Legislature's Review of Tax Credits Has Corn Growers Concerned

ICGA is afraid tax credits important to agriculture could be eliminated in effort by legislature to generate revenue for state.

Last week, the Iowa Corn Growers Association put out a "call to action" to its members, requesting farmers' help in contacting state legislators regarding an effort by the Iowa Senate to identify current tax credits that could be eliminated. The reason legislators at the Iowa Capitol in Des Moines are reviewing state tax credits is to see if the credits could be eliminated to generate additional revenue for the state. They are looking at all different types of tax credits, including credits important to the agricultural industry. A core piece of the 2006 Iowa Renewable Fuels Standard law—the ethanol retailers' tax credit—has been highlighted for farther review.

"While there has not yet been a bill introduced in the legislature on this issue, it is important that lawmakers hear from you about the importance of the ethanol retailers' tax credit and other agricultural credits that support your operation and the farming industry," says Mindy Larsen Poldberg, government relations director for the Iowa Corn Growers Association.

ICGA urges farmers to contact legislators now

"Sometimes the most important things we can accomplish as corn growers are the things that we defend, as opposed to those things we can get "passed" by the legislature," she points out. "Unfortunately, this appears to be a year where we will need to be defending our cause on taxes and tax credits important to agriculture. It would be good to have legislators hear from their constituents back home and show your support for these agricultural and ethanol tax credits before a bill is drafted or a proposal to eliminate an ag tax credit gains momentum."

Senate Ways and Means Chairman Joe Bolkcom of Iowa City announced during a committee meeting last week his intent to review all tax credits that exist today, and see where the legislature can eliminate or reduce tax credits. The committee started by reviewing the ethanol retailers' tax credit which is the core piece of the 25% Iowa RFS. The 2006 law gives retailers 6.5 cents per gallon if they meet the Iowa RFS, 4.5 cents if they are within 1% to 2%, 2.5 cents if they are within 3% to 4% and nothing if they are below that. Chairman Bolkcom expressed concern about the amount of money being "spent" on ethanol tax credits, questioned whether the credits were working, and stated that he believed Iowa should eliminate the credit and do a 10% ethanol mandate instead.

"While the Iowa Corn Growers Association appreciates Chairman Bolkcom's support for an ethanol use mandate, we believe the credits are working and are important for getting Iowa to far more than 10% blends--the state is already at 9.2% statewide," says Larsen Poldberg.

Key points when contacting legislators

She says you should keep the following points in mind when you contact state legislators regarding this issue.

1. Iowa Corn Growers Association policy does support a 10% mandate; however, the 25% Iowa RFS is designed to get Iowa to far more ethanol sales than 10%. Therefore, the current 2006 law will yield more ethanol sales in the long term. In fact, according to the Iowa Department of Revenue (IDR), in 2008 Iowa was already at 9.2% ethanol sales state-wide.

2. The new tax system (6.5/4.5/2.5), which began on Jan. 1, 2009, is projected to SAVE the state money without making changes. According to the IDR, in 2008 (final year under the old tax system) about $15 million in credits will be claimed. Starting in 2009, the credits are forecasted to be $12-13 million for two years; then will drastically reduce after the schedule becomes more aggressive.

3. It is clear that the tax credit program at the retail level has worked. Before the tax credit went into effect, Iowa was around 40% sales of ethanol; we are now nearly 80%. Before the tax credit, ethanol was priced higher than gasoline at the pump. This lower price has encouraged consumers to buy it and has increased sales. The tax credit has also worked by changing the marketing plans of Iowa retailers in pricing.

4. The ethanol retailers' tax credit has benefited Iowa consumers by providing cheaper prices at the pump for ethanol.

Part 2 of this "call to action" by ICGA

There is a long list of items under the section "Sales and Use Taxes" that the legislators are looking into. Chairman Bolkcom has requested the committee to review this list of sales and use taxes to determine if there are any that can be eliminated or reduced for additional state revenue. "Because of the chairman's statements, we need to take this seriously, and use this opportunity to educate our local legislators on the importance of our existing tax credits," says Larsen Poldberg. "It is important to note that the Chairman was not singling out agriculture in particular; the list is for ALL tax credits in the state of Iowa." You can contact the ICGA office in Des Moines for the full list. But the ones that impact agriculture most, followed by the amount of tax increase that would result if the credit were eliminated, are: ag chemicals ($26.1 million); ag drainage tile ($4.7 million); ag feed ($104.5 million); commercial fertilizer and lime ($43.7 million); domesticated fowl ($7 million); farm machinery-self propelled ($55.5 million); farm machinery-special purpose ($8.7 million); fuel for implements of husbandry ($19.2 million); fuel to heat & cool livestock buildings ($5.6 million); fuel used in grain drying ($7.4 million); grain dryers ($700,000); lab tests on animals ($2.8 million); water for farmers ($400,000).

"These tax credits are very important to Iowa's ag community and could result in negative impacts to our farm economy and certainly our farmers' profitability," says the ICGA's Larsen Poldberg. "Please make contact with your state legislator about the importance of these agricultural tax credits."

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