Ways & Means – Week of April 28, 2011

STAFF CONTACT:  Kris Bell

SF 530 – Family Farm Tax Credit

SF 531 – Biofuels

HF 652 – Active Duty Military Pay Income Tax Exemption

HF 676 – Non-profit vehicle lease tax exemption

HF 679 – Cogeneration Replacement Tax

FLOOR AND COMMITTEE ACTION:

HF 679 corrects certain ambiguities in tax law relating to the machinery and equipment exemption that is available for the property of a new cogeneration facility that is subject to local property tax. It divides the machinery and equipment used in a cogeneration facility between the portion subject to uniform replacement tax and the portion subject to local property tax. This provides consistency between the method for taxing new cogeneration facilities and the method for determining the machinery and equipment exemption. [4/21: short form] [4/25: 50-0]

SF 530 increases the number of eligible corporate entities entitled to claim the family farm tax credit. It provides that a family farm limited liability company is eligible. [4/21: short form] [4/26: 49-0 (Chelgren “present”)]

COMMITTEE ACTION:

SF 531 is a “strike after amendment” and would change the Iowa 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. [4/21: short form (Chelgren, Zaun “no”)]

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. [4/21: short form]

HF 676 allows a tax exemption for non-profit entities paying leasing fees on vehicles. [4/26: short form (Chelgren “no”)]