Senate Study Bill 3174 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON AGRICULTURE BILL BY CHAIRPERSON DRISCOLL) A BILL FOR An Act regulating the marketing of grain, by providing for 1 fees paid by grain dealers and warehouse operators into 2 the grain depositors and sellers indemnity fund, and the 3 payment of claims to reimburse sellers and depositors for 4 losses covered by the fund, and including effective date 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 6323XC (3) 90 da/ns

S.F. _____ Section 1. Section 203.15, subsection 6, Code 2024, is 1 amended by striking the subsection. 2 Sec. 2. Section 203D.1, subsection 2, Code 2024, is amended 3 by striking the subsection. 4 Sec. 3. Section 203D.1, subsection 14, paragraph b, Code 5 2024, is amended to read as follows: 6 b. “Purchased grain” does not include grain that is subject 7 to an exempt transaction based on documentation satisfactory 8 to the department showing that the grain dealer did any of the 9 following: 10 (1) Purchased the grain from the United States government or 11 any of its subdivisions or agencies. 12 (2) Purchased the grain from a person licensed as a grain 13 dealer in any jurisdiction. 14 (3) Purchased the grain under a credit-sale contract. 15 (4) (3) Entered the grain in the company-owned paid 16 position as a cancellation of a collateral warehouse receipt. 17 (5) (4) Entered the grain in the company-owned paid 18 position as an intra-company location transfer. 19 Sec. 4. Section 203D.1, subsection 16, Code 2024, is amended 20 to read as follows: 21 16. a. “Seller” means a person who sells grain which the 22 person has produced or caused to be produced to a licensed 23 grain dealer , but excludes a person who executes a credit-sale 24 contract as a seller as provided in section 203.15 . However, 25 “seller” 26 b. “Seller” does not include any of the following: 27 a. (1) A person licensed as a grain dealer in any 28 jurisdiction who sells grain to a licensed grain dealer. 29 b. (2) A person who sells grain that is not produced in 30 this state unless such grain is delivered to a licensed grain 31 dealer at a location in this state as the first point of sale. 32 Sec. 5. Section 203D.5, subsections 4 and 5, Code 2024, are 33 amended to read as follows: 34 4. If on the last date of the fund’s assessment year as 35 -1- LSB 6323XC (3) 90 da/ns 1/ 6

S.F. _____ provided in section 203D.3 the assets of the fund exceed eight 1 sixteen million dollars, less any encumbered balances or 2 pending or unsettled claims, all of the following apply: 3 a. The participation fee shall be waived and shall not be 4 assessable or owing for the following assessment year of the 5 fund. However, the licensee shall continue to pay any owing 6 participation fee that was in effect on the prior September 1. 7 b. The per-bushel fee shall be waived and shall not be 8 assessable or owing. 9 5. The board shall reinstate the fees as provided in this 10 section if the assets of the fund, less any unencumbered 11 balances or pending or unsettled claims, are three eight 12 million dollars or less. 13 Sec. 6. Section 203D.6, subsection 4, paragraph d, Code 14 2024, is amended to read as follows: 15 d. That the claim derives from a covered transaction. For 16 purposes of this paragraph, a claim derives from a covered 17 transaction if the claimant is a seller who transferred 18 title to the grain to a licensed grain dealer other than by 19 credit-sale contract within six months of the incurrence date 20 for a claim period as provided in subsection 2 , or if the 21 claimant is a depositor who delivered the grain to a licensed 22 warehouse operator. 23 Sec. 7. EMERGENCY RULES. The department of agriculture 24 and land stewardship shall adopt emergency rules under section 25 17A.4, subsection 3, and section 17A.5, subsection 2, paragraph 26 “b”, to implement the provisions of this Act and the adopted 27 rules shall be effective July 1, 2024. The rules adopted 28 in accordance with this section shall also be published as a 29 notice of intended action as provided in section 17A.4. 30 Sec. 8. ASSESSMENT OF FEES. A grain dealer licensed under 31 chapter 203 who is a party to a credit-sale contract shall 32 owe any participation fee or per-bushel fee assessed on grain 33 purchased under the credit-sale contract beginning on July 1 of 34 the fourth assessment quarter pursuant to section 203D.3A. 35 -2- LSB 6323XC (3) 90 da/ns 2/ 6

S.F. _____ Sec. 9. EFFECTIVE DATE. 1 1. Except as provided in subsection 2, this Act takes effect 2 July 1, 2024. 3 2. The section of this Act requiring the department of 4 agriculture and land stewardship to adopt emergency rules takes 5 effect upon enactment. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 BACKGROUND —— GRAIN DEPOSITORS AND SELLERS INDEMNITY FUND. 10 This bill amends provisions regulating marketers of grain, 11 referred to as grain dealers purchasing grain (Code chapter 12 203), and grain warehouse operators storing grain under 13 bailment (Code chapter 203C). The department of agriculture 14 and land stewardship (DALS) issues a license to each type of 15 marketer (licensee) doing business in this state, including 16 inspections and audits. A person selling grain to a licensed 17 grain dealer (seller) or a person depositing grain with a 18 licensed warehouse operator (depositor) may be reimbursed for 19 a loss incurred by the failure of the licensee to honor a 20 contractual obligation regarding the transaction (Code section 21 203D.6). Payments are made from the grain depositors and 22 sellers indemnity fund (indemnity fund) upon a determination 23 that the claim is eligible for payment by the Iowa grain 24 indemnity fund board (indemnity board) acting in cooperation 25 with DALS. 26 BACKGROUND —— FEES. In addition to license fees deposited 27 into the general fund of the state (Code sections 203.6 and 28 203C.33), each licensee pays either one or two special fees 29 (indemnity fees) to support the indemnity fund, referred 30 to as a participation fee and per-bushel fee. A licensed 31 grain dealer pays both fees based on the number of bushels of 32 grain purchased during the grain dealer’s last fiscal year 33 (coinciding with the grain dealer’s license period). The term 34 “purchased grain” is used to designate those bushels purchased 35 -3- LSB 6323XC (3) 90 da/ns 3/ 6

S.F. _____ for which a loss may be claimed under the indemnity fund and 1 therefore excluded from coverage (e.g., grain purchased from 2 the United States government or by credit-sale contract) (21 3 IAC 92.2). The rate for the participation fee is 0.014 cents 4 per bushel on all purchased grain with a minimum of $50, and 5 the rate for the per-bushel fee is 0.25 cents per bushel on 6 all purchased grain. A licensed warehouse operator pays only 7 a participation fee, based on bulk warehouse capacity. The 8 rate of the participation fee is 0.014 cents per bushel of 9 bulk grain storage capacity, or $500, whichever is less, with 10 a minimum of $50. Indemnity fees are collected quarterly 11 during the assessment year: September 1, December 1, March 1, 12 and June 1 (Code section 203D.3). The indemnity board must 13 annually review the debits of and credits to the indemnity fund 14 and by May 1 determine whether the balance triggers a waiver or 15 reinstatement (Code section 203D.5). The triggered waiver or 16 reinstatement is effective on the first day of the following 17 assessment year (September 1). If a waiver is triggered before 18 then, a licensee is subject to pay the outstanding amount of 19 the participation fee that is otherwise owing for the current 20 assessment year. However, a licensed grain dealer is no longer 21 obligated to pay the outstanding amount of the per-bushel 22 fee otherwise owing for that period, unless the amount is 23 delinquent (Code section 203D.5). 24 BACKGROUND —— CREDIT-SALE CONTRACTS. A credit-sale 25 contract (also referred to as deferred-payment contract, 26 deferred-pricing contract, or price-later contract) involves a 27 transaction for the sale of grain in which the sales price is 28 to be paid to the seller by the licensed grain dealer (buyer) 29 more than 30 days after the delivery of the grain to the buyer 30 (Code section 203.1). The delayed price arrangement may be 31 made on the basis of an expectation of higher price or tax 32 liability. In such a transaction, the seller becomes the 33 grain dealer’s creditor. For regulations regarding the use of 34 credit-sale contracts by licensees, see Code sections 203.3, 35 -4- LSB 6323XC (3) 90 da/ns 4/ 6

S.F. _____ 203.8, 203.15, 203.17, and 203C.17. 1 BACKGROUND —— PAYMENT OF CLAIMS. A claim by a seller or 2 depositor (claimant) for the reimbursement of a loss from the 3 indemnity fund begins on the incurrence date which is the 4 earlier of when the grain dealer’s or warehouse operator’s 5 state license ceases or when the grain dealer or warehouse 6 operator files a petition in bankruptcy (Code section 203D.6). 7 The claim must derive from a covered transaction, meaning that 8 it is timely filed, there is evidence of a loss incurred by a 9 claimant, and the claim derives from a covered transaction. 10 For a claimant who is a seller, a covered transaction requires 11 that title be transferred with six months of the incurrence 12 date. A covered transaction excludes sale by credit-sale 13 contract. The value of a loss incurred by a seller is based 14 on the sales price. If the sold grain was unpriced, the value 15 of a claim is presumed to be based upon the price paid on the 16 incurrence date at the nearest terminal. A seller or depositor 17 is entitled to be reimbursed 90 percent of a loss but not more 18 than $300,000. 19 BILL’S PROVISIONS —— INDEMNITY FEES TRIGGERS. The bill 20 adjusts both triggers waiving or reinstating the two indemnity 21 fees. The bill increases from $8 million to $16 million the 22 balance in the indemnity fund required to trigger a waiver and 23 increases from $3 million to $8 million the balance in the 24 indemnity fund required to trigger a reinstatement. 25 BILL’S PROVISIONS —— INDEMNITY FUND (FEES AND REIMBURSEMENT 26 BASED ON CREDIT-SALE CONTRACT TRANSACTIONS). The bill provides 27 that grain purchased by credit-sale contract is no longer 28 excluded from the definition of purchased grain. Therefore, a 29 grain dealer must pay the participation fee and per-bushel fee 30 and a warehouse operator must pay the participation fee. It 31 also provides that the sale of grain by credit-sale contract is 32 no longer excluded from the meaning of a covered transaction. 33 A seller may therefore claim a loss resulting from this type 34 of transaction. In the case of a claim filed for a loss 35 -5- LSB 6323XC (3) 90 da/ns 5/ 6

S.F. _____ resulting from a credit-sale contract for which no price was 1 established by the incurrence date, the unpriced valuation 2 would be determined in the manner described for unpriced grain. 3 The bill does not modify special regulations that apply to a 4 licensee’s use of a credit-sale contract. 5 EMERGENCY RULEMAKING. The bill authorizes DALS to adopt 6 emergency rules in order to implement its provisions. 7 ASSESSMENT OF FEES. A grain dealer who is a party to a 8 credit-sale contract owing an indemnity fee assessed on grain 9 purchased by credit-sale contract is imposed on July 1 of the 10 fourth assessment quarter. 11 EFFECTIVE DATE. The bill takes effect July 1, 2024, except 12 for the provision authorizing DALS to adopt emergency rules 13 which takes effect upon enactment. 14 -6- LSB 6323XC (3) 90 da/ns 6/ 6