol blended gasoline and twenty thirty cents for motor fuel 27 other than ethanol blended gasoline. 28 Sec. 7. Section 452A.3, subsection 1, Code 2015, is amended 29 by adding the following new paragraph: 30 NEW PARAGRAPH . c. The provisions of paragraph “b” and 31 subsection 6, paragraph “a” , subparagraph (2), shall be 32 subject to legislative review at least every six years. The 33 review shall be based upon a fuel distribution percentage 34 formula status report containing the recommendations of a 35 -4- LSB 1782XC (16) 86 ns/sc 4/ 12

S.F. _____ legislative interim committee appointed to conduct a review 1 of the fuel distribution percentage formulas, to be prepared 2 with the assistance of the department of revenue in association 3 with the department of transportation. The report shall 4 include recommendations for changes or revisions to the 5 fuel distribution percentage formulas based upon advances 6 in technology, fuel use trends, and fuel price fluctuations 7 observed during the preceding six-year interval; an analysis 8 of the operation of the fuel distribution percentage formulas 9 during the preceding six-year interval; and a summary of issues 10 that have arisen since the previous review and potential 11 approaches for resolution of those issues. The first such 12 report shall be submitted to the general assembly no later 13 than January 1, 2020, with subsequent reports developed and 14 submitted by January 1 at least every sixth year thereafter. 15 Sec. 8. Section 452A.3, subsections 2 and 6, Code 2015, are 16 amended to read as follows: 17 2. Except as otherwise provided in this section and in this 18 division , after June 30, 2015 2025 , an excise tax of twenty 19 thirty cents is imposed on each gallon of motor fuel used for 20 any purpose for the privilege of operating motor vehicles in 21 this state. 22 6. a. For the privilege of operating motor vehicles or 23 aircraft in this state, there is imposed an excise tax on the 24 use of special fuel in a motor vehicle or aircraft. The tax 25 rate on special fuel for diesel engines of motor vehicles is 26 twenty-two and one-half cents per gallon. 27 (1) Except as otherwise provided in this section and in 28 this division, after June 30, 2025, the tax rate on special 29 fuel for diesel engines of motor vehicles used for any purpose 30 for the privilege of operating motor vehicles in this state is 31 thirty-two and five-tenths cents per gallon. 32 (2) Except as provided in this section and in this 33 division, until June 30, 2025, this subparagraph shall apply 34 to the excise tax imposed on each gallon of special fuel for 35 -5- LSB 1782XC (16) 86 ns/sc 5/ 12

S.F. _____ diesel engines of motor vehicles used for any purpose for the 1 privilege of operating motor vehicles in this state. The rate 2 of the excise tax shall be based on the number of gallons of 3 biodiesel blended fuel classified as B-11 or higher that is 4 distributed in this state as expressed as a percentage of the 5 number of gallons of special fuel for diesel engines of motor 6 vehicles distributed in this state, which is referred to as 7 the distribution percentage. The department shall determine 8 the percentage basis for each determination period beginning 9 January 1 and ending December 31. The rate for the excise tax 10 shall apply for the period beginning July 1 and ending June 30 11 following the end of the determination period. The rate for 12 the excise tax shall be as follows: 13 (a) If the distribution percentage is not greater than fifty 14 percent, the rate shall be twenty-nine and five-tenths cents 15 for biodiesel blended fuel classified as B-11 or higher and 16 thirty-two and five-tenths cents for special fuel for diesel 17 engines of motor vehicles other than biodiesel blended fuel 18 classified as B-11 or higher. 19 (b) If the distribution percentage is greater than fifty 20 percent but not greater than fifty-five percent, the rate 21 shall be twenty-nine and eight-tenths cents for biodiesel 22 blended fuel classified as B-11 or higher and thirty-two and 23 five-tenths cents for special fuel for diesel engines of motor 24 vehicles other than biodiesel blended fuel classified as B-11 25 or higher. 26 (c) If the distribution percentage is greater than 27 fifty-five percent but not greater than sixty percent, the rate 28 shall be thirty and one-tenth cents for biodiesel blended fuel 29 classified as B-11 or higher and thirty-two and five-tenths 30 cents for special fuel for diesel engines of motor vehicles 31 other than biodiesel blended fuel classified as B-11 or higher. 32 (d) If the distribution percentage is greater than sixty 33 percent but not greater than sixty-five percent, the rate shall 34 be thirty and four-tenths cents for biodiesel blended fuel 35 -6- LSB 1782XC (16) 86 ns/sc 6/ 12

S.F. _____ classified as B-11 or higher and thirty-two and five-tenths 1 cents for special fuel for diesel engines of motor vehicles 2 other than biodiesel blended fuel classified as B-11 or higher. 3 (e) If the distribution percentage is greater than 4 sixty-five percent but not greater than seventy percent, the 5 rate shall be thirty and seven-tenths cents for biodiesel 6 blended fuel classified as B-11 or higher and thirty-two and 7 five-tenths cents for special fuel for diesel engines of motor 8 vehicles other than biodiesel blended fuel classified as B-11 9 or higher. 10 (f) If the distribution percentage is greater than seventy 11 percent but not greater than seventy-five percent, the rate 12 shall be thirty-one cents for biodiesel blended fuel classified 13 as B-11 or higher and thirty-two and five-tenths cents for 14 special fuel for diesel engines of motor vehicles other than 15 biodiesel blended fuel classified as B-11 or higher. 16 (g) If the distribution percentage is greater than 17 seventy-five percent but not greater than eighty percent, the 18 rate shall be thirty-one and three-tenths cents for biodiesel 19 blended fuel classified as B-11 or higher and thirty-two and 20 five-tenths cents for special fuel for diesel engines of motor 21 vehicles other than biodiesel blended fuel classified as B-11 22 or higher. 23 (h) If the distribution percentage is greater than eighty 24 percent but not greater than eighty-five percent, the rate 25 shall be thirty-one and six-tenths cents for biodiesel 26 blended fuel classified as B-11 or higher and thirty-two and 27 five-tenths cents for special fuel for diesel engines of motor 28 vehicles other than biodiesel blended fuel classified as B-11 29 or higher. 30 (i) If the distribution percentage is greater than 31 eighty-five percent but not greater than ninety percent, the 32 rate shall be thirty-one and nine-tenths cents for biodiesel 33 blended fuel classified as B-11 or higher and thirty-two and 34 five-tenths cents for special fuel for diesel engines of motor 35 -7- LSB 1782XC (16) 86 ns/sc 7/ 12

S.F. _____ vehicles other than biodiesel blended fuel classified as B-11 1 or higher. 2 (j) If the distribution percentage is greater than ninety 3 percent but not greater than ninety-five percent, the rate 4 shall be thirty-two and two-tenths cents for biodiesel 5 blended fuel classified as B-11 or higher and thirty-two and 6 five-tenths cents for special fuel for diesel engines of motor 7 vehicles other than biodiesel blended fuel classified as B-11 8 or higher. 9 (k) If the distribution percentage is greater than 10 ninety-five percent, the rate shall be thirty-two and 11 five-tenths cents for biodiesel blended fuel classified as B-11 12 or higher and thirty-two and five-tenths cents for special 13 fuel for diesel engines of motor vehicles other than biodiesel 14 blended fuel classified as B-11 or higher. 15 (3) The rate of tax on special fuel for aircraft is three 16 five cents per gallon. 17 (4) On all other special fuel, unless otherwise specified in 18 this section , the per gallon rate is the same as the motor fuel 19 tax. 20 b. Indelible dye meeting United States environmental 21 protection agency and internal revenue service regulations must 22 be added to fuel before or upon withdrawal at a terminal or 23 refinery rack for that fuel to be exempt from tax and the dyed 24 fuel may be used only for an exempt purpose. 25 Sec. 9. 2005 Iowa Acts, chapter 178, section 41, subsection 26 3, is amended to read as follows: 27 3. REPEAL. This section is repealed effective July 1, 2015 28 2025 . 29 Sec. 10. LEGISLATIVE INTENT. 30 1. It is the intent of the general assembly that one 31 hundred percent of the revenue produced as a result of the 32 increase in the excise taxes on motor fuel and certain special 33 fuel enacted in this Act and credited to the secondary road 34 fund or the farm-to-market road fund from the road use tax 35 -8- LSB 1782XC (16) 86 ns/sc 8/ 12

S.F. _____ fund pursuant to section 312.2, subsection 1, shall be used 1 exclusively for critical road and bridge construction projects 2 that significantly extend the life of such assets. 3 2. It is the intent of the general assembly that the state 4 department of transportation and the state transportation 5 commission shall utilize one hundred percent of the revenue 6 produced as a result of the increase in the excise taxes on 7 motor fuel and certain special fuel enacted in this Act that 8 is allocated to the department on critical road and bridge 9 construction projects. The department shall identify the 10 critical road and bridge construction projects funded with such 11 revenue in the department’s annual five-year transportation 12 improvement program report. 13 Sec. 11. INVENTORY TAX EXEMPTION. Notwithstanding section 14 452A.85, persons who have title to motor fuel, ethanol blended 15 gasoline, or undyed special fuel in storage and held for sale 16 on the effective date of an increase in the rate of excise tax 17 imposed on motor fuel, ethanol blended gasoline, or undyed 18 special fuel pursuant to this Act shall not be subject to an 19 inventory tax on the gallonage in storage as a result of the 20 tax increases provided in this Act. 21 Sec. 12. EFFECTIVE UPON ENACTMENT. The following 22 provisions of this Act, being deemed of immediate importance, 23 take effect upon enactment: 24 1. The section of this Act enacting section 312.2A. 25 2. The section of this Act enacting section 315.4A. 26 3. The section of this Act enacting section 331.443A. 27 4. The section of this Act amending 2005 Iowa Acts, chapter 28 178, section 41. 29 Sec. 13. EFFECTIVE DATES. 30 1. Except as otherwise provided in this Act, this Act 31 takes effect the first day of the month following the month of 32 enactment of this Act. 33 2. The section of this Act amending section 321E.14 takes 34 effect January 1, 2016. 35 -9- LSB 1782XC (16) 86 ns/sc 9/ 12

S.F. _____ EXPLANATION 1 The inclusion of this explanation does not constitute agreement with 2 the explanation’s substance by the members of the general assembly. 3 This bill relates to transportation funding by limiting the 4 term of indebtedness for certain county projects, modifying 5 certain permit fees, modifying the rate of the excise taxes 6 on motor fuel and certain special fuel, establishing a fuel 7 distribution percentage formula for certain special fuel used 8 in motor vehicles, requiring legislative review of the fuel 9 distribution percentage formulas, and extending the repeal date 10 of the access Iowa highway plan. 11 The bill provides for limitations on the use by counties of 12 moneys allocated from the road use tax fund, including moneys 13 from the secondary road fund, the farm-to-market road fund, the 14 county bridge construction fund, and the RISE fund. The bill 15 provides that such moneys shall not be used for debt service 16 or to otherwise pay principal and interest on bonds, loans, or 17 other indebtedness issued or incurred on or after the effective 18 date of this section of the bill, including refunding, 19 reissuance, or other refinancing of such indebtedness, or 20 refunding, reissuance, or other refinancing of indebtedness 21 issued or incurred prior to the effective date of this section 22 of the bill, if the term for repayment of the indebtedness as 23 financed or refinanced would exceed the useful life of the 24 asset being constructed, reconstructed, improved, repaired, 25 equipped, or maintained. 26 Beginning January 1, 2016, the bill provides for increases 27 in fees for single-trip permits, all-systems permits, and 28 certain permits relating to length, height, and gross weight of 29 vehicles of excessive size and weight (Code chapter 321E). The 30 bill also provides for an additional increase in fees for such 31 permits beginning on January 1, 2017. 32 The bill increases by 10 cents the rate of the excise tax 33 on motor fuel and increases by 2 cents the rate of the excise 34 tax on special fuel for aircraft. In addition, the bill 35 -10- LSB 1782XC (16) 86 ns/sc 10/ 12

S.F. _____ establishes a distribution percentage formula for biodiesel 1 blended fuel classified as B-11 or higher and special fuel 2 for diesel engines of motor vehicles other than biodiesel 3 blended fuel classified as B-11 or higher. If the distribution 4 percentage is not greater than 50 percent, the tax rate for 5 biodiesel blended fuel classified as B-11 or higher is 29.5 6 cents, 3 cents less than special fuel for diesel engines of 7 motor vehicles other than biodiesel blended fuel classified as 8 B-11 or higher. As the distribution percentage increases, the 9 difference in the tax rates on the two types of fuel decreases 10 until the distribution percentage is greater than 95 percent, 11 at which point the tax rate for both types of fuel is 32.5 12 cents. 13 The bill provides that both fuel distribution percentage 14 formulas will expire on June 30, 2025. The bill also provides 15 that both distribution percentage formulas shall be subject 16 to legislative review at least every six years. The review 17 shall be based upon a report containing the recommendations of 18 a legislative interim committee appointed to conduct a review 19 of the fuel distribution percentage formulas, to be prepared 20 with the assistance of the department of revenue in association 21 with the department of transportation. The report shall 22 include recommendations for changes or revisions to the fuel 23 distribution percentage formulas. The first such report shall 24 be submitted to the general assembly no later than January 1, 25 2020. 26 The 2005 Iowa Acts provide for the designation of certain 27 highways as access Iowa highways, which receive priority 28 funding from certain moneys in the TIME-21 and RISE funds 29 created in Code sections 312A.2 and 315.2. These provisions 30 will be repealed by operation of law on July 1, 2015. The bill 31 extends the date of repeal to July 1, 2025. 32 The bill provides that it is the intent of the general 33 assembly that 100 percent of the revenue produced as a result 34 of the increase in the excise taxes on motor fuel and certain 35 -11- LSB 1782XC (16) 86 ns/sc 11/ 12

S.F. _____ special fuel enacted in the bill and credited to the secondary 1 road fund or the farm-to-market road fund from the road use tax 2 fund shall be used exclusively for critical road and bridge 3 construction projects that significantly extend the life of 4 such assets. In addition, the bill provides that it is also 5 the intent of the general assembly that the state department of 6 transportation and the state transportation commission shall 7 utilize 100 percent of the revenue produced as a result of the 8 increase in the excise taxes on motor fuel and certain special 9 fuel enacted in the bill that is allocated to the department on 10 critical road and bridge construction projects. The department 11 shall identify the critical road and bridge construction 12 projects funded with such revenue in the department’s annual 13 five-year transportation improvement program report. 14 Pursuant to current law, when the rate of excise tax on 15 motor fuel, ethanol blended gasoline, undyed special fuel, 16 compressed natural gas, or liquefied petroleum gas is increased 17 by more than one-half cent per gallon, a person who has title 18 to such fuel held in storage for eventual sale is subject to an 19 inventory tax based on the gallonage in storage at the close of 20 the business day preceding the effective date of the increase. 21 The bill provides that the inventory tax shall not be imposed 22 as a result of the tax increases provided in the bill. 23 The bill takes effect the first day of the month following 24 the month of enactment, except that the section of the bill 25 modifying certain permit fees takes effect January 1, 2016, and 26 the sections of the bill limiting the term of indebtedness for 27 certain county projects and the section of the bill relating 28 to extending the access Iowa highway plan take effect upon 29 enactment. 30 -12- LSB 1782XC (16) 86 ns/sc 12/ 12