Fuel tax increase on fast track in Iowa Legislature

Fuel tax increase on fast track in Iowa Legislature

Iowa 'gas tax' proposal would spur growth of biodiesel use in state.

A bill that proposes raising Iowa's motor fuel tax 10 cents a gallon on gasoline and diesel fuel is on the fast track toward final approval in the Iowa Legislature. This week the House and Senate introduced identical bills that would provide much-needed funding to help repair Iowa's deteriorating roads and bridges. The bills passed through both the Transportation Committee and the Ways and Means Committee in each chamber.

FUEL TAX HIKE: Tax writing committees in both the Iowa House and Senate gave fuel tax legislation a green light this week. Lawmakers say final votes in the full House and Senate could come as early as Feb. 24, sending the bill to Gov. Branstad for his signature.

Floor debate and a full vote on these proposals is expected next week, says Mindy Larsen Poldberg, director of government relations for the Iowa Corn Growers Association. The Iowa Corn Growers support the proposed 10 cent tax increase. "Now is the time to contact your local legislators and tell them to support HF 351 and SF 257, because our roads and bridges can't afford to wait," says Poldberg.

Representative Josh Byrnes, R-Osage, chair of the House Transportation Committee, hopes to have the bill passed by both the House and Senate and have it on Gov. Branstad's desk by the end of the month. Branstad has indicated he is likely to sign it.

Iowa Farm Bureau supports 10-cent-per-gallon fuel tax increase
The Iowa Farm Bureau is also urging passage of the 10-cent-per-gallon fuel tax hike. About 200 Farm Bureau members launched a full-court press at the Iowa Capitol on Wednesday. They were there to lobby House and Senate members to vote for the gasoline and diesel fuel tax hike. The legislation, if passed and signed into law by the governor, would raise about $215 annually for road and bridge repair in Iowa.

"It's time to fix our roads because this has been put off for far too long," says Iowa Farm Bureau president Craig Hill. He says raising the tax by 10 cents per gallon is fair because it would be paid by Iowa motorists who use the roads, as well as motorists traveling through Iowa from out of state.

Iowa 'gas tax' proposal would spur growth of biodiesel use
The Iowa Biodiesel Board registered February 20 in support of legislation that would raise the state's fuel tax. A provision contained in the legislation would give a partial exemption to the new tax for diesel blended with at least 11% biodiesel (B11).

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The proposed tax increase in both the House and Senate bills (HF 351 and SF 257) is 10 cents a gallon for both diesel and gasoline as part of a plan to address Iowa's infrastructure needs. A provision provides a 3 cent exemption for biodiesel blends of B11 and above for five years.

Biodiesel board supports House and Senate bills as strong energy policy
The IBB, whose membership includes biodiesel producers, soybean farmers and other stakeholders, called the biodiesel provision a bold leadership move.

"This is smart policy on the part of our state leaders that will benefit the entire state, and we thank them," says Grant Kimberley, executive director of IBB. "Doing everything we can to encourage biodiesel production and use generates significant economic activity for Iowa. Every gallon of biodiesel we use at home is one less equivalent gallon from the Middle East, and keeps money in our state."

More blending of biodiesel into Iowa diesel fuel supply needed
Kimberley says IBB members are hopeful the five year sunset will be extended to 10 years down the road. Iowa biodiesel plants produced 227 million gallons in 2014, down slightly from the 2013 record of 230 million gallons. Yet the state's 10 operating biodiesel plants have an annual capacity of more than 300 million gallons, showing a lost economic opportunity for Iowa.

Moreover, encouraging the blending of biodiesel into the state's diesel supply can help Iowa meet its own renewable fuel goals, Kimberley says. According to a recent Iowa Department of Revenue report, "…the study forecasts that approximately 13% of Iowa's petroleum…will be replaced by biofuels in 2020, falling short of the Legislative goal of 25%."

Currently diesel is taxed at 22.5 cents, with no incentive for biodiesel
Currently in Iowa, gasoline is taxed at 21 cents per gallon with ethanol blends containing at least 10% taxed at only 19 cents per gallon. Diesel is taxed at 22.5 cents per gallon with no incentive for biodiesel. The ethanol differential would continue if the proposed Iowa legislation becomes law.

"Unfortunately, federal legislation has proven to be unreliable for biodiesel," Kimberley says. "The states that create the most supportive environment for biodiesel will be the most successful in reaping the industry's economic benefits."

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New research shows in 2014, the increase in economic activity generated by biodiesel production supported more than 4,300 full-time equivalent jobs in Iowa, he notes. It contributed more than $471 million to the state's Gross Domestic Product. Other research shows biodiesel adds 74 cents a bushel to the price of soybeans, lowers soybean meal feed costs for livestock producers by $25 to $40 a ton and also adds value to livestock production. Biodiesel is an advanced biofuel made from agricultural byproducts and coproducts, such as soybean oil. The Iowa Biodiesel Board is a state trade association representing the biodiesel industry.

Other ag-related state that moved forward this week
The Iowa Corn Growers Association is monitoring and advocating for a variety of other issues during this legislative session, says Poldberg. She lists some of the legislation favorable to ICGA policy currently moving through the state Capitol:

• Cuba Resolution ( SR6)- supporting an enhanced trade relationship between Iowa and Cuba.

• Rural Broadband (HSB104, SSB1146)- providing grants and tax incentives to establish broadband infrastructure across the state.

• Bio-Based Tax Credit (HSB98, SSB1116)- creating a credit for renewable chemical production.

• Corn Distillery (SSB1164)- supporting value-added agriculture, related to corn-based distillery operations.

• Tax Update (SF126)- decouples certain federal bonus depreciation provisions from state income tax calculations.  Signed into law by Gov. Branstad on Feb 17.

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