Iowa Modifies Renewable Fuel Incentives and Creates Biodiesel Refund and E-15 Credit

The following summaries tell of upcoming changes to the various Iowa renewable fuel tax credits.

Ethanol Promotion Tax Credit
The ethanol promotion tax credit has been increased from 6.5 cents per gallon to a maximum credit of 8 cents per gallon.  In addition, retail fuel dealers may now claim the credit on a company-wide basis along with the location-by-location basis allowed previously.  The amendments are applicable retroactively to January 1, 2011.

E-85 Gasoline Promotion Tax Credit
The phase-down of the current E-85 credit has been eliminated and replaced with a 16-cent per-gallon credit, effective January 1, 2012, through December 31, 2017.

Biodiesel Blended Fuel Tax Credit
The December 31, 2011 expiration date for the biodiesel blended fuel tax credit has been extended until December 31, 2017. In addition, retailer’s diesel gallon sales no longer are required to meet a threshold of at least 50% biodiesel to qualify for the credit.

The legislation also establishes new per-gallon tax credit rates. In calendar year 2012, biodiesel blended fuel classified as B-2 or higher, but less than B-5, is at the designated rate of 2 cents while fuel classified as B-5 or higher, is at 4.5 cents.

Beginning in calendar year 2013, biodiesel blended fuel must be classified as B-5 or higher to qualify for a credit of 4.5 cents.

E-15 Plus Gasoline Tax Credit

A new credit has been created for ethanol blends between E-15 and E-69 equaling 3 cents per gallon for calendar years 2012 through 2014 and 2 cents per gallon for calendar years 2015 through 2017.

Biodiesel Production Refund
The legislation creates a per-gallon production refund on no more than 25 million gallons of biodiesel per facility produced in Iowa by a qualified manufacturer. Specifically, a qualifying producer may apply for a refund of the amount of the sales tax imposed and paid upon purchases made by the producer. The refund is made on a quarterly basis, according to the following per-gallon rates; 3 cents for calendar year 2012; 2.5 cents for calendar year 2013; and 2 cents for calendar year 2014.

For corporate and personal income tax purposes, a subtraction adjustment is allowed for the amount of any biodiesel production refund, to the extent included in federal taxable income or adjusted gross income.

The refund provision is repealed on January 1, 2015.