SF 2393 (LSB 6323SV (1) 90)

SENATE FILE 2393

BY  COMMITTEE ON AGRICULTURE

(SUCCESSOR TO SSB 3174)

A BILL FOR

An Act regulating the marketing of grain, by providing for fees paid by grain dealers and warehouse operators into the grain depositors and sellers indemnity fund, and the payment of claims to reimburse sellers and depositors for losses covered by the fund, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 203.15, subsection 6, Code 2024, is amended by striking the subsection.
    Sec. 2.  Section 203D.1, subsection 2, Code 2024, is amended by striking the subsection.
    Sec. 3.  Section 203D.1, subsection 14, paragraph b, Code 2024, is amended to read as follows:
   b.  “Purchased grain” does not include grain that is subject to an exempt transaction based on documentation satisfactory to the department showing that the grain dealer did any of the following:
   (1)  Purchased the grain from the United States government or any of its subdivisions or agencies.
   (2)  Purchased the grain from a person licensed as a grain dealer in any jurisdiction.
   (3)  Purchased the grain under a credit-sale contract.
   (4)  (3)  Entered the grain in the company-owned paid position as a cancellation of a collateral warehouse receipt.
   (5)  (4)  Entered the grain in the company-owned paid position as an intra-company location transfer.
    Sec. 4.  Section 203D.1, subsection 16, Code 2024, is amended to read as follows:
   16.  a.  “Seller” means a person who sells grain which the person has produced or caused to be produced to a licensed grain dealer, but excludes a person who executes a credit-sale contract as a seller as provided in section 203.15. However, “seller”
   b.  “Seller” does not include any of the following:
   a.  (1)  A person licensed as a grain dealer in any jurisdiction who sells grain to a licensed grain dealer.
   b.  (2)  A person who sells grain that is not produced in this state unless such grain is delivered to a licensed grain dealer at a location in this state as the first point of sale.
    Sec. 5.  Section 203D.5, subsections 4 and 5, Code 2024, are amended to read as follows:
   4.  If on the last date of the fund’s assessment year as provided in section 203D.3 the assets of the fund exceed eight sixteen million dollars, less any encumbered balances or pending or unsettled claims, all of the following apply:
   a.  The participation fee shall be waived and shall not be assessable or owing for the following assessment year of the fund. However, the licensee shall continue to pay any owing participation fee that was in effect on the prior September 1.
   b.  The per-bushel fee shall be waived and shall not be assessable or owing.
   5.  The board shall reinstate the fees as provided in this section if the assets of the fund, less any unencumbered balances or pending or unsettled claims, are three eight million dollars or less.
    Sec. 6.  Section 203D.6, subsection 4, paragraph d, Code 2024, is amended to read as follows:
   d.  That the claim derives from a covered transaction. For purposes of this paragraph, a claim derives from a covered transaction if the claimant is a seller who transferred title to the grain to a licensed grain dealer other than by credit-sale contract within six months of the incurrence date for a claim period as provided in subsection 2, or if the claimant is a depositor who delivered the grain to a licensed warehouse operator.
    Sec. 7.  EMERGENCY RULES.  The department of agriculture and land stewardship shall adopt emergency rules under section 17A.4, subsection 3, and section 17A.5, subsection 2, paragraph “b”, to implement the provisions of this Act and the adopted rules shall be effective July 1, 2024. The rules adopted in accordance with this section shall also be published as a notice of intended action as provided in section 17A.4.
    Sec. 8.  ASSESSMENT OF FEES.  A grain dealer licensed under chapter 203 who is a party to a credit-sale contract shall owe any participation fee or per-bushel fee assessed on grain purchased under the credit-sale contract beginning on July 1 of the fourth assessment quarter pursuant to section 203D.3A.
    Sec. 9.  EFFECTIVE DATE.
   1.  Except as provided in subsection 2, this Act takes effect July 1, 2024.
   2.  The section of this Act requiring the department of agriculture and land stewardship to adopt emergency rules takes effect upon enactment.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   BACKGROUND —— GRAIN DEPOSITORS AND SELLERS INDEMNITY FUND.  This bill amends provisions regulating marketers of grain, referred to as grain dealers purchasing grain (Code chapter 203), and grain warehouse operators storing grain under bailment (Code chapter 203C). The department of agriculture and land stewardship (DALS) issues a license to each type of marketer (licensee) doing business in this state, including inspections and audits. A person selling grain to a licensed grain dealer (seller) or a person depositing grain with a licensed warehouse operator (depositor) may be reimbursed for a loss incurred by the failure of the licensee to honor a contractual obligation regarding the transaction (Code section 203D.6). Payments are made from the grain depositors and sellers indemnity fund (indemnity fund) upon a determination that the claim is eligible for payment by the Iowa grain indemnity fund board (indemnity board) acting in cooperation with DALS.
   BACKGROUND —— FEES. In addition to license fees deposited into the general fund of the state (Code sections 203.6 and 203C.33), each licensee pays either one or two special fees (indemnity fees) to support the indemnity fund, referred to as a participation fee and per-bushel fee. A licensed grain dealer pays both fees based on the number of bushels of grain purchased during the grain dealer’s last fiscal year (coinciding with the grain dealer’s license period). The term “purchased grain” is used to designate those bushels purchased for which a loss may be claimed under the indemnity fund and therefore excluded from coverage (e.g., grain purchased from the United States government or by credit-sale contract) (21 IAC 92.2). The rate for the participation fee is 0.014 cents per bushel on all purchased grain with a minimum of $50, and the rate for the per-bushel fee is 0.25 cents per bushel on all purchased grain. A licensed warehouse operator pays only a participation fee, based on bulk warehouse capacity. The rate of the participation fee is 0.014 cents per bushel of bulk grain storage capacity, or $500, whichever is less, with a minimum of $50. Indemnity fees are collected quarterly during the assessment year: September 1, December 1, March 1, and June 1 (Code section 203D.3). The indemnity board must annually review the debits of and credits to the indemnity fund and by May 1 determine whether the balance triggers a waiver or reinstatement (Code section 203D.5). The triggered waiver or reinstatement is effective on the first day of the following assessment year (September 1). If a waiver is triggered before then, a licensee is subject to pay the outstanding amount of the participation fee that is otherwise owing for the current assessment year. However, a licensed grain dealer is no longer obligated to pay the outstanding amount of the per-bushel fee otherwise owing for that period, unless the amount is delinquent (Code section 203D.5).
   BACKGROUND —— CREDIT-SALE CONTRACTS. A credit-sale contract (also referred to as deferred-payment contract, deferred-pricing contract, or price-later contract) involves a transaction for the sale of grain in which the sales price is to be paid to the seller by the licensed grain dealer (buyer) more than 30 days after the delivery of the grain to the buyer (Code section 203.1). The delayed price arrangement may be made on the basis of an expectation of higher price or tax liability. In such a transaction, the seller becomes the grain dealer’s creditor. For regulations regarding the use of credit-sale contracts by licensees, see Code sections 203.3, 203.8, 203.15, 203.17, and 203C.17.
   BACKGROUND —— PAYMENT OF CLAIMS. A claim by a seller or depositor (claimant) for the reimbursement of a loss from the indemnity fund begins on the incurrence date which is the earlier of when the grain dealer’s or warehouse operator’s state license ceases or when the grain dealer or warehouse operator files a petition in bankruptcy (Code section 203D.6). The claim must derive from a covered transaction, meaning that it is timely filed, there is evidence of a loss incurred by a claimant, and the claim derives from a covered transaction. For a claimant who is a seller, a covered transaction requires that title be transferred with six months of the incurrence date. A covered transaction excludes sale by credit-sale contract. The value of a loss incurred by a seller is based on the sales price. If the sold grain was unpriced, the value of a claim is presumed to be based upon the price paid on the incurrence date at the nearest terminal. A seller or depositor is entitled to be reimbursed 90 percent of a loss but not more than $300,000.
   BILL’S PROVISIONS —— INDEMNITY FEES TRIGGERS. The bill adjusts both triggers waiving or reinstating the two indemnity fees. The bill increases from $8 million to $16 million the balance in the indemnity fund required to trigger a waiver and increases from $3 million to $8 million the balance in the indemnity fund required to trigger a reinstatement.
   BILL’S PROVISIONS —— INDEMNITY FUND (FEES AND REIMBURSEMENT BASED ON CREDIT-SALE CONTRACT TRANSACTIONS). The bill provides that grain purchased by credit-sale contract is no longer excluded from the definition of purchased grain. Therefore, a grain dealer must pay the participation fee and per-bushel fee and a warehouse operator must pay the participation fee. It also provides that the sale of grain by credit-sale contract is no longer excluded from the meaning of a covered transaction. A seller may therefore claim a loss resulting from this type of transaction. In the case of a claim filed for a loss resulting from a credit-sale contract for which no price was established by the incurrence date, the unpriced valuation would be determined in the manner described for unpriced grain. The bill does not modify special regulations that apply to a licensee’s use of a credit-sale contract.
   EMERGENCY RULEMAKING. The bill authorizes DALS to adopt emergency rules in order to implement its provisions.
   ASSESSMENT OF FEES. A grain dealer who is a party to a credit-sale contract owing an indemnity fee assessed on grain purchased by credit-sale contract is imposed on July 1 of the fourth assessment quarter.
   EFFECTIVE DATE. The bill takes effect July 1, 2024, except for the provision authorizing DALS to adopt emergency rules which takes effect upon enactment.