Iowa Incentives and Laws for Ethanol

The list below contains summaries of all Iowa incentives and laws related to Ethanol.

State Incentives

Ethanol Blend Retailer Tax Credit

The Ethanol Promotion Tax Credit is available to any retailer in the amount of $0.08 per gallon of ethanol blended into gasoline, as long as the retailer sells a certain percentage of renewable fuels as part of their total gasoline sales. Retailers must meet the following annual renewable fuel goals to be eligible for the credit:

The schedule is delayed by two years for retailers of gasoline with sales of less than 200,000 gallons annually. For retailers within 2% of meeting these goals, the tax credit will be $0.06 for every gallon of ethanol-blended gasoline sold. For retailers within 4% of meeting these goals, the tax credit will be $0.025 for calendar year 2011 and $0.04 for calendar year 2012 for every gallon of ethanol-blended gasoline sold. The governor may adjust the percentages if certain flexible fuel vehicle registration targets are not met or if there is a shortage of biofuel feedstock. Eligible taxpayers may also claim the biodiesel tax credit available for retail biodiesel blends. (Reference Senate File 531, 2011, and Iowa Code 422.11N and 422.33)

E15 Retailer Tax Credit

Effective July 1, 2011, retail stations dispensing fuel blends of 15% ethanol and 85% gasoline (E15) for use in motor vehicles may be eligible for a tax credit in the amount of $0.03 per gallon for calendar years 2011-2014. For calendar years 2015-2017, the credit is reduced to $0.02 per gallon. The tax credit expires after December 31, 2017. Eligible taxpayers may also claim the tax credit available for retail ethanol blends for the same gallon of fuel and tax year. (Reference Senate File 531, 2011, and Iowa Code 422.11Y)

E85 Retailer Tax Credit

Retail stations dispensing E85 for use in motor vehicles may be eligible for a tax credit in the amount of $0.16 per gallon for calendar years 2011-2017. The tax credit expires after December 31, 2017. Taxpayers claiming the E85 tax credit may also claim the tax credit available for retail ethanol blends for the same gallon of fuel and tax year. (Reference Senate File 531, 2011, and Iowa Code 422.11O)

Biofuels Infrastructure Grants

The Renewable Fuel Infrastructure Program provides financial assistance to E85 and biodiesel retailers. Cost-share grants are available for up to 70% of the total cost of the project, or $50,000, whichever is less, to upgrade or install new E85 or biodiesel infrastructure. Applicants may also qualify for supplemental incentives of up to 75% of the cost of making the improvement, or $30,000, whichever is less, to upgrade or replace an E85 fueling dispenser that has not been approved by an independent testing laboratory. The supplemental incentive is available only to applicants who made the improvement no later than 60 days after the date of the publication in the Iowa administrative bulletin of the state fire marshal's order providing that a commercially available fueling dispenser is listed as compatible for use with E85 by an independent testing laboratory. Biodiesel distributors may apply for a cost-share grant for infrastructure upgrades and installations at biodiesel terminal facilities. Facilities blending or dispensing blends ranging from B2 to B98 are eligible for up to 50% of the total project, or $50,000, whichever is less. Facilities blending or dispensing B99 or B100 are eligible for up to 50% of the total project, or $100,000, whichever is less. The Renewable Fuels Infrastructure Board was established under the guidance of the Iowa Department of Economic Development; this 11-member board has authority to determine the eligibility of applicants. (Reference Iowa Code 15G.202-15G.204)

Alternative Fuel Vehicle (AFV) Demonstration Grants

The Iowa Department of Natural Resources conducts marketing and education outreach to encourage the use of alternative fuels and, contingent upon funding, awards demonstration grants to individuals who purchase vehicles that operate on alternative fuels, including but not limited to E85, biodiesel, compressed natural gas, electricity, solar energy, or hydrogen. Individuals may use grants to conduct research connected with the fuel or the vehicle and to purchase the vehicle if the Department of Natural Resources retains the title of the vehicle, the vehicle is used for research, and the proceeds from the eventual sale of the vehicle are used for additional research. (Reference Iowa Code 214A.19)

Alternative Fuel Loan Program

The Iowa Energy Center administers the Alternate Energy Revolving Loan Program (AERLP) for alternative energy projects. Through a participation agreement with the project lender, the AERLP provides up to 50% of the cost of biomass or alternative fuel production projects, up to $1 million per facility. The AERLP funds are provided at 0% interest with the lender's funds bearing market interest. Fuel production facilities must be located in Iowa and funding is limited. (Reference Iowa Code 476.46)

Alternative Fuel Production Loans

The Value-Added Agriculture Program offers a combination of forgivable and traditional low-interest loans for business projects involving the production of alternative fuels. The mixture of forgivable and low-interest loans varies according to the size of the award. Research and development projects are not eligible for this program.

Alternative Fuel Production Tax Credits

The Enterprise Zone Program and the High Quality Jobs Program offer state tax incentives to business projects for the production of biomass or alternative fuels. Depending on the program, incentives may include: an investment tax credit equal to a percentage of the qualifying investment, amortized over five years; a refund of state sales, service, or use taxes paid to contractors or subcontractors during construction; a doubling of the state's refundable research activities credit; additional funding for training new employees; and a local property tax exemption of up to 100% of the value added to the property.

Alternative Fuel Research and Development Funding

The Iowa Power Fund, administered through the Office of Energy Independence, supports research, development, commercialization, and deployment of biofuels, renewable energy technologies, and energy efficiency technologies, while seeking to cut greenhouse gas emissions. An 18-member board runs the Iowa Power Fund, and a seven-member committee is responsible for reviewing financial assistance applications. (Reference Iowa Code 469.6-469.10)

Laws and Regulations

E85 Fuel Exclusivity Contract Regulations

Any motor fuel franchise contract entered into or renewed on or after May 30, 2006, must allow for the delivery of E85 at any time demanded by the motor fuel dealer or allow the dealer to purchase E85 from another source. If a contract is already in effect on May 30, 2006, and does not have an expiration date, the franchisor must provide for the delivery of E85 at the demand of the franchisee or allow the franchisee to purchase those volumes of E85 at those times from another source. (Reference Iowa Code 323A)

Renewable Fuel Replacement Goal

The Iowa Legislature set a goal of replacing 25% of conventional fuels sold in the state with biofuels by January 1, 2020. To reach this goal, the state encourages retailers to sell a certain percentage of renewable fuels in relation to their total gasoline sales by offering tax credits. (Reference Iowa Code 422.11N)

Renewable Fuel Labeling Requirement

Biodiesel and ethanol blend dispensers must be affixed with decals identifying the type of fuel blend. If fuel blends containing more than 10% ethanol are being dispensed, the decal must include the following statement: "For Flexible Fuel Vehicles Only." The Iowa Department of Agriculture and Land Stewardship (Department) may approve an application to place a decal in a special location on a pump with special lettering or colors if the decal appears clear and conspicuous to the consumer. The application must be made in writing to the Department. (Reference Iowa Code 214A.16)

Ethanol Blend Dispenser Requirement

An ethanol retailer selling a blend of 10% ethanol by volume or higher may only use a dispenser that the Iowa Department of Natural Resources and state fire marshal have determined is compatible with the ethanol blend being dispensed. Exceptions may apply. (Reference Iowa Code 455G.31)

Regional Biofuels Promotion Plan

Iowa has joined Indiana, Kansas, Michigan, Minnesota, Ohio, South Dakota, and Wisconsin in adopting the Energy Security and Climate Stewardship Platform Plan (Platform), which establishes shared goals for the Midwest region, including increased biofuels production and use. Specifically, the Platform sets the following goals:

• Produce commercially available cellulosic ethanol and other low carbon fuels in the region by 2012;
• Increase E85 availability at retail fueling stations in the region to 15% of stations by 2015, 20% by 2020, and 33% of all fueling stations in the region by 2025;
• Reduce the amount of fossil fuel that is used in the production of biofuels by 50% by 2025;
• By 2025, at least 50% of all transportation fuels consumed in the Midwest will be from regionally produced biofuels and other low carbon transportation fuels.

The Platform also establishes a regional biofuels corridor program. The program directs state transportation, agriculture, and regulatory officials to develop a system of coordinated signage across the region for biofuels and advanced transportation fuels and to collaborate to create regional E85 corridors. The program requires standardized fuel product coding at fueling stations as well as increased education for retailers about converting existing fueling infrastructure to dispense E85.

State Fleet Biofuels Use and Fuel Efficiency

As part of the Green Government Initiative, the Iowa Office of Energy Independence (OEI), Department of Administrative Services, Department of Natural Resources, and Department of Transportation lead a Biofuels Task Force. This group focuses on issues including increasing each state agency's use of biofuels to the maximum amount feasible and increasing the fuel efficiency of the state's vehicle fleet. The Biofuels Task Force sets specific five- and ten-year targets related to these areas, which are included in the Green Government Master Plan. Progress toward these goals will be tracked using a reporting system developed under the Green Government Initiative, and resulting data will be made public via the OEI whenever possible. (Reference Executive Order 6, 2008)

Biofuel Decal and Use Requirement

State fleet gasoline and diesel vehicles must operate using ethanol-blended gasoline and biodiesel-blended diesel, except in emergency circumstances. Vehicles must be affixed with a visible sticker that notifies the public that the motor vehicle uses ethanol-blended gasoline or biodiesel. The sticker is not required for unmarked vehicles used for law enforcement or security purposes. (Reference Iowa Code 8A.362, 216B.3, 260C.19A, 262.25A, 307.21 and 904.312A)

Alternative Fuel Vehicle (AFV) Acquisition Requirements

At least 10% of new light-duty vehicles purchased by institutions under the control of the state fleet administrator, Iowa Department of Transportation administrator, board of directors of community colleges, state board of regents, commission for the blind, and department of corrections must be capable of using alternative fuels. Vehicles and trucks purchased and directly used for law enforcement, off-road maintenance work, or to pull loaded trailers are exempt from this requirement. (Reference Iowa Code 8A.362, 216B.3, 260C.19A, 262.25A, 307.21 and 904.312A)

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