House File 508 - Introduced HOUSE FILE 508 BY COMMITTEE ON AGRICULTURE (SUCCESSOR TO HSB 131) A BILL FOR An Act providing for the marketing of grain by licensed 1 warehouse operators and grain dealers, including by 2 providing for indemnity fees and the indemnification of 3 grain depositors and sellers for losses following the 4 cessation of a license or bankruptcy. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2306HV (3) 91 da/ns

H.F. 508 Section 1. Section 203.1, subsection 3, Code 2025, is 1 amended to read as follows: 2 3. “Credit-sale contract” means a contract for the sale of 3 grain pursuant to which the sale price is to be paid more than 4 thirty days after the delivery of the grain to the buyer, or a 5 contract which is titled as a credit-sale contract, including 6 but not limited to those contracts commonly referred to as 7 deferred-payment contracts, contract or a deferred-pricing 8 contracts, and price-later contracts contract . 9 Sec. 2. Section 203.1, Code 2025, is amended by adding the 10 following new subsections: 11 NEW SUBSECTION . 4A. “Deferred-payment contract” means a 12 contract for the purchase of grain if all of the following 13 apply: 14 a. The purchase price is agreed to by the licensed grain 15 dealer and the seller by the date of the grain’s delivery as 16 provided in section 203.8. 17 b. Under the terms of the contract, the licensed grain 18 dealer’s payment of the purchase price to the seller may be 19 made on a date later than the last date for scheduled payments 20 made by the licensed grain dealer to sellers for delivered 21 grain according to the licensed grain dealer’s standard 22 business operation. 23 NEW SUBSECTION . 4B. “Deferred-pricing contract” means a 24 contract for the purchase of grain if all of the following 25 apply: 26 a. The purchase price is not agreed to by the licensed grain 27 dealer and the seller by the date of the grain’s delivery as 28 provided in section 203.8. 29 b. Under the terms of the contract, the licensed grain 30 dealer’s payment of the purchase price to the seller may be 31 made on a date later than the last date for scheduled payments 32 made by the licensed grain dealer to sellers for delivered 33 grain according to the licensed grain dealer’s standard 34 business operation. 35 -1- LSB 2306HV (3) 91 da/ns 1/ 17

H.F. 508 Sec. 3. Section 203.8, subsection 1, Code 2025, is amended 1 to read as follows: 2 1. a. A grain dealer licensed or required to be licensed 3 pursuant to section 203.3 shall pay the purchase price to the 4 seller for grain upon as follows: 5 (1) Upon delivery or later upon demand by the seller , 6 but . If the seller does not make a demand, the grain dealer 7 shall pay the purchase price not later than thirty days after 8 delivery by the seller unless in last date for scheduled 9 payments made by the licensed grain dealer to sellers for 10 delivered grain according to the grain dealer’s standard 11 business operation. 12 (2) In accordance with the terms of a credit-sale 13 contract that satisfies the requirements of this chapter . 14 The department shall adopt rules for payment by check and 15 electronic funds transfer. 16 b. A grain dealer licensed or required to be licensed 17 pursuant to section 203.3 shall not hold a check for the 18 purchase of grain more than five days after the grain dealer 19 issues a check to the seller. After that date, the grain 20 dealer shall deliver the check in person or by mail to the 21 seller’s last known address. The department shall adopt rules 22 pursuant to chapter 17A for a grain dealer’s payment by check 23 and electronic funds transfer. 24 Sec. 4. Section 203.15, subsection 4, paragraph c, 25 subparagraph (1), subparagraph division (b), Code 2025, is 26 amended to read as follows: 27 (b) The grain dealer files a bond with the department in the 28 amount of one two hundred fifty thousand dollars payable to the 29 department. 30 Sec. 5. Section 203.15, subsection 6, Code 2025, is amended 31 to read as follows: 32 6. A grain dealer who purchases grain by credit-sale 33 contract shall obtain from the seller a signed acknowledgment 34 stating that the seller has received notice that grain 35 -2- LSB 2306HV (3) 91 da/ns 2/ 17

H.F. 508 purchased by credit-sale contract is not protected by the 1 grain depositors and sellers indemnity fund. The form for the 2 acknowledgment shall be prescribed by the department, and the 3 licensed grain dealer and the seller shall each be provided a 4 copy. A contract’s use of terms defined in section 203.1 shall 5 not determine whether a contract is a credit-sale contract or a 6 type of credit-sale contract. 7 Sec. 6. Section 203D.1, Code 2025, is amended by adding the 8 following new subsections: 9 NEW SUBSECTION . 2A. “Deferred-payment contract” means the 10 same as defined in section 203.1. 11 NEW SUBSECTION . 2B. “Deferred-pricing contract” means the 12 same as defined in section 203.1. 13 NEW SUBSECTION . 8A. “Indemnity fees” or “fees” means a 14 participation fee and per-bushel fee as provided in sections 15 203D.3 and 203D.3A. 16 Sec. 7. Section 203D.1, subsections 14 and 16, Code 2025, 17 are amended to read as follows: 18 14. a. “Purchased grain” means grain any of the following: 19 (1) Grain entered in the company-owned paid position as 20 evidenced on the grain dealer’s daily position record. 21 (2) Grain purchased under a deferred-pricing contract. 22 b. “Purchased grain” does not include grain that is subject 23 to an exempt transaction based on documentation satisfactory 24 to the department showing that the grain dealer did any of the 25 following: 26 (1) Purchased the grain from the United States government or 27 any of its subdivisions or agencies. 28 (2) Purchased the grain from a person licensed as a grain 29 dealer in any jurisdiction. 30 (3) Purchased the grain under a credit-sale 31 deferred-payment contract. 32 (4) Entered the grain in the company-owned paid position as 33 a cancellation of a collateral warehouse receipt. 34 (5) Entered the grain in the company-owned paid position as 35 -3- LSB 2306HV (3) 91 da/ns 3/ 17

H.F. 508 an intra-company location transfer. 1 16. a. “Seller” means a person who sells grain which , that 2 the person has produced or caused to be produced , to a licensed 3 grain dealer , but excludes a person who executes a credit-sale 4 contract as a seller as provided in section 203.15 . However, 5 “seller” 6 b. “Seller” does not include any of the following: 7 a. (1) A person licensed as a grain dealer in any 8 jurisdiction who sells grain to a licensed grain dealer. 9 b. (2) A person who sells grain that is not produced in 10 this state unless such grain is delivered to a licensed grain 11 dealer at a location in this state as the first point of sale. 12 (3) A person who sells grain pursuant to a deferred-payment 13 contract. 14 Sec. 8. Section 203D.3, subsection 4, Code 2025, is amended 15 to read as follows: 16 4. The moneys collected under this section and deposited 17 in the fund shall be used exclusively to indemnify depositors 18 and sellers as provided in section 203D.6 and to pay the 19 administrative costs of this chapter . 20 Sec. 9. Section 203D.3A, unnumbered paragraph 1, Code 2025, 21 is amended to read as follows: 22 The department shall collect indemnity fees , including 23 participation fees and per-bushel fees as provided in this 24 section , if established imposed by the board pursuant to 25 section 203D.5 , at rates determined by the board as provided 26 in that section. A person required to pay a fee shall use 27 licensee shall remit indemnity fees and forms and deliver the 28 payment to the department as required by the department. 29 Sec. 10. Section 203D.3A, subsection 1, paragraph a, 30 subparagraph (1), Code 2025, is amended to read as follows: 31 (1) In calculating the amount of the initial participation 32 fee, an applicant for a new license shall be deemed a licensee 33 paying the full annual amount of the participation fee owing on 34 the licensee’s first anniversary date as provided in paragraph 35 -4- LSB 2306HV (3) 91 da/ns 4/ 17

H.F. 508 “b” . The department must be satisfied that the applicant is 1 calculating the amount due in good faith and using the best 2 information available. 3 (a) For a licensed grain dealer, the anniversary date is 4 the last date to apply for the renewal of the grain dealer’s 5 license before the license expires as provided in section 6 203.5. 7 (b) For a licensed warehouse operator, the anniversary date 8 is the last date to apply for the renewal of the warehouse 9 operator’s license before the license expires as provided in 10 section 203C.37. 11 Sec. 11. Section 203D.3A, subsection 1, paragraph b, Code 12 2025, is amended to read as follows: 13 b. A licensee shall pay remit a participation fee in one 14 installment as part of a license renewal application in the 15 same manner provided in paragraph “a” . However, the licensee 16 may elect to remit the participation fee on four successive 17 installment dates, with each installment date occurring on in 18 the month succeeding the last date of the fund’s assessment 19 quarter as provided in section 203D.3 , on December 15, March 20 15, June 15, and September 15 . The licensee shall pay remit 21 twenty-five percent of the total participation fee assessed on 22 each installment date. However, nothing in this subsection 23 prevents a licensee from paying the participation fee on an 24 accelerated basis. A licensee shall pay the first installment 25 on the last date of the fund’s assessment quarter immediately 26 following the licensee’s anniversary date. 27 (1) For a licensed grain dealer, the anniversary date is 28 the last date to apply for the renewal of the grain dealer’s 29 license before the license expires as provided in section 30 203.5 . 31 (2) For a licensed warehouse operator, the anniversary date 32 is the last date to apply for the renewal of the warehouse 33 operator’s license before the license expires as provided in 34 section 203C.37 . 35 -5- LSB 2306HV (3) 91 da/ns 5/ 17

H.F. 508 Sec. 12. Section 203D.3A, subsection 2, Code 2025, is 1 amended to read as follows: 2 2. a. A licensed grain dealer shall remit a per-bushel fee 3 shall be assessed on all purchased grain. 4 b. The licensed grain dealer shall forward remit the 5 per-bushel fee to the department on a quarterly basis in the 6 manner and using the forms a form prescribed by the department. 7 The licensed grain dealer shall remit the per-bushel fee 8 and form on four successive installment dates, with each 9 installment date occurring in the month succeeding the last 10 assessment quarter as provided in section 203D.3, on December 11 15, March 15, June 15, and September 15. 12 c. A licensee licensed grain dealer is delinquent if the 13 licensee grain dealer fails to submit remit the full quarterly 14 per-bushel fee or quarterly forms and form when due or if, 15 upon examination, an underpayment of the fee is found by the 16 department. The licensed grain dealer is subject to a penalty 17 of ten dollars for each day the licensed grain dealer is 18 delinquent or an amount equal to the amount of the deficiency, 19 whichever is less. However, a licensee licensed grain dealer 20 who fails to submit remit the full quarterly per-bushel fee or 21 quarterly forms form when due , is subject to a minimum payment 22 of ten dollars. The department may establish and apply a 23 margin of error in determining whether a licensed grain dealer 24 is delinquent. The per-bushel fee shall be collected only once 25 on each bushel of grain. 26 c. d. The per-bushel fee shall not be collected more 27 than once on each bushel of grain. A licensed grain dealer 28 may choose to pass on the cost of a per-bushel fee to the 29 sellers by an itemized discount noted on the settlement sheet. 30 However, if the per-bushel fee is not in effect, no a licensed 31 grain dealer shall not make such a discount on the purchase of 32 grain. A discount made nominally for the per-bushel fee while 33 the per-bushel fee is not in effect is grounds for a license 34 suspension or revocation under chapter 203 . 35 -6- LSB 2306HV (3) 91 da/ns 6/ 17

H.F. 508 Sec. 13. Section 203D.5, subsection 1, unnumbered paragraph 1 1, Code 2025, is amended to read as follows: 2 The board shall annually review the debits of and credits 3 to the grain depositors and sellers indemnity fund created 4 in section 203D.3 and shall determine whether to impose the 5 participation fee and per-bushel fee as provided in section 6 203D.3A , make adjustments to the indemnity fees effective 7 on the previous September 1, or waive the indemnity fees as 8 necessary to comply with this section . The board shall make 9 the determination not later than May 1 of each year. The 10 board shall impose the indemnity fees or adjust the indemnity 11 fees effective on the previous September 1 in accordance with 12 chapter 17A . The imposition or adjustment of the indemnity 13 fees shall become effective as follows: 14 Sec. 14. Section 203D.5, subsections 4 and 5, Code 2025, are 15 amended to read as follows: 16 4. If on the last date of the fund’s assessment year as 17 provided in section 203D.3 the assets of the fund exceed eight 18 sixteen million dollars, less any encumbered balances or 19 pending or unsettled claims, all of the following apply: 20 a. The participation fee as provided in section 203D.3A 21 shall be waived and shall not be assessable or owing for the 22 following assessment year of the fund. However, the licensee 23 shall continue to pay remit any owing participation fee that 24 was in effect on the prior September 1. 25 b. The per-bushel fee as provided in section 203D.3A 26 shall be waived and shall not be assessable or owing for the 27 following assessment year . The waiver shall also apply to 28 purchased grain that is unpriced on the last date of the fund’s 29 assessment year. However, the licensed grain dealer shall 30 remit any per-bushel fee that is owing on that date. 31 5. The board shall reinstate the indemnity fees as 32 provided in this section if the assets of the fund, less any 33 unencumbered balances or pending or unsettled claims, are three 34 eight million dollars or less. 35 -7- LSB 2306HV (3) 91 da/ns 7/ 17

H.F. 508 Sec. 15. Section 203D.6, subsection 1, Code 2025, is amended 1 to read as follows: 2 1. Persons who may file claims. A depositor or seller may 3 file a claim with the department for indemnification of a loss 4 from the grain depositors and sellers indemnity fund. A claim 5 shall be filed in the manner prescribed by rules adopted by the 6 board department . 7 Sec. 16. Section 203D.6, subsection 4, paragraph d, Code 8 2025, is amended to read as follows: 9 d. That the claim derives from a covered transaction. For 10 purposes of this paragraph, a claim derives from a covered 11 transaction if the claimant is a any of the following: 12 (1) A depositor who delivered the grain to a licensed 13 warehouse operator within six months of the incurrence date for 14 a claim period as provided in subsection 2. 15 (2) A seller who transferred title to the grain to a 16 licensed grain dealer , other than by credit-sale contract a 17 deferred-payment contract, within six months of the incurrence 18 date for a claim period as provided in subsection 2 , or if the 19 claimant is a depositor who delivered the grain to a licensed 20 warehouse operator . 21 Sec. 17. Section 203D.6, subsections 5, 6, and 8, Code 2025, 22 are amended to read as follows: 23 5. Value Dollar value of loss —— warehouse depositor claims. 24 a. The board shall determine the dollar value of a claim 25 loss incurred by a depositor holding a warehouse receipt or a 26 scale weight ticket for grain that the depositor delivered for 27 storage to the licensed warehouse operator. 28 b. (1) If the department has been appointed by the court 29 as receiver of the grain assets of the warehouse operator, 30 the dollar value of a loss shall be presumed to be as stated 31 in the plan of disposition approved by the court. If the 32 warehouse operator has filed a petition in bankruptcy, the 33 dollar value of a loss shall be presumed to be based upon 34 the fair market price, free-on-board from the site of the 35 -8- LSB 2306HV (3) 91 da/ns 8/ 17

H.F. 508 warehouse operator, being paid to producers for grain by the 1 grain terminal operator nearest the warehouse operator on the 2 date the petition was filed. If there is neither a department 3 receivership nor a bankruptcy filing, the dollar value of 4 a loss shall be presumed to be based upon the fair market 5 price, free-on-board from the site of the warehouse operator, 6 being paid to producers for grain by the grain terminal 7 operator nearest the warehouse operator on the date of license 8 revocation or cancellation incurrence date . If more than 9 one incurrence date applies to a claim, the board may choose 10 between the two. However, the board may accept an alternative 11 valuation value of a claim loss upon a showing of just cause by 12 the depositor or department. 13 (2) Notwithstanding subparagraph (1), all of the following 14 apply: 15 (a) The dollar value of a loss for corn shall not exceed the 16 dollar value for a loss of U.S. No. 2 yellow corn according to 17 grain standards adopted by the federal grain inspection service 18 of the United States department of agriculture. 19 (b) The dollar value of a loss for soybeans shall not 20 exceed the dollar value of a loss for U.S. No. 2 yellow 21 soybeans according to grain standards adopted by the federal 22 grain inspection service of the United States department of 23 agriculture. 24 c. All depositors filing claims under this section shall be 25 bound by the dollar value loss determined by the board. The 26 dollar value loss of the loss is the outstanding balance on the 27 validated claim at time of payment from the fund. 28 6. Value Dollar value of loss —— grain dealer seller claims. 29 a. The dollar value of a claim loss incurred by a seller who 30 has sold grain or delivered grain for sale or exchange and who 31 is a creditor of the licensed grain dealer for all or part of 32 the dollar value of a loss of the grain shall be based on the 33 amount stated on the obligation on the date of the sale. 34 b. (1) If the sold grain was unpriced, the dollar value of 35 -9- LSB 2306HV (3) 91 da/ns 9/ 17

H.F. 508 a claim loss shall be presumed to be based upon the fair market 1 price, free-on-board from the site of the grain dealer, being 2 paid to producers for grain by the grain terminal operator 3 nearest the grain dealer on the incurrence date of the license 4 revocation or cancellation or the filing of a petition in 5 bankruptcy . If more than one incurrence date applies to a 6 claim, the board may choose between the two. However, the 7 board may accept an alternative valuation dollar value of 8 a claim loss upon a showing of just cause by the seller or 9 department. 10 (2) Notwithstanding subparagraph (1), all of the following 11 apply: 12 (a) The dollar value of a loss for corn shall not exceed the 13 dollar value for a loss of U.S. No. 2 yellow corn according to 14 grain standards adopted by the federal grain inspection service 15 of the United States department of agriculture. 16 (b) The dollar value of a loss for soybeans shall not 17 exceed the dollar value of a loss for U.S. No. 2 yellow 18 soybeans according to grain standards adopted by the federal 19 grain inspection service of the United States department of 20 agriculture. 21 c. All sellers filing claims under this section shall be 22 bound by the dollar value of a loss determined by the board. 23 The dollar value of the loss is the outstanding balance on the 24 validated claim at the time of payment from the fund. 25 8. Payment of claims. 26 a. Upon a determination that the claim is eligible for 27 payment indemnification , the board shall provide for payment of 28 ninety percent of pay a claimant based on the dollar value of 29 the loss, as determined by the board for a depositor’s claim 30 under subsection 5 , but not or for a seller’s claim under 31 subsection 6. The board shall pay the claimant according to 32 the following schedule: 33 (1) For a depositor, the board shall pay ninety percent of 34 the loss but not more than three hundred thousand dollars per 35 -10- LSB 2306HV (3) 91 da/ns 10/ 17

H.F. 508 claimant . 1 (2) (a) For a seller, except for a seller who sold the 2 grain under credit-sale contract, the board shall pay ninety 3 percent of the loss but not more than three hundred thousand 4 dollars. 5 (b) For a seller who sold the grain pursuant to a 6 credit-sale contract, one of the following: 7 (i) If the grain was sold pursuant to a deferred-pricing 8 contract, the board shall pay seventy percent of the loss but 9 not more than two hundred ten thousand dollars. 10 (ii) If the grain was sold pursuant to a deferred-payment 11 contract, the board shall not pay any percent or amount of the 12 loss. 13 b. (1) If at any time the board determines that there 14 are insufficient funds moneys in the fund to make payment of 15 indemnify all claims, the board may shall order that payment be 16 deferred on specified claims be indemnified according to the 17 following order: 18 (a) First to depositors and sellers equally as determined 19 by the board, except for sellers who sold the grain pursuant 20 to deferred-pricing contracts . 21 (b) Second to sellers who sold the grain pursuant to 22 deferred-pricing contracts. 23 (2) The board may establish one or more claim 24 indemnification periods based on the amount of moneys in the 25 fund and the amount required to indemnify all eligible claims. 26 The department , upon the board’s instruction, shall hold those 27 unindemnified claims for payment until the board determines 28 that the fund again contains sufficient assets until the next 29 payment period or payment periods as moneys in the fund are 30 available . 31 EXPLANATION 32 The inclusion of this explanation does not constitute agreement with 33 the explanation’s substance by the members of the general assembly. 34 BACKGROUND —— GRAIN DEALERS AND WAREHOUSE OPERATORS. This 35 -11- LSB 2306HV (3) 91 da/ns 11/ 17

H.F. 508 bill amends provisions regulating marketers of grain, referred 1 to as grain dealers purchasing grain (Code chapter 203), and 2 grain warehouse operators storing grain under bailment (Code 3 chapter 203C). The bill also provides for sellers of grain to 4 licensed grain dealers, and depositors storing grain with a 5 licensed grain warehouse, by indemnifying losses resulting from 6 the sale or deposit (Code chapter 203D). 7 BACKGROUND —— LICENSURE REQUIREMENTS. The department of 8 agriculture and land stewardship (DALS) licenses a grain dealer 9 purchasing at least 1,000 bushels from producers of that grain 10 (sellers) during any calendar month (Code section 203.1). DALS 11 licenses a warehouse operator in the business of operating a 12 warehouse for the storage of bushels on behalf of title holders 13 (depositors) (Code section 203C.1). Alternatively, a warehouse 14 operator may be regulated by the United States department of 15 agriculture under the United States Warehouse Act (7 U.S.C. 16 ch. 10). A state license application must be accompanied by 17 a financial statement (Code sections 203.3 and 203C.6). A 18 grain dealer must meet certain net worth requirements to be 19 issued a class 1 license and purchase grain by credit-sale 20 contract. Normally, a grain dealer’s financial statement 21 must be accompanied by an unqualified opinion based upon an 22 audit performed by a certified public accountant licensed in 23 this state. However, DALS may accept a qualification in an 24 opinion because of the audit procedures used. DALS may also 25 accept a review by a certified public accountant in lieu of an 26 unqualified opinion. 27 BACKGROUND —— CREDIT-SALE CONTRACTS. A credit-sale 28 contract (also referred to as deferred-payment contract, 29 deferred-pricing contract, or price-later contract) involves a 30 transaction for the sale of grain in which the grain’s producer 31 is the seller and the licensed grain dealer is the buyer. The 32 purchase price is to be paid to the seller by the licensed 33 grain dealer more than 30 days after the seller’s delivery of 34 the grain to the licensed grain dealer or a person designated 35 -12- LSB 2306HV (3) 91 da/ns 12/ 17

H.F. 508 by the licensed grain dealer (Code sections 203.1 and 203.8). 1 Generally, there are two types of credit-sale contracts, a 2 deferred-pricing contract and a deferred-payment contract. 3 In both cases, the seller’s payment amount is delayed until 4 after the sale (transfer of title) and delivery. Under a 5 deferred-pricing contract, the payment amount is unknown at 6 the time of sale and delivery, with the expectation that the 7 seller will receive a higher price in the future. Under 8 a deferred-payment contract, the purchase price has been 9 determined upon, or within a short time after, the grain’s 10 sale and delivery. By deferring payment, the seller elects to 11 claim income from the sale in the subsequent tax year assuming 12 a more beneficial tax rate will apply in that year (e.g., 13 expecting a reduction in farm income). In order to purchase 14 grain under a credit sale contract, a licensed grain dealer 15 must comply with a number of requirements, including a number 16 of financial conditions based on net worth or a deficiency bond 17 or irrevocable letter of credit. The licensed grain dealer’s 18 last financial statement must be accompanied by an unqualified 19 opinion by a certified public accountant or alternatively the 20 licensed grain dealer must file a bond with DALS in the amount 21 of $100,000. 22 BACKGROUND —— GRAIN DEPOSITORS AND SELLERS INDEMNITY 23 FUND. A seller selling grain to a licensed grain dealer or a 24 depositor depositing grain with a licensed warehouse operator 25 may be reimbursed for a loss incurred by the failure of the 26 licensee to honor a contractual obligation regarding the 27 transaction (Code section 203D.6). A payment is made from 28 the grain depositors and sellers indemnity fund (indemnity 29 fund) upon a determination that the claim is eligible for 30 indemnification by the Iowa grain indemnity fund board 31 (indemnity board) acting in cooperation with DALS. To be 32 timely, a claim must be filed within a claim period. The claim 33 period begins on either of two incurrence dates and ends 120 34 days later. An incurrence date is either when the license of 35 -13- LSB 2306HV (3) 91 da/ns 13/ 17

H.F. 508 the grain dealer or warehouse operator’s license ceases (is 1 revoked or voluntarily canceled) or the date a petition is 2 filed in bankruptcy. 3 BACKGROUND —— FEES. In addition to license fees deposited 4 into the general fund of the state (Code sections 203.6 and 5 203C.33), each licensee may be required to remit either one or 6 two special fees (indemnity fees) deposited in the indemnity 7 fund, referred to as a participation fee and per-bushel fee. 8 The licensed grain dealer’s participation fee is calculated 9 according to the following formula: the assessment rate of not 10 more than $0.014 multiplied by all bushels of purchased grain 11 during the grain dealer’s prior fiscal year with a minimum 12 of $50 and no maximum limit. The licensed grain dealer’s 13 per-bushel fee is calculated according to a similar formula: 14 the assessment rate of not more than $0.25 multiplied by all 15 bushels of purchased grain for the grain dealer’s assessment 16 year with no minimum and a $500 maximum limit. The qualifying 17 term “purchased grain” equals the total number of bushels 18 purchased from sellers minus a number of exempt bushels 19 purchased, including those purchased under credit-sale contract 20 (Code section 203D.1). Purchased grain is reported to DALS 21 as “paid company-owned” (Code section 203D.1). The licensed 22 warehouse operator’s participation fee is based on the number 23 of bushels of storage capacity of the warehouse (Code section 24 203D.5). An assessment year begins September 1 and ends August 25 31 (Code sections 203D.3 and 203D.5). The assessment year is 26 further divided into four three-month assessment quarters. A 27 grain dealer or warehouse operator may remit a participation 28 fee annually (with an application for an initial license or the 29 renewal of a license) or on a quarterly basis. A grain dealer 30 must remit a per-bushel fee on a quarterly basis (Code section 31 203D.3A). 32 BACKGROUND —— INDEMNITY BOARD REVIEW OF INDEMNITY FUND. The 33 indemnity board must annually review the debits of and credits 34 to the indemnity fund and by May 1 determine whether to impose 35 -14- LSB 2306HV (3) 91 da/ns 14/ 17

H.F. 508 the indemnity fees, make adjustments to the existing indemnity 1 fees, or waive the existing indemnity fees as necessary to 2 comply with two triggers. The balance in the indemnity fund 3 triggers the indemnity fees waiver or reinstatement (Code 4 section 203D.5). When the balance in the indemnity fund 5 reaches $8 million, the indemnity fees are automatically 6 waived. The indemnity fees are reinstated by the indemnity 7 board if the balance in the fund is $3 million or less (Code 8 section 203D.5). The triggered waiver or reinstatement is 9 effective on the first day of the following assessment year 10 (September 1). A licensee is required to remit the outstanding 11 amount of the waived participation fee that is otherwise owing 12 for the current assessment year. However, a licensed grain 13 dealer is no longer obligated to remit the outstanding amount 14 of the per-bushel fee otherwise owing for that period, unless 15 the amount is delinquent (Code section 203D.5). 16 BACKGROUND —— INDEMNITY FUND —— VALUE OF LOSS. Generally, 17 a loss incurred by a depositor (holding a warehouse receipt 18 or scale weight ticket) or seller who is a party to a sale 19 may be determined using several methods of valuation. For 20 a depositor, it may be a court order hearing a matter in 21 receivership. Otherwise, the loss is based on the fair market 22 price paid to producer sellers at a nearby terminal on an 23 incurrence date. For a seller, it may be the sales price 24 agreed to by the parties. If the grain has not yet been priced, 25 the loss is again based on the fair market price paid at the 26 terminal on one of those incurrence dates. In any case, from 27 the determined loss is deducted any amount recovered by the 28 depositor or seller through other legal or equitable remedies, 29 including the liquidation of assets (Code section 203D.6). 30 BACKGROUND —— INDEMNITY FUND —— PAYMENT OF CLAIMS. A 31 claim must meet eligibility requirements, including that it 32 is timely filed, there is evidence of a loss incurred by a 33 claimant, and the claim derives from a covered transaction. 34 For a claimant who is a depositor, a covered transaction 35 -15- LSB 2306HV (3) 91 da/ns 15/ 17

H.F. 508 requires that the grain must have been delivered to a licensed 1 warehouse operator. For a claimant who is a seller, a covered 2 transaction requires that title be transferred within six 3 months of the incurrence date. A covered transaction excludes 4 sale by credit-sale contract. A seller or depositor is 5 entitled to be reimbursed 90 percent of a loss but not more 6 than $300,000. 7 BILL’S PROVISIONS —— CREDIT-SALE CONTRACTS —— LICENSED GRAIN 8 DEALER’S FINANCIAL CONDITIONS. The bill amends financial 9 conditions required for a licensed grain dealer holding a 10 class 1 license to purchase grain by credit-sale contract. 11 Specifically, a licensed grain dealer who did not submit a 12 financial statement accompanied by an unqualified opinion must 13 file a bond with DALS for $250,000. 14 BILL’S PROVISIONS —— INDEMNITY FEES —— PAYMENT SCHEDULE. 15 The bill provides that a grain dealer or warehouse operator 16 may pay the participation fee in one installment as part of 17 the license renewal or on four successive installment dates on 18 December 15, March 15, June 15, and September 15. The bill 19 provides that the grain dealer must pay the per-bushel fee on 20 the same installment dates. 21 BILL’S PROVISIONS —— INDEMNITY FEES —— TRIGGERS. The bill 22 adjusts both triggers waiving or reinstating the two indemnity 23 fees. The bill increases from $8 million to $16 million the 24 balance in the indemnity fund required to trigger a waiver and 25 increases from $3 million to $8 million the balance in the 26 indemnity fund required to trigger a reinstatement. 27 BILL’S PROVISIONS —— INDEMNITY FEES IMPOSED ON CREDIT-SALE 28 CONTRACT TRANSACTIONS. The bill provides that grain sold by 29 deferred-pricing contract is considered purchased grain and 30 grain sold by deferred-payment contract is not. Therefore, a 31 licensed grain dealer is only assessed an indemnity fee on the 32 deferred-pricing contract grain. 33 BILL’S PROVISIONS —— INDEMNITY FUND —— DOLLAR VALUE OF 34 LOSS. The bill provides special valuation rules for losses 35 -16- LSB 2306HV (3) 91 da/ns 16/ 17

H.F. 508 involving corn or soybeans. The dollar value of a loss 1 for corn cannot exceed the dollar value for a loss of U.S. 2 No. 2 yellow corn according to grain standards adopted by 3 the federal grain inspection service of the United States 4 department of agriculture. The dollar value of a loss for 5 soybeans cannot exceed the dollar value of a loss for U.S. No. 6 2 yellow soybeans according to grain standards adopted by that 7 same agency. A dollar loss incurred under a deferred-pricing 8 contract is presumed the same as any other loss in which the 9 price for the grain has not been determined (e.g., determined 10 by the fair market price at the nearest terminal on the 11 incurrence date). 12 BILL’S PROVISIONS —— INDEMNITY FUND —— PAYMENT OF CLAIMS. 13 The bill provides that the sale of grain by deferred-pricing 14 contract is no longer excluded from the meaning of a covered 15 transaction and a seller may therefore claim a dollar loss 16 resulting from the grain dealer’s default. The bill provides 17 for the payment to claimants based on an order of priority. 18 The first priority is provided to a depositor or seller, other 19 than a seller who sold grain by credit-sale contract. The 20 payout remains the same: 90 percent of the loss but not more 21 than $300,000. The second priority is provided to a seller 22 who sold grain pursuant to a deferred-pricing contract. In 23 that case, the payout is reduced to 70 percent of the loss but 24 not more than $210,000. A deferred-payment contract remains 25 ineligible for payment. 26 BILL’S PROVISIONS —— INDEMNITY FUND —— ORDER OF PAYMENTS. 27 The board may determine when payments are to be made 28 depending upon moneys in the indemnity fund. Payments are 29 to be made on an equal basis between depositors and sellers 30 with one exception. A seller whose grain was sold under a 31 deferred-pricing contract is indemnified after depositors and 32 other sellers. 33 -17- LSB 2306HV (3) 91 da/ns 17/ 17