SF 556 (LSB 2529SV (3) 90)

SENATE FILE 556

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO SSB 1205)

A BILL FOR

An Act providing for financing of certain agricultural commodity programs, by reducing and eliminating fees imposed on licensed grain dealers and warehouse operators, replacing those moneys with moneys collected from a percentage of state assessments imposed on the sale of corn, increasing moneys deposited into the grain depositors and sellers indemnity fund, increasing indemnification amounts, and making appropriations.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 185C.1, subsection 9, Code 2023, is amended to read as follows:
   9.  “Market development” means to engage improve the economic conditions of corn production, storage, and marketing, by engaging in research and educational programs directed toward better and more efficient production, storage, and utilization of corn; to provide providing methods and means, including but not limited to, public relations and other promotion techniques for the maintenance of present markets; to provide ensuring the security of corn to be stored and marketed in commercial channels; providing for the development of new or larger domestic and foreign markets; and to provide providing for the prevention, modification, or elimination of trade barriers which obstruct the free flow of corn.
    Sec. 2.  Section 185C.11, subsection 1, Code 2023, is amended by adding the following new paragraphs:
   NEW PARAGRAPH.  j.  Administer the corn checkoff account as provided in section 185C.26.
   NEW PARAGRAPH.  k.  Accept gifts, rents, royalties, interest, license fees, or federal or state grants. Any moneys accepted by the board shall be deposited in an account of a qualified financial institution.
    Sec. 3.  Section 185C.21, subsection 1, Code 2023, is amended to read as follows:
   1.  The board shall determine and set the state assessment rate. State assessments collected pursuant to the promotional order shall be paid into the corn promotion marketing fund established in section 185C.26. Except as provided in subsection 2, a state assessment shall not exceed one-quarter of one cent per bushel upon corn marketed in this state. 
    Sec. 4.  Section 185C.24, subsections 1 and 2, Code 2023, are amended to read as follows:
   1.  The board shall be suspended and board operations and terms of members shall cease upon either any of the following events:
   a.  The state assessment is terminated pursuant to section 185C.25.
   b.  The state assessment is suspended pursuant to section 185C.25A.
   2.  However, notwithstanding subsection 1, the board shall continue to operate until proceeds remaining in moneys transferred from the corn promotion marketing fund to the corn checkoff account are disbursed. Disbursement shall be made as provided for payment the transfer of moneys under section 185C.26.
    Sec. 5.  Section 185C.26, Code 2023, is amended to read as follows:
   185C.26  Deposit of moneys —— corn promotion marketing fund —— transfers.
   1.  A Moneys from the state assessment collected by the Iowa corn promotion board from a the sale of corn shall be deposited in the office of the treasurer of state in a special fund known as the corn promotion marketing fund established in the office of the treasurer of state. The fund may include any gifts, rents, royalties, interest, license fees, or a federal or state grant received by the board. Moneys collected, deposited in the corn marketing fund, and transferred to the board as provided in this chapter shall be subject to audit by the auditor of state. The auditor of state may seek reimbursement for the cost of the audit from moneys deposited in the corn marketing fund as provided in this chapter. The department of administrative services shall transfer moneys from the fund 
   2.  a.  Except as provided in paragraph “b”, the department of administrative services shall transfer moneys deposited in the corn marketing fund to the board for deposit into in an account known as the corn checkoff account which shall be established by the board in a qualified financial institution. The department of administrative services shall transfer the moneys to the corn checkoff account as provided in a resolution adopted by the board. However, the department is only required to transfer moneys once during each day and only during hours when the offices of the state are open. From moneys collected, transferred to the corn checkoff account, the board shall first pay all the direct and indirect costs incurred by the secretary and the costs of referendums, elections, and other expenses incurred in the administration of this chapter, before the transferred moneys may be expended to carry for other uses as provided in section 185C.28, including for carrying out the purposes of this chapter as provided in section 185C.11.
   b.  (1)  Except as otherwise provided in subparagraph (2), twenty-five percent of moneys deposited in the corn marketing fund shall be transferred to the grain depositors and sellers indemnity fund created in section 203D.3 for use as provided in section 185C.28.
   (2)  If the department of agriculture and land stewardship delivers a state assessment transfer suspension notice to the department of administrative services as provided in section 203D.3B, moneys that would otherwise be transferred to the grain depositors and sellers indemnity fund as described in subparagraph (1) shall instead be transferred to the corn checkoff account for use by the board in the same manner provided in paragraph “a”.
   (3)  If the department of agriculture and land stewardship delivers a state assessment transfer reinstatement notice to the department of administrative services as provided in section 203D.3B, moneys that would otherwise be transferred to the corn checkoff account under subparagraph (2) shall again be transferred to the grain depositors and sellers indemnity fund in the same manner described in subparagraph (1).
   c.  The department of administrative services is only required to transfer moneys under this subsection to the corn checkoff account and the grain depositors and sellers indemnity fund once during each day and only during hours when the offices of the state are open.
    Sec. 6.  Section 185C.28, Code 2023, is amended to read as follows:
   185C.28  Use of moneys —— appropriation appropriations.
   1.  Moneys deposited in the corn promotion fund and transferred to Except as provided in subsection 2, moneys transferred or accepted by the board, as provided in section 185C.26, including federal moneys to the extent permitted by federal law, are appropriated and shall be used for the administration of this chapter and for the payment of claims based upon obligations incurred in the performance of activities and functions provided in this chapter.
   2.  Moneys transferred from the corn marketing fund to the grain depositors and sellers indemnity fund as provided in section 185C.26 are appropriated for use by the department of agriculture and land stewardship and the Iowa grain indemnity fund board as provided in chapter 203D.
    Sec. 7.  Section 185C.29, subsection 1, Code 2023, is amended to read as follows:
   1.  After the direct and indirect costs incurred by the secretary and the costs of elections, referendums, necessary board expenses, and administrative costs have been paid, at least seventy-five percent of the remaining moneys from a state assessment deposited in the corn promotion marketing fund and transferred to the corn checkoff account established in section 185C.26 shall be used to carry out the purposes of the board as provided in section 185C.11.
    Sec. 8.  Section 185C.30, Code 2023, is amended to read as follows:
   185C.30  Bond.
   Every person occupying a position of trust with the board and acting under any provisions a provision of this chapter shall give post a bond in such amount as may be required by the board, the. The premium for which the bond shall be paid out of moneys in the corn promotion fund checkoff account established in section 185C.26.
    Sec. 9.  Section 185C.33, Code 2023, is amended to read as follows:
   185C.33  Report.
   The board shall each year prepare and submit a report summarizing the activities of the board under this chapter to the auditor of state and the secretary of agriculture. The report shall show all income, expenses, and other relevant information concerning fees moneys collected by the board, deposited by the board into the corn marketing fund established in section 185C.26 or another account, transferred to the board, and expended by the board under the provisions of this chapter.
    Sec. 10.  Section 185C.34, Code 2023, is amended to read as follows:
   185C.34  Not a state agency —— public funds.
   1.  The Except as provided in subsection 2, the Iowa corn promotion board is not a state agency.
   2.  The board is deemed to be a public body for purposes of chapter 12C.
   3.  Moneys deposited in the corn marketing fund and transferred to the corn checkoff account as established in section 185C.26 or the grain depositors and sellers indemnity fund as provided in that section shall be deemed to be public funds under chapter 12C.
    Sec. 11.  Section 203.1, Code 2023, is amended by adding the following new subsection:
   NEW SUBSECTION.  7A.  “Fund” means the grain depositors and sellers indemnity fund created in section 203D.3.
    Sec. 12.  Section 203.4, Code 2023, is amended to read as follows:
   203.4  Participation in indemnity fund required.
   A grain dealer licensed or required to be licensed pursuant to section 203.3 shall participate in and comply with the grain depositors and sellers indemnity fund as provided in chapter 203D.
    Sec. 13.  Section 203.5, Code 2023, is amended to read as follows:
   203.5  License.
   1.  a.  Upon the filing of an application on a form prescribed by the department and compliance with the terms and conditions of this chapter including rules of the department, the department shall issue the applicant a grain dealer’s license. The license expires at the end of the third calendar month following the close of the grain dealer’s fiscal year. A grain dealer’s license may be renewed annually by filing a renewal application on a form prescribed by the department. An application for renewal must be received by the department on or before the end of the third calendar month following the close of the grain dealer’s fiscal year.
   b.  The department shall not issue approve an application for the issuance or renewal of a grain dealer’s license unless the applicant pays all of the following fees: to the department an issuance fee or renewal fee imposed under section 203.6.
   (1)  For the issuance of a license, all of the following:
   (a)  A license fee imposed under section 203.6.
   (b)  A participation fee imposed under section 203D.3A, and any delinquent participation fee imposed under a previous license as provided in that section.
   (2)  For the renewal of a license, all of the following:
   (a)  A renewal fee imposed under section 203.6.
   (b)  A participation fee imposed under section 203D.3A, and any delinquent participation fee as provided in that section.
   (c)  A per-bushel fee as provided in section 203D.3A, and any delinquent per-bushel fee and penalty as provided in that section.
   2.  The department shall notify a licensed grain dealer of any delinquency in the payment of a participation fee or per-bushel fee as provided in section 203D.3A. The department shall suspend the grain dealer’s license thirty days after delivering the notice unless the licensed grain dealer pays the delinquent fee.
   3.  The department may suspend or revoke the license of a grain dealer who discounts the purchase price paid for grain nominally for the participation fee or per-bushel fee as provided in section 203D.3A while that fee is not in effect.
   4.  2.  A grain dealer license which that has expired may be reinstated by the department upon receipt of a proper renewal application, the a renewal fee, and a reinstatement fee as provided in imposed under section 203.6, and any delinquent participation fee or per-bushel fee and penalty as provided in section 203D.3A. The applicant must file the renewal application and pay the fees and penalty to the department renewal fee and reinstatement fee within thirty days from the date of expiration of the grain dealer license.
   5.  3.  The department may cancel a license upon request of the licensee unless a complaint or information is filed against the licensee alleging a violation of a provision of this chapter.
   6.  4.  a.  The department shall refund a fee imposed under section 203.6 that has been paid by an applicant to the department under this section if the department does not issue or renew a grain dealer’s license.
   b.  The department shall prorate a fee imposed under section 203.6 that has been paid by an applicant to the department under this section for the issuance or renewal of a license for less than a full year.
   7.  5.  The department may deny a license to an applicant if the applicant has had a license issued under this chapter or chapter 203C revoked within the past three years, the applicant has been convicted of a felony involving a violation of this chapter or chapter 203C, or the applicant is owned or controlled by a person who has had a license so revoked or who has been so convicted.
   8.  6.  The department may deny a license to an applicant if any of the following apply:
   a.  The applicant has caused liability to the Iowa grain depositors and sellers indemnity fund in regard to a license issued under this chapter or chapter 203C, and the liability has not been discharged, settled, or satisfied.
   b.  The applicant is owned or controlled by a person who has caused liability to the fund through operations under a license issued under this chapter or chapter 203C and the liability has not been discharged, settled, or satisfied.
    Sec. 14.  Section 203.6, unnumbered paragraph 1, Code 2023, is amended to read as follows:
   The department shall charge impose the following license fees for deposit in the general fund:
    Sec. 15.  Section 203C.1, Code 2023, is amended by adding the following new subsection:
   NEW SUBSECTION.  9A.  “Fund” means the grain depositors and sellers indemnity fund created in section 203D.3.
    Sec. 16.  Section 203C.12, Code 2023, is amended to read as follows:
   203C.12  Participation in fund required.
   A person licensed to operate a warehouse under this chapter shall participate in and comply with the grain depositors and sellers indemnity fund as provided in chapter 203D.
    Sec. 17.  Section 203C.33, subsection 1, unnumbered paragraph 1, Code 2023, is amended to read as follows:
   The department shall charge impose the following license fees for deposit in the general fund:
    Sec. 18.  Section 203C.37, subsections 1, 2, and 3, Code 2023, are amended to read as follows:
   1.  a.  Upon the filing of an application pursuant to section 203C.7 and compliance with the terms and conditions of this chapter including rules of the department, the department shall issue the applicant a warehouse operator’s license. The license expires at the end of the third calendar month following the close of the warehouse operator’s fiscal year. A warehouse operator’s license may be renewed annually by the filing of a renewal application on a form prescribed by the department pursuant to section 203C.7. An application for A renewal application must be received by the department on or before the end of the third calendar month following the close of the warehouse operator’s fiscal year.
   b.  The department shall not approve an application for the issuance or renewal of a warehouse operator’s license unless the applicant pays all of the following fees: to the department an issuance fee or renewal fee imposed under section 203C.33.
   (1)  For the issuance of a license, all of the following:
   (a)  A license fee imposed under section 203C.33.
   (b)  A participation fee imposed under section 203D.3A, and any delinquent participation fee imposed under a previous license as provided in that section.
   (2)  For the renewal of a license, all of the following:
   (a)  A renewal fee imposed under section 203C.33.
   (b)  A participation fee imposed under section 203D.3A, and any delinquent participation fee as provided in that section.
   2.  The failure of a warehouse operator to file a renewal application and to pay a renewal fee as provided for in imposed under section 203C.33 and any delinquent participation fee as provided in section 203D.3A, on or before the end of the third calendar month following the close of the licensee’s fiscal year shall cause a license to expire.
   3.  A warehouse license that has expired may be reinstated by the department upon receipt of a proper renewal application, the renewal fee, and the reinstatement fee as provided for in imposed under section 203C.33, and any delinquent participation fee as provided in section 203D.3A.  The applicant must file the renewal application and pay the fees renewal fee and reinstatement fee to the department within thirty days from the date that the warehouse license expires.
    Sec. 19.  Section 203D.1, Code 2023, is amended by adding the following new subsection:
   NEW SUBSECTION.  15A.  “State assessment” means the state assessment on corn imposed, suspended, or reinstated as provided in sections 185C.26 and 203D.3B.
    Sec. 20.  Section 203D.2, Code 2023, is amended to read as follows:
   203D.2  Persons participating in fund —— compliance.
   1.  All licensed grain dealers, including persons applying to be issued or renewed grain dealer licenses as provided in chapter 203, and licensed warehouse operators, including persons applying to be issued or renewed warehouse operator licenses as provided in chapter 203C, shall participate in the fund.
   2.  a.  Participation in the fund by a licensed grain dealer includes complying with this chapter and chapter 203.
   b.  Participation in the fund by a licensed warehouse operator includes complying with this chapter and chapter 203C.
   3.  This section does not require participation in the fund to include payment of a fee for deposit into the fund.
    Sec. 21.  Section 203D.3, subsection 2, Code 2023, is amended to read as follows:
   2.  The fund consists of all of the following:
   a.  Participation fees paid to the department by licensed grain dealers and persons applying to be issued a grain dealer’s license as provided in section 203D.3A.  The state assessment collected pursuant to chapter 185C and transferred to the fund pursuant to section 185C.26 and this chapter, including section 203D.3B.
   b.  Participation fees paid to the department by licensed warehouse operators and persons applying to be issued a warehouse operator’s license as provided in section 203D.3A.
   c.  Per-bushel fees paid to the department by licensed grain dealers as provided in section 203D.3A.
   d.  Delinquency penalties.
   e.  b.  Amounts collected by the state pursuant to legal action on behalf of the fund.
   f.  c.  Interest, earnings on investments, property, or securities acquired through the use of moneys in the fund.
    Sec. 22.  NEW SECTION.  203D.3B  Grain depositors and sellers indemnity fund —— administration of state assessment on corn.
   1.  The board shall annually review the debits of and credits to the grain depositors and sellers indemnity fund.
   2.  The state assessment shall be imposed effective July 1, 2023.
   3.  Beginning May 1, 2024, and not later than May 1 of each year thereafter, the board shall determine whether to suspend or reinstate the state assessment. The suspension or reinstatement of the state assessment is effective beginning on the following July 1.
   4.  a.  Notwithstanding subsection 3, if on the last day of the fund’s fiscal year as provided in section 203D.3, moneys in the fund exceed twenty million dollars, less any encumbered balances or pending or unsettled claims, the state assessment shall be suspended effective on the first day of the following fiscal year.
   b.  Notwithstanding subsection 3, if at any time moneys in the fund do not exceed ten million dollars, less any encumbered balances or pending or unsettled claims, the state assessment shall be reinstated effective on the first day of the following fiscal year.
   5.  a.  If the state assessment is suspended as provided in this section, the department of agriculture and land stewardship shall immediately deliver a state assessment transfer suspension notice to the department of administrative services as provided in section 185C.26.
   b.  If the state assessment is reinstated as provided in this section, the department of agriculture and land stewardship shall immediately deliver a state assessment transfer reinstatement notice to the department of administrative services as provided in section 185C.26.
    Sec. 23.  Section 203D.4, subsections 2 and 3, Code 2023, are amended to read as follows:
   2.  a.  The duties of the board include the review and determination of claims, and the review and approval of administrative costs of the fund. To carry out these duties, the board has the power to adopt rules regarding its organization and procedures for determining claims. Further, the board shall approve rules proposed by the department for the administration of the per-bushel fee prior to their adoption by the department.
   b.  The board may provide comment and advice to the department in regard to the department’s administration of chapters 203 and 203C where the department’s policies and rules may affect the exposure of the fund to liability. However, the board shall not become actively involved in a determination by the department as to whether disciplinary action is to be taken against a particular licensee. The board is not a forum for review or appeal in regard to any particular action taken by the department against a licensee.
   3.  a.  The department through the grain warehouse bureau shall perform the administrative functions necessary for the operation of the board and the fund. Administrative costs approved by the board shall be paid from the fund. The rules of the department shall contain the rules of the board adopted for its organization and its procedures. The department shall adopt rules for the administration of the per-bushel fee upon the board’s approval of the rules proposed by the department. 
   b.  The secretary of agriculture, as president of the board as well as head of the department of agriculture and land stewardship, shall administer the department so as to minimize the risk of loss to the fund while protecting interests of depositors and sellers of grain. Policies and rules for the administration of chapters 203 and 203C which, as determined by the secretary of agriculture, may affect the exposure of the fund, shall be presented to the board for comment prior to their adoption by the department.
   c.  The department shall make reports to the board in regard to licensee investigations which may result in disciplinary action against a licensee and exposure of the fund. The reports may be discussed by the board in closed session pursuant to section 21.5, and are confidential. In making the report, the department shall make available to the board records of licensees which are otherwise confidential under section 22.7, 203.16, or 203C.24. However, a determination to take disciplinary action against a particular licensee shall be made exclusively by the department. A report to the board is not a prerequisite to disciplinary action against a licensee. Review of any action against a licensee, whether or not relating to the fund, shall be made exclusively through the department.
    Sec. 24.  Section 203D.6, subsection 8, Code 2023, is amended to read as follows:
   8.  Payment of claims.
   a.  Upon a determination that the claim is eligible for payment, the board shall provide for payment of ninety percent of the loss, as determined under subsection 5, but not more than three six hundred thousand dollars per claimant.
   b.  If at any time the board determines that there are insufficient funds moneys in the fund to make payment of all claims, the board may order that payment be deferred on specified claims. The department, upon the board’s instruction, shall hold those claims for payment until the board determines that the fund again contains there are sufficient assets moneys in the fund to pay deferred claims.
    Sec. 25.  REPEAL.  Sections 203D.3A and 203D.5, Code 2023, are repealed.
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 grain dealers purchasing grain (Code chapter 203), and grain warehouse operators storing grain under bailment (Code chapter 203C). A grain dealer or warehouse operator must do business in this state under a license issued by the department of agriculture and land stewardship (DALS). The licensed grain dealer and licensed warehouse operator (licensees) pay license fees for deposit in the general fund (Code sections 203.6 and 203C.33). A person selling grain to a licensed grain dealer (seller) or 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). Upon a determination that the claim is eligible for payment, the Iowa grain indemnity fund board (indemnity board) provides for payment of 90 percent of the loss, but not more than $300,000. The indemnity board may defer a claim if there are insufficient assets in the fund to fully cover a loss. The indemnity fund is paid from several sources, including a participation fee paid by those grain dealers and warehouse operators (persons applying for or renewing a license) and a per-bushel fee paid only by those grain dealers (Code sections 203D.3A and 203D.5). For grain dealers, the amount of the participation fee is based on purchased grain during the grain dealer’s last fiscal year, and for warehouse operators, the amount of the participation fee is based on warehouse storage capacity. The maximum amount of the participation fee is .014 of 1 cent per bushel of either purchased or stored grain with a minimum required amount of $50. The per-bushel fee is also based on purchased grain with a maximum of $0.25 per bushel. The moneys available in the indemnity fund are calculated by subtracting from the balance any unencumbered obligations or pending claims (Code section 203D.6). The indemnity fund is managed on a state fiscal year basis (July 1 to June 30). By May 1 of each year, the indemnity board may impose, reinstate, adjust, or waive the fees. However, if on the last date of the fund’s fiscal year, the moneys in the indemnity fund exceed a ceiling of $8 million, the two fees are waived. If at any time moneys in the indemnity fund are at a floor of $3 million or less, the indemnity fees are reinstated (Code section 203D.5).
   BACKGROUND —— CORN CHECKOFFS. An excise tax or “assessment” is imposed on the first purchaser of a number of commodities as a pass-through (commonly referred to as a “checkoff”). The purpose of the assessment is to finance activities which involve improving market development which includes aspects related to the commodity’s production and market share, such as research and education. Depending upon the commodity, the assessment is implemented and administered under either a state or federal statute or both. An assessment takes effect, is continued, or is terminated on the basis of a majority vote of producers voting in a referendum conducted by the United States department of agriculture in the case of a federal assessment or DALS in the case of a state assessment. The checkoff moneys imposed due to the state or federal assessment are collected and expended pursuant to a promotional order under the direction of a governing body of elected producers (referred to as a board, committee, or council). For corn, the state has implemented and administers a state assessment (Code chapter 185C) under the direction of the Iowa corn promotion board (Code sections 185C.8, 185C.11, and 185C.13). The maximum amount of the state assessment for corn is 3 cents per bushel (Code section 185C.21) subject to a right of refund (Code section 185C.27). For each commodity subject to a state assessment, including corn, the collected checkoff moneys are deposited into a separate state-controlled fund established in the state treasury (state fund) and transferred by the department of administrative services (DAS) to an account in a qualified financial institution eligible to hold public funds (Code chapter 12C) and established by the governing body of the commodity organization; in this case the Iowa corn promotion board.
   BILL’S PROVISIONS. The bill eliminates the indemnity fees paid to DALS by licensees used to support the indemnity fund (Code sections 203D.3A and 203D.5). The bill replaces that funding source with checkoff moneys collected from state assessments imposed on corn. The bill provides that market development for corn expressly includes the production, storage, and marketing of corn in commercial channels (amended Code section 185C.1). The name of the state-controlled fund is changed from the corn promotion fund to the corn marketing fund (amended Code section 185C.26). The account under the control of the Iowa corn promotion board is named “the corn checkoff account”. Under the bill, 25 percent of moneys in the fund are transferred to the indemnity fund and appropriated for use by DALS and the indemnity board to support claims for losses by depositors and sellers (amended Code sections 185C.26 and 185C.28). Moneys deposited into the corn marketing fund and transferred to the corn checkoff account or the indemnity fund are public funds (amended Code section 185C.34). The bill increases the limits of the indemnity fund to a ceiling of $20 million, and a floor of $10 million. On May 1, the indemnity board must determine to suspend or reinstate the state assessment. However, if on the last day of the indemnity fund’s fiscal year, moneys in the fund reach the $20 million ceiling, the state assessment is suspended, and if at any time those moneys reach the $10 million floor, the state assessment is reinstated (new Code section 203D.3B). In either case, DALS must notify DAS of the suspension or reinstatement. Finally, the indemnity fund’s payout limit for a claim is increased to $600,000 (Code section 203D.6).