Ways and Means – Week of May 5, 2011

STAFF CONTACT:  Kris Bell

SF 531 – Biofuels

HF 652 – Active Duty Military Pay Income Tax Exemption

HF 672 – Wind and other renewable energy tax credits

HF 676 – Tax exemption for non-profit vehicles leases

FLOOR ACTION:

SF 531 changes the Iowa renewable fuel standard (RFS) incentives by increasing the amount of incentive given to a retail station for meeting the Iowa RFS. The current Iowa RFS schedule would not be changed as to the percentages required to meet the law as established in 2006. As amended, the bill:
** Maintains the schedule, but provides additional incentives to retailers who meet the schedule: For 2012 and beyond, the amounts would be 8/6/4 cents for achieving various levels. These amounts would replace the 6.5/4.5/2.5 incentive levels established in the 2006 Iowa RFS.
** Keeps the E-85 Promotion Credit at a stable level of 16 cents until December 31, 2017. If action is not taken, the amount of the E85 tax credit will drop from 20 cents to 10 cents this year and quickly phase down to zero.
** Creates a new promotion tax credit that would pay on each gallon sold, regardless of the retail station’s status in meeting the ethanol promotion (schedule). Beginning January 1, 2012, it would provide an additional 3 cents for blends between E-15 and E-69. Beginning January 1, 2015, the incentive is reduced to 2 cents. The program expires on December 31, 2017. For fiscal reasons, there is no longer any additional incentive for E30-E69 under this amendment.
** Eliminates the 50 percent requirement for biodiesel tax credit eligibility and provides that 4.5 cents per gallon would be paid on B5 gallons and above, from the very first gallon. The 4.5 cents on B5 would be available in 2012, as would the B2 at 2 cents for that one year. Beginning in 2013, incentives are only paid for B5 and above, at the 4.5 cent level.
** Provides for 3 cents per gallon in 2012, 2.5 cents per gallon in 2013, and 2 cents per gallon in 2014. This is a three-year program and would end after 2014. The credit would be limited to the first 25 million gallons of production per plant per calendar year.
** Allows retailers to calculate both the RFS schedule calculation and their individual tax credits on a site-by-site or a company wide basis. This would leave the option for the retail station for method of calculation.
** Provides retailer stations with liability protection from consumer lawsuits for misfueling, so long as the retail station has provided the proper and legal labeling (similar to the concept put forth in SF 8). The language has been broadened to eliminate the word “motor” and will be applied as broadly as possible to any type of consumer lawsuit based on misfueling. [5/2: 48-1 (Chelgren “no”; Behn excused)]

HF 652 exempts the pay of active duty military service members from state income tax. The exemption is retroactive to January 1, 2011. The bill applies to all income received by the federal government for military service performed while on active duty status in the armed forces, armed forces military reserve or national guard. Iowa law currently only exempts active duty pay for certain specified combat-related situations. The bill extends this current exemption to Operation New Dawn for service members currently serving in Iraq. The bill is estimated to return approximately $10 million in income taxes to Iowa active duty service personnel annually. [5/3: 47-0 (Behn, Kapucian, McKinley excused)]

HF 672 reallocates unused wind energy production tax credits that were available for mid-sized wind energy projects under Iowa Code 476B to be available for use for smaller, locally owned wind energy projects under Iowa Code 476C. Because all of the current credits allocated under 476C have been claimed, the transfer of credits from 476B to this area will allow projects that have been on a waiting list to access the credit and move forward. It allows projects that have received the credit but have not become operational to extend their time period to do so without losing the credit certificate they have claimed. Currently, a project has to become operation within a period of time, or it will lose the credit certificate. It also would allow projects that generate heat from a refuse derived fuel, methane or biomass to receive the credit if they use the energy produced on site. Currently, that energy must be sold for commercial use to be eligible for the production tax credit. It also establishes a schedule for issuing new wind energy production tax credits. An additional 25 MW of production tax credits under 476C would be available each year beginning 2015 and continuing through 2020, for a total of 150 MW of new production tax credits. 5/3: 46-1 (Chelgren no)]

HF 676 allows a tax exemption for non-profit entities paying leasing fees on vehicles. [5/3: 47-0 (Behn, Kapucian, McKinley excused)]