Iowa Legislature extends state biofuel tax incentives

Iowa Legislature extends state biofuel tax incentives

State lawmakers voted to extend policies to expand availability and use of ethanol and biodiesel.

On September 21, the Iowa House of Representatives voted 88 to 6 to extend several important state tax incentives for homegrown renewable fuels—ethanol and biodiesel—through 2024. The bill previously passed the Iowa Senate 49 to 0.

“We commend the Iowa Legislature for its overwhelming support in taking this important step to continue Iowa’s leadership in renewable fuels,” said Iowa Renewable Fuels Association (IRFA) policy director Grant Menke. “Extending these tax incentives supports Iowa jobs, cleaner air, competition in the fuel marketplace and Iowa’s motorists through lower fuel prices.” 

Gov. Branstad is expected to sign the bill into law

BOOST FOR BIOFUELS: As the 2016 session of the Iowa Legislature began winding down last week, state lawmakers on September 21 voted overwhelmingly to extend state tax incentives for ethanol and biodiesel. The governor is expected to sign the bill into law.

Included in the legislation that is now headed to Gov. Terry Branstad for final approval is an extension of two retailer tax credits for ethanol blends. The E85 Promotion Tax Credit, available for fuel blends containing 70% to 85% ethanol, was extended at 16 cents per gallon. The E15 tax credit, available for fuel blends containing 15% to 69% ethanol, was extended at 3 cents per gallon from September 16 through May 31, and 10 cents per gallon from June 1 through September 15 to help alleviate the summertime blending issues for registered E15.

“This forward-thinking legislation also included an extension and adjustment of the Biodiesel Blended Fuel Retailer Tax Credit,” says Menke. While the incentive will continue at 4.5 cents per gallon for retailers offering a biodiesel blend containing a minimum of 5% biodiesel (B5) through 2017, from 2018 through 2024 it will then provide a 3.5 cents per gallon incentive on B5, and a 5.5 cents per gallon credit on B11, or diesel blended with a minimum of 11% biodiesel.

Renewable fuels industry supports over 43,000 jobs in Iowa

According to a recent IRFA study, Iowa’s renewable fuels industry accounts for more than $4.6 billion of Iowa GDP (gross domestic product), generates $2.3 billion in income for Iowa households and supports more than 43,000 jobs throughout all sectors of the Iowa economy.

Iowa is the nation’s leader in renewable fuels production. Iowa has 43 ethanol refineries capable of producing 4 billion gallons annually, including nearly 55 million gallons of annual cellulosic ethanol production capacity. In addition, Iowa has 12 biodiesel facilities with the capacity to produce nearly 315 million gallons annually. The IRFA was formed in 2002 to represent the state’s liquid renewable fuels industry. The trade group fosters the development and growth of the renewable fuels industry in Iowa through education, promotion, legislation and infrastructure development.

Biodiesel board also applauds state lawmakers’ decision

The Iowa Biodiesel Board also applauded the legislature’s action to extend and expand state biodiesel incentives. This will boost biodiesel usage and keep production in the state, says Grant Kimberley, executive director of IBB. “The incentives include a tax credit that helps keep the state’s 13 biodiesel producers competitive on a national scale, and a retailer’s credit that entices fuel retailers to carry biodiesel blends.”

The legislation, SF 2309, will do the following if it is signed into law by Iowa Gov. Terry Branstad, as expected:

•Extend the Biodiesel Production Credit through 2024, which was originally set to expire at the end of next year. The credit is 2 cents per gallon on the first 25 million gallons of production per biodiesel plant, and helps keep biodiesel production and economic activity in Iowa.

•Extend and expand the Biodiesel Promotion Retail Tax Credit. The incentive will continue to provide petroleum retailers 4.5 cents a gallon on blends of at least 5% biodiesel (B5) through 2017. From 2018 to 2024, the B5 incentive will drop to 3.5 cents per gallon, but an additional incentive of 5.5 cents per gallon will take effect for gallons of B11 and higher.

“These policies help keep biodiesel production in Iowa, reinforcing our state’s leadership position in the drive for renewable energy,” says Kimberley. “With the addition of the retail incentive for blends of B11 and higher, we should see biodiesel begin to make up a more substantial portion of our state’s motor fuel supply, too. We can and should use our own fuel product to displace foreign oil.”

The legislation now goes to Gov. Terry Branstad for consideration. In 2015, Iowa’s 12 operating biodiesel plants produced a record 242 million gallons of biodiesel. The industry supported more than 3,000 jobs and contributed almost $345 million in GDP for the year. Biodiesel is an advanced biofuel made from agricultural byproducts and co-products, such as soybean oil and animal fat. The Iowa Biodiesel Board is a state trade association representing the biodiesel industry.

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