SF 2069 (LSB 5917XS (5) 91)

SENATE FILE 2069

BY  KLIMESH

A BILL FOR

An Act imposing a tax on the transportation of liquefied carbon dioxide through pipelines, and providing for penalties.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 438.3, Code 2026, is amended by adding the following new subsection:
   NEW SUBSECTION.  13.  Whether liquefied carbon dioxide is transported though or within the state through the pipelines owned, operated, or leased by the pipeline company, and whether the liquefied carbon dioxide being transported is used in enhanced oil recovery. As used in this subsection, “enhanced oil recovery” means the same as defined in section 438A.1.
    Sec. 2.  NEW SECTION.  438A.1  Definitions.
   As used in this section:
   1.  “Department” means the department of revenue.
   2.  “Director” means the director of revenue.
   3.  “Enhanced oil recovery” means an advanced oil extraction technique to remove stranded crude oil from a reservoir after the use of primary or secondary extraction techniques.
   4.  “Pipeline company” means any person, partnership, association, corporation, or syndicate that may own or operate or be engaged in operating or utilizing pipelines, for the purpose of transporting liquefied carbon dioxide as permitted pursuant to chapter 479B.
    Sec. 3.  NEW SECTION.  438A.2  Taxation procedure.
   Every person, partnership, association, corporation, or syndicate that is engaged in the business of transporting liquefied carbon dioxide by means of pipelines permitted pursuant to chapter 479B, whether such pipelines be owned or leased, shall be taxed as provided in this chapter.
    Sec. 4.  NEW SECTION.  438A.3  Administration —— rules.
   1.  The department shall administer and enforce the tax imposed by this chapter.
   2.  The department shall adopt rules pursuant to chapter 17A to administer this chapter.
    Sec. 5.  NEW SECTION.  438A.4  Imposition of tax —— notice.
   1.  In addition to any other tax imposed in this state, there shall be a tax imposed at a rate of two dollars and fifty cents per metric ton of liquefied carbon dioxide transported by a pipeline company within or through this state by means of a pipeline to any recipient located within or outside the state.
   2.  Notwithstanding subsection 1, the rate shall be one dollar per metric ton of liquefied carbon dioxide transported by a pipeline company within or through this state by means of a pipeline to any recipient located within or outside the state for use in enhanced oil recovery.
   3.  A pipeline company subject to taxation under this section shall notify the department of the date when liquefied carbon dioxide begins to be transported through or within the state and to what extent the liquefied carbon dioxide will be used for enhanced oil recovery.
    Sec. 6.  NEW SECTION.  438A.5  Return and payment requirements.
   1.  Each pipeline company, on or before March 31 following a tax year in which a pipeline company transported liquefied carbon dioxide subject to tax imposed under this chapter, shall file a return with the director including but not limited to the following information:
   a.  The total taxable metric tons of liquefied carbon dioxide transported through or within the state subject to tax imposed pursuant to section 438A.4, subsection 1.
   b.  The total taxable metric tons of liquefied carbon dioxide transported through or within the state subject to tax imposed pursuant to section 438A.4, subsection 2.
   c.  The tax imposed by section 438A.4 due for the tax year.
   2.  In addition to the information under subsection 1, the pipeline company shall submit sufficient information accompanying the tax return, to the satisfaction of the department, that verifies the amount of the liquefied carbon dioxide transported through the state that is subject to tax under section 438A.4, subsection 1 or 2.
   3.  A return shall be signed by an officer, or other person duly authorized by the pipeline company, and must be certified as correct.
    Sec. 7.  NEW SECTION.  438A.6  Revenues.
   All revenues received from imposition of the tax under this chapter shall be deposited into the taxpayer relief fund created in section 8.57E.
    Sec. 8.  NEW SECTION.  438A.7  Failure to file return —— incorrect return.
   1.  As soon as practicable after a return required by section 438A.5 is filed, and in any event within three years after such return is filed, the department shall examine the return, determine the tax due if the return is found to be incorrect, and give notice to the taxpayer of the determination as provided in subsection 2. The period for the examination and determination of the correct amount of tax is unlimited in the case of a false or fraudulent return made with the intent to evade any tax or in the case of a failure to file a return.
   2.  If a return required by section 438A.5 is not filed, or if such return when filed is incorrect or insufficient and the taxpayer fails to file a corrected or sufficient return within twenty days after such return is required by notice from the department, the department shall determine the amount of tax due from information as the department may be able to obtain and, if necessary, may estimate the tax due on the basis of external indices. The department shall give notice of the determination to the taxpayer liable for the tax. The determination shall fix the tax unless the taxpayer against whom the tax is levied, within sixty days after notice of the determination, applies to the director for a hearing. At the hearing evidence may be offered to support the determination or to prove that the determination is incorrect. After the hearing the director shall give notice of the decision to the person liable for the tax.
   3.  The three-year period of limitation provided in subsection 1 may be extended by the taxpayer by signing a waiver agreement form provided by the department. The agreement shall stipulate the period of extension and the tax period to which the extension applies. The agreement shall also provide that a claim for refund may be filed by the taxpayer at any time during the period of extension.
    Sec. 9.  NEW SECTION.  438A.8  Judicial review.
   1.  Judicial review of the actions of the department may be sought pursuant to chapter 17A, the Iowa administrative procedure Act.
   2.  For cause and upon a showing by the department that collection of the tax in dispute is in doubt, the court may order the petitioner to file with the clerk of the district court a bond, with sureties approved by the clerk of the district court, in the amount of the tax appealed from, conditioned upon the performance by the petitioner of any orders of the court.
   3.  An appeal may be taken by the pipeline company or the director to the supreme court irrespective of the amount involved.
    Sec. 10.  NEW SECTION.  438A.9  State tax lien —— actions authorized.
   1.  Whenever a pipeline company who is liable to pay a tax imposed by this chapter refuses or neglects to pay such tax, the amount, including any interest, penalty, or addition to such tax, together with the costs that may accrue, shall be a state tax lien to which the tax is owed upon all property and rights to property, whether real or personal, belonging to the pipeline company. The lien shall be prior to and superior over all subsequent liens upon any personal property within this state, or right to such personal property, belonging to the pipeline company, without the necessity of recording the lien. The requirement for recording, as applied to the tax imposed by this chapter, shall apply only to a lien upon real property. The lien may be preserved against subsequent mortgagees, purchasers, or judgment creditors, for value and without notice of the lien, on any real property situated in the state by filing with the recorder of the county in which the real property is located a notice of the lien.
   2.  The county recorder of each county shall index each lien showing the applicable entries specified in sections 558.49 and 558.52 and showing, under the names of taxpayers arranged alphabetically, all of the following:
   a.  The name of the pipeline company.
   b.  The state of Iowa as claimant.
   c.  Time the notice of lien was filed for recording.
   d.  Date of notice.
   e.  Amount of lien then due.
   f.  Date of assessment.
   g.  Date when the lien is satisfied.
   3.  The recorder shall endorse on each notice of lien the day, hour, and minute when filed for recording and the document reference number, shall preserve such notice, shall index the notice in the index, and shall promptly record the lien in the manner provided for recording real estate mortgages. The lien is effective from the time of the indexing of the lien.
   4.  The state shall pay recording fees as provided in section 331.604, for the recording of the lien, or for its satisfaction.
   5.  Upon the payment of the tax as to which state has filed notice with a county recorder, the state shall promptly file with the recorder a satisfaction of the tax. The recorder shall record the notice of satisfaction showing the applicable entries specified in sections 558.49 and 558.52, and the revenues shall be distributed as provided in section 438A.6.
   6.  Section 445.3 applies with respect to taxes, penalties, and interest imposed by this chapter, except for the provisions limiting the commencement of actions. In addition, chapters 446, 447, and 448 apply in the enforcement of the taxes imposed by this chapter, but any tax deed issued shall not extinguish a tax lien or judgment lien for taxes that have attached to the property.
    Sec. 11.  NEW SECTION.  438A.10  Service of notice —— no limitation on enforcement.
   1.  A notice authorized or required under this chapter may be given by mailing the notice to the pipeline company, addressed to the pipeline company at the address given in the last return filed by the pipeline company pursuant to this chapter, or if no return has been filed, then to the most recent address of the pipeline company obtainable. The mailing of the notice is presumptive evidence of the receipt of the notice by the pipeline company to whom the notice is addressed. A period of time within which some action must be taken for which notice is provided under this section commences to run from the date of mailing of the notice.
   2.  There is no limitation for the enforcement of a civil remedy pursuant to any proceeding or action taken to levy, assess, determine, or enforce the collection of any tax or penalty due under this chapter.
    Sec. 12.  NEW SECTION.  438A.11  Penalties —— offenses —— limitation.
   1.  A pipeline company is subject to the penalty provisions in section 421.27 with respect to any tax due under this chapter. A pipeline company shall also pay interest on the delinquent tax at the rate in effect under section 421.7 for each month computed from the date the payment was due, counting each fraction of a month as an entire month. The penalty and interest shall be paid to the department of revenue. Unpaid penalties and interest may be enforced in the same manner as provided for unpaid replacement tax under this chapter.
   2.  A pipeline company, or officer, member, or employee of the pipeline company, who willfully attempts to evade the tax imposed or the payment of the tax is guilty of a class “D” felony.
   3.  The issuance of a certificate by the department stating that a tax has not been paid, that a return has not been filed, or that information has not been supplied pursuant to this chapter is prima facie evidence of such failure.
   4.  A pipeline company, or officer, member, or employee of the pipeline company, required to pay a replacement tax, or required to make, sign, or file an annual return or supplemental return, who willfully makes a false or fraudulent annual return, or who willfully fails to pay at least ninety percent of the tax or willfully fails to make, sign, or file the annual return, as required, is guilty of a fraudulent practice.
   5.  For purposes of determining the place of trial for a violation of this section, the situs of an offense is in the county of the residence of the taxpayer, officer, member, or employee of the taxpayer charged with the offense, unless the taxpayer, officer, member, or employee of the taxpayer is a nonresident of this state or the residence cannot be established, in which event the situs of the offense is in Polk county.
   6.  Prosecution for an offense specified in this section shall be commenced within six years after the commission of the offense.
    Sec. 13.  NEW SECTION.  438A.12  Correction of errors —— refunds or credits of tax paid —— information confidential —— penalty.
   1.  a.  If an amount of tax, penalty, or interest has been paid which was not due under this chapter, the department shall do one of the following:
   (1)  Credit the amount of the erroneous payment against any tax due, or to become due, from the pipeline company.
   (2)  Refund the amount of the erroneous payment to the pipeline company.
   b.  Claims for refund or credit of taxes paid shall be filed with the director. A claim for refund or credit that is not filed with the department within three years after the tax payment upon which a refund or credit is claimed became due, or one year after the tax payment was made, whichever time is later, shall not be allowed. A claim for refund or credit of tax alleged to be unconstitutional not filed with the department within ninety days after the tax payment upon which a refund or credit is claimed became due shall not be allowed. As a precondition for claiming a refund or credit of alleged unconstitutional taxes, such taxes must be paid under written protest which specifies the particulars of the alleged unconstitutionality. Claims for refund or credit may only be made by, and refunds or credits may only be made to, the person responsible for paying the tax, or such person’s successors. Section 421.10 applies to denied claims.
   2.  It is unlawful for any present or former officer or employee of the state to divulge or to make known in any manner to any person the amount of liquefied carbon dioxide delivered by a pipeline company disclosed on a tax return, return information, or investigative or audit information. A person who violates this section is guilty of a serious misdemeanor. If the offender is an officer or employee of the state, such person, in addition to any other penalty, shall also be dismissed from office or discharged from employment. This section does not prohibit turning over to duly authorized officers of the United States or tax officials of other states such information pursuant to agreement between the director and the secretary of the treasury of the United States or the secretary’s delegate or pursuant to a reciprocal agreement with another state.
   3.  Unless otherwise expressly permitted by a section referencing this chapter, the amount of liquefied carbon dioxide delivered by a taxpayer in a service area shall not be divulged to any person or entity, other than the taxpayer, the department of revenue, or the internal revenue service for use in a matter unrelated to tax administration. This prohibition precludes persons or entities other than the taxpayer, the department of revenue, or the internal revenue service from obtaining such information from the department of revenue. A subpoena, order, or process which requires the department of revenue to produce such information to a person or entity, other than the taxpayer, the department of revenue, or internal revenue service, for use in a nontax proceeding is void.
    Sec. 14.  NEW SECTION.  438A.13  Records.
   Each pipeline company that is subject to the tax imposed under this chapter shall maintain records associated with the tax for a period of five years following the later of the original due date for filing a return pursuant to this chapter in which such taxes are reported, or the date on which either such return is filed. Such records shall include those associated with any additions or dispositions of property.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill imposes a tax on the transportation of liquefied carbon dioxide (carbon dioxide) through pipelines.
   In addition to any other tax imposed in this state, the bill imposes a tax on a pipeline company at a rate of $2.50 per metric ton of carbon dioxide transported by the pipeline company within or through this state through a pipeline to any recipient located within or outside the state.
   The bill reduces the tax rate to $1 per metric ton of carbon dioxide transported through or within the state if the carbon dioxide is used in enhanced oil recovery. The bill defines “enhanced oil recovery” to mean an advanced oil extraction technique to remove stranded crude oil from a reservoir after the use of primary or secondary extraction techniques.
   The bill directs the department of revenue (department) to administer and enforce the tax, and requires the department to adopt rules to administer the bill.
   Beginning in 2027, every pipeline company having pipelines in the state, along with other annual disclosures to the department under Code section 438.3, shall disclose to the department whether carbon dioxide is transported though or within the state through the pipelines owned, operated, or leased by the pipeline company, and whether the carbon dioxide being transported is used in enhanced oil recovery.
   The bill requires each pipeline company to file a return before March 31 following the tax year in which a pipeline company transported liquefied carbon dioxide subject to the tax imposed under the bill. The return shall include all of the following and any other requested information: (1) the total taxable metric tons of liquefied carbon dioxide transported through or within the state subject to the $2.50 metric ton rate; (2) the total taxable metric tons of liquefied carbon dioxide transported through or within the state subject to the $1 metric ton rate; and (3) the amount of tax due for the year.
   The revenues received from imposition of the tax under the bill are credited to the taxpayer relief fund created in Code section 8.57E.
   The bill establishes procedures for the failure to file a return or for filing an incorrect return.
   The bill specifies the actions of the department are subject to judicial review pursuant to Code chapter 17A (Iowa administrative procedures Act). The bill also establishes procedures for posting a bond when the amount of tax is in dispute, and specifies an appeal may be taken by the pipeline company or the director to the supreme court irrespective of the amount involved.
   The bill establishes procedures for a state tax lien if the tax imposed is not paid. The lien is prior to and superior to all subsequent liens on personal property within the state, without the necessity of recording the lien. The bill requires a lien on real property to be recorded. The lien may be preserved against subsequent mortgagees, purchasers, or judgment creditors, for value and without notice of the lien, on any real property situated in the state by filing with the recorder of the county in which the real property is located a notice of the lien.
   The bill specifies there is no limitation for the enforcement of a civil remedy pursuant to any proceeding or action taken to levy, appraise, assess, determine, or enforce the collection of any tax or penalty due under the bill.
   A pipeline company, or officer, member, or employee of the pipeline company, who willfully attempts to evade the tax imposed or the payment of the tax is guilty of a class “D” felony. A class “D” felony is punishable by confinement for no more than five years and a fine of at least $1,025 but not more than $10,245. The bill also specifies a person is guilty of a fraudulent practice if the person willfully files a fraudulent return, who willfully fails to pay 90 percent of the tax, or does not sign or file the return. The bill requires a prosecution for a criminal offense to be commenced within six years after the commission of the offense.
   The bill establishes procedures for correcting errors or overpayment of taxes by allowing for refunds or crediting overpayment on the return for the following tax year.
   The bill also specifies the information provided on the return is confidential information and employees of the department that may have access to the return commit a serious misdemeanor for improperly disclosing information about a pipeline company’s return. A serious misdemeanor is punishable by confinement for no more than one year and a fine of at least $430 but not more than $2,560.
   The bill requires each pipeline company that is subject to the tax to maintain records associated with the tax for a period of five years. The records shall include those associated with any additions or dispositions of property.