House Study Bill 131 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON AGRICULTURE BILL BY CHAIRPERSON SEXTON) 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 2306YC (8) 91 da/ns

H.F. _____ Section 1. Section 203.1, subsection 3, Code 2025, is 1 amended to read as follows: 2 3. a. “Credit-sale contract” means a contract in which a 3 seller and licensed grain dealer are parties for the sale of 4 grain pursuant to which , if the sale purchase price is to be 5 paid to the seller more than thirty days after the delivery 6 of the grain to the buyer, or a contract which is titled as 7 a credit-sale contract, including but not limited to those 8 contracts commonly referred to licensed grain dealer or other 9 person in accordance with the contract as provided in section 10 203.8. 11 b. “Credit-sale contract” includes a deferred-payment 12 contracts, contract and a deferred-pricing contracts, and 13 price-later contracts contract . 14 Sec. 2. Section 203.1, Code 2025, is amended by adding the 15 following new subsections: 16 NEW SUBSECTION . 4A. “Deferred-payment contract” means 17 a credit-sale contract pursuant to which the purchase price 18 for the grain is agreed to by a seller and licensed grain 19 dealer not later than thirty days after the day that the seller 20 delivers the grain to the licensed grain dealer or other person 21 in accordance with the contract as provided in section 203.8. 22 NEW SUBSECTION . 4B. “Deferred-pricing contract” means a 23 credit-sale contract pursuant to which the purchase price for 24 the grain is agreed to by a seller and licensed grain dealer 25 more than thirty days after the day that the seller delivers 26 the grain to the licensed grain dealer or other person in 27 accordance with the contract as provided in section 203.8. 28 Sec. 3. Section 203.3, subsection 4, paragraph b, Code 2025, 29 is amended to read as follows: 30 b. (1) The Except as provided in subparagraph (2), a grain 31 dealer shall submit, as required by the department, a financial 32 statement that is accompanied by an unqualified opinion based 33 upon an audit performed by a certified public accountant 34 licensed in this state. However, the 35 -1- LSB 2306YC (8) 91 da/ns 1/ 17

H.F. _____ (2) (a) The department may accept a qualification in an 1 opinion that is unavoidable by any audit procedure that is 2 permitted under generally accepted accounting principles. An 3 opinion that is qualified because of a limited audit procedure 4 or because the scope of an audit is limited shall not be 5 accepted by the department. The department shall not require 6 that a grain dealer submit more than one such unqualified 7 opinion per year. The grain dealer , except as provided in 8 section 203.15 , may elect to submit a financial statement that 9 is accompanied by the report of a certified public accountant 10 licensed in this state that is based upon a review performed 11 by the certified public accountant in lieu of the audited 12 financial statement specified in this paragraph. However, at 13 any time the department may require a financial statement that 14 is accompanied by the report of a certified public accountant 15 licensed in this state that is based upon a review performed by 16 a certified public accountant if the department has good cause. 17 (b) A grain dealer purchasing grain by credit-sale contract 18 shall submit a financial statement that is accompanied by 19 an unqualified opinion based upon an audit performed by a 20 certified public accountant licensed in this state. The 21 department shall not accept a qualification in an opinion or a 22 review performed by the certified public accountant in lieu of 23 the audited financial statement. 24 (c) A grain dealer shall submit one or more financial 25 statements to the department in addition to those required 26 in this paragraph if the department determines that it is 27 necessary to verify the grain dealer’s financial status or 28 compliance with this subsection . 29 Sec. 4. Section 203.15, subsection 6, Code 2025, is amended 30 to read as follows: 31 6. A grain dealer who purchases grain by credit-sale 32 contract shall obtain from the seller a signed acknowledgment 33 stating that the seller has received notice that grain 34 purchased by credit-sale contract is not protected by the 35 -2- LSB 2306YC (8) 91 da/ns 2/ 17

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

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

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

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

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

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

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

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

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

H.F. _____ to as grain dealers purchasing grain (Code chapter 203), and 1 grain warehouse operators storing grain under bailment (Code 2 chapter 203C). The bill also provides for sellers of grain to 3 licensed grain dealers, and depositors storing grain with a 4 licensed grain warehouse, by indemnifying losses resulting from 5 the sale or deposit (Code chapter 203D). 6 BACKGROUND —— LICENSURE REQUIREMENTS. The department of 7 agriculture and land stewardship (DALS) licenses a grain dealer 8 purchasing at least 1,000 bushels from producers of that grain 9 (sellers) during any calendar month (Code section 203.1). DALS 10 licenses a warehouse operator in the business of operating a 11 warehouse for the storage of bushels on behalf of title holders 12 (depositors) (Code section 203C.1). Alternatively, a warehouse 13 operator may be regulated by the United States department of 14 agriculture under the United States Warehouse Act (7 U.S.C. 15 ch. 10). A state license application must be accompanied by 16 a financial statement (Code sections 203.3 and 203C.6). A 17 grain dealer must meet certain net worth requirements to be 18 issued a class 1 license and purchase grain by credit-sale 19 contract. Normally, a grain dealer’s financial statement 20 must be accompanied by an unqualified opinion based upon an 21 audit performed by a certified public accountant licensed in 22 this state. However, DALS may accept a qualification in an 23 opinion because of the audit procedures used. DALS may also 24 accept a review by a certified public accountant in lieu of an 25 unqualified opinion. 26 BACKGROUND —— CREDIT-SALE CONTRACTS. A credit-sale 27 contract (also referred to as deferred-payment contract, 28 deferred-pricing contract, or price-later contract) involves a 29 transaction for the sale of grain in which the grain’s producer 30 is the seller and the licensed grain dealer is the buyer. The 31 purchase price is to be paid to the seller by the licensed 32 grain dealer more than 30 days after the seller’s delivery of 33 the grain to the licensed grain dealer or a person designated 34 by the licensed grain dealer (Code sections 203.1 and 203.8). 35 -12- LSB 2306YC (8) 91 da/ns 12/ 17

H.F. _____ Generally, there are two types of credit-sale contracts, a 1 deferred-pricing contract and a deferred-payment contract. 2 In both cases, the seller’s payment amount is delayed until 3 after the sale (transfer of title) and delivery. Under a 4 deferred-pricing contract, the payment amount is unknown at 5 the time of sale and delivery, with the expectation that the 6 seller will receive a higher price in the future. Under 7 a deferred-payment contract, the purchase price has been 8 determined upon, or within a short time after, the grain’s sale 9 and delivery. By deferring payment, the seller elects to claim 10 income from the sale in the subsequent tax year assuming a more 11 beneficial tax rate will apply in that year (e.g., expecting a 12 reduction in farm income). 13 BACKGROUND —— GRAIN DEPOSITORS AND SELLERS INDEMNITY 14 FUND. A seller selling grain to a licensed grain dealer or a 15 depositor depositing grain with a licensed warehouse operator 16 may be reimbursed for a loss incurred by the failure of the 17 licensee to honor a contractual obligation regarding the 18 transaction (Code section 203D.6). A payment is made from 19 the grain depositors and sellers indemnity fund (indemnity 20 fund) upon a determination that the claim is eligible for 21 indemnification by the Iowa grain indemnity fund board 22 (indemnity board) acting in cooperation with DALS. To be 23 timely, a claim must be filed within a claim period. The claim 24 period begins on either of two incurrence dates and ends 120 25 days later. An incurrence date is either when the license of 26 the grain dealer or warehouse operator’s license ceases (is 27 revoked or voluntarily canceled) or the date a petition is 28 filed in bankruptcy. 29 BACKGROUND —— FEES. In addition to license fees deposited 30 into the general fund of the state (Code sections 203.6 and 31 203C.33), each licensee may be required to remit either one or 32 two special fees (indemnity fees) deposited in the indemnity 33 fund, referred to as a participation fee and per-bushel fee. 34 The licensed grain dealer’s participation fee is calculated 35 -13- LSB 2306YC (8) 91 da/ns 13/ 17

H.F. _____ according to the following formula: the assessment rate of not 1 more than $0.014 multiplied by all bushels of purchased grain 2 during the grain dealer’s prior fiscal year with a minimum 3 of $50 and no maximum limit. The licensed grain dealer’s 4 per-bushel fee is calculated according to a similar formula: 5 the assessment rate of not more than $0.25 multiplied by all 6 bushels of purchased grain for the grain dealer’s assessment 7 year with no minimum and a $500 maximum limit. The qualifying 8 term “purchased grain” equals the total number of bushels 9 purchased from sellers minus a number of exempt bushels 10 purchased, including those purchased under credit-sale contract 11 (Code section 203D.1). Purchased grain is reported to DALS 12 as “paid company-owned” (Code section 203D.1). The licensed 13 warehouse operator’s participation fee is based on the number 14 of bushels of storage capacity of the warehouse (Code section 15 203D.5). An assessment year begins September 1 and ends August 16 31 (Code sections 203D.3 and 203D.5). The assessment year is 17 further divided into four three-month assessment quarters. A 18 grain dealer or warehouse operator may remit a participation 19 fee annually (with an application for an initial license or the 20 renewal of a license) or on a quarterly basis. A grain dealer 21 must remit a per-bushel fee on a quarterly basis (Code section 22 203D.3A). 23 BACKGROUND —— INDEMNITY BOARD REVIEW OF INDEMNITY FUND. The 24 indemnity board must annually review the debits of and credits 25 to the indemnity fund and by May 1 determine whether to impose 26 the indemnity fees, make adjustments to the existing indemnity 27 fees, or waive the existing indemnity fees as necessary to 28 comply with two triggers. The balance in the indemnity fund 29 triggers the indemnity fees waiver or reinstatement (Code 30 section 203D.5). When the balance in the indemnity fund 31 reaches $8 million, the indemnity fees are automatically 32 waived. The indemnity fees are reinstated by the indemnity 33 board if the balance in the fund is $3 million or less (Code 34 section 203D.5). The triggered waiver or reinstatement is 35 -14- LSB 2306YC (8) 91 da/ns 14/ 17

H.F. _____ effective on the first day of the following assessment year 1 (September 1). A licensee is required to remit the outstanding 2 amount of the waived participation fee that is otherwise owing 3 for the current assessment year. However, a licensed grain 4 dealer is no longer obligated to remit the outstanding amount 5 of the per-bushel fee otherwise owing for that period, unless 6 the amount is delinquent (Code section 203D.5). 7 BACKGROUND —— INDEMNITY FUND —— VALUE OF LOSS. Generally, 8 a loss incurred by a depositor (holding a warehouse receipt 9 or scale weight ticket) or seller who is a party to a sale 10 may be determined using several methods of valuation. For 11 a depositor, it may be a court order hearing a matter in 12 receivership. Otherwise, the loss is based on the fair market 13 price paid to producer sellers at a nearby terminal on an 14 incurrence date. For a seller, it may be the sales price 15 agreed to by the parties. If the grain has not yet been priced, 16 the loss is again based on the fair market price paid at the 17 terminal on one of those incurrence dates. In any case, from 18 the determined loss is deducted any amount recovered by the 19 depositor or seller through other legal or equitable remedies, 20 including the liquidation of assets (Code section 203D.6). 21 BACKGROUND —— INDEMNITY FUND —— PAYMENT OF CLAIMS. A 22 claim must meet eligibility requirements, including that it 23 is timely filed, there is evidence of a loss incurred by a 24 claimant, and the claim derives from a covered transaction. 25 For a claimant who is a depositor, a covered transaction 26 requires that the grain must have been delivered to a licensed 27 warehouse operator. For a claimant who is a seller, a covered 28 transaction requires that title be transferred within six 29 months of the incurrence date. A covered transaction excludes 30 sale by credit-sale contract. A seller or depositor is 31 entitled to be reimbursed 90 percent of a loss but not more 32 than $300,000. 33 BILL’S PROVISIONS —— LICENSE REQUIREMENT FOR GRAIN DEALERS. 34 The bill provides that a grain dealer who purchases grain by 35 -15- LSB 2306YC (8) 91 da/ns 15/ 17

H.F. _____ credit-sale contract and is issued a class 1 license must 1 submit to DALS a financial statement that is accompanied by 2 an unqualified opinion based upon an audit performed by a 3 certified public accountant licensed in this state. DALS 4 cannot accept a qualification in an opinion or a review 5 performed by the certified public accountant. 6 BILL’S PROVISIONS —— INDEMNITY FEES —— PAYMENT SCHEDULE. 7 The bill provides that a grain dealer or warehouse operator 8 may pay the participation fee in one installment as part of 9 the license renewal or on four successive installment dates on 10 December 15, March 15, June 15, and September 15. The bill 11 provides that the grain dealer must pay the per-bushel fee on 12 the same installment dates. 13 BILL’S PROVISIONS —— INDEMNITY FEES —— TRIGGERS. The bill 14 adjusts both triggers waiving or reinstating the two indemnity 15 fees. The bill increases from $8 million to $16 million the 16 balance in the indemnity fund required to trigger a waiver and 17 increases from $3 million to $8 million the balance in the 18 indemnity fund required to trigger a reinstatement. 19 BILL’S PROVISIONS —— INDEMNITY FEES IMPOSED ON CREDIT-SALE 20 CONTRACT TRANSACTIONS. The bill provides that grain sold by 21 deferred-pricing contract is considered purchased grain and 22 grain sold by deferred-payment contract is not. Therefore, a 23 licensed grain dealer is only assessed an indemnity fee on the 24 deferred-pricing contract grain. 25 BILL’S PROVISIONS —— INDEMNITY FUND —— DOLLAR VALUE OF 26 LOSS. The bill provides special valuation rules for losses 27 involving corn or soybeans. The dollar value of a loss 28 for corn cannot exceed the dollar value for a loss of U.S. 29 No. 2 yellow corn according to grain standards adopted by 30 the federal grain inspection service of the United States 31 department of agriculture. The dollar value of a loss for 32 soybeans cannot exceed the dollar value of a loss for U.S. No. 33 2 yellow soybeans according to grain standards adopted by that 34 same agency. A dollar loss incurred under a deferred-pricing 35 -16- LSB 2306YC (8) 91 da/ns 16/ 17

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