Iowa Laws and Incentives

Listed below are the summaries of all current Iowa laws, incentives, regulations, funding opportunities, and other initiatives related to alternative fuels and vehicles, advanced technologies, or air quality. You can go directly to summaries of:

• State Incentives (9)
• Laws and Regulations (10)

State Incentives

Ethanol Blend Retailer Tax Credit

The Ethanol Promotion Tax Credit is available to any fuel retailer for up to $0.08 per gallon of pure ethanol blended into gasoline, as long as the retailer sells a certain percentage of renewable fuels (ethanol and biodiesel) as part of their total motor fuel sales on a company-wide or a site-by-site basis. Retailers must meet the following annual renewable fuel goals to be eligible for the credit:

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 $0.04 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 Iowa Code 422.11N)

E15 Retailer Tax Credit

Retail stations dispensing gasoline fuel blends of 15% ethanol (E15) for use in motor vehicles may be eligible for a tax credit in the amount of $0.03 per gallon for calendar years 2012-2014. 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 E85 retailer tax credit for the same gallon of fuel and tax year. (Reference 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 2012-2017. The tax credit expires after December 31, 2017. Eligible taxpayers may also claim the tax credit available for retail blends of 15% ethanol (E15) for the same gallon of fuel and tax year. (Reference Iowa Code 422.11O)

Biodiesel Blend Retailer Tax Credit

Retailers whose total diesel sales consist of at least 50% biodiesel blends containing a minimum of 5% biodiesel (B5) are eligible for a state income tax credit of $0.045 per gallon of biodiesel sold. The tax credit expires December 31, 2017. (Reference Iowa Code 422.11P)

Biofuels Infrastructure Grants

The Renewable Fuel Infrastructure Program provides financial assistance to qualified E85 and biodiesel retailers. Cost-share grants are available for up to 70% of the total cost of the project, up to $50,000, to upgrade or install new E85 or biodiesel infrastructure. Applicants may also qualify for supplemental incentives of up to 75% of the cost of improvements, up to $30,000, 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 that a commercially available fueling dispenser is listed as compatible for use with E85 by an independent testing laboratory.

Biodiesel distributors may apply for cost-share grants for infrastructure upgrades and installations at biodiesel terminal facilities. Facilities blending or dispensing blends ranging from 2% biodiesel (B2) to 98% biodiesel (B98) are eligible for up to 50% of the total project, up to $50,000. Facilities blending or dispensing B99 or B100 are eligible for up to 50% of the total project, up to $100,000.

The Renewable Fuels Infrastructure Board receives administrative support from staff within the Iowa Department of Agriculture and Land Stewardship and the 11-member board has authority to determine the eligibility of applicants. For more information, refer to the Renewable Fuel Infrastructure Program website.

(Reference Iowa Code 15G.202-15G.204)

Biodiesel Producer Tax Refund

A biodiesel producer may apply for a refund of Iowa state sales or use taxes paid on purchases. To qualify, the producer must be registered with the U.S. Environmental Protection Agency and any biodiesel produced must be used in biodiesel fuel blends. The refund amount is based on the total gallons of biodiesel produced in the state multiplied by a designated rate, as follows:

A biodiesel producer is only eligible to receive a refund for up to 25 million gallons of biodiesel produced during each calendar year through 2014. The producer must file refund claims with the Iowa Department of Revenue on a quarterly basis. Refunds received may not be included as income for Iowa individual and corporation income tax purposes. This incentive expires December 31, 2014. (Reference Iowa Code 423.4)

Fuel Cell Motor Vehicle Tax Deduction

A taxpayer is eligible for a $2,000 tax deduction for the purchase of a qualified fuel cell motor vehicle placed into service before January 1, 2015. The taxpayer must have claimed the federal alternative motor vehicle credit under Section 30B of the Internal Revenue Code using Internal Revenue Service Form 8910 during the current tax year to be eligible for the Iowa state deduction. (Reference Iowa Code 422.7)

Alternative Fuel Vehicle (AFV) Demonstration Grants

The Iowa Department of Natural Resources (Department) 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 the grants to conduct research connected with the fuel or vehicle and to purchase the vehicle if the Department 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. Grants are subject to funding availability. (Reference Iowa Code 214A.19)

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; an increase of the state's refundable research activities credit; and a local property tax exemption of up to 100% of the value added to the property. For more information, refer to the Enterprise Zone Program and High Quality Jobs Program websites.

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 requested by the motor fuel dealer or allow the dealer to purchase E85 from another source. If a contract was 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 request of the franchisee or allow the franchisee to purchase those volumes of E85 from another source. (Reference Iowa Code 323A)

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 must 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)

Biodiesel and Ethanol Specifications

Ethanol-blended gasoline must conform to ASTM D4814, E85 must conform to ASTM D4806, and biodiesel-blended fuel containing at least 6%, but no more than 20%, biodiesel must conform to ASTM D7467. The state defers to the U.S. Environmental Protection Agency for potential changes in specifications. (Reference Iowa Code 214A.2)

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)

Biodiesel Fuel Use

The Iowa Department of Transportation (IDOT) may purchase biodiesel for use in IDOT vehicles through the biodiesel fuel revolving fund created in the state treasury. The fund consists of money received from the sale of Energy Policy Act of 1992 (EPAct) credits IDOT has banked and other income IDOT has obtained or accepted for deposit in the fund. (Reference Iowa Code 307.20)

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, including the Iowa Department of Transportation, Board of Directors of Community Colleges, 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 and off-road maintenance work are exempt from this requirement. (Reference Iowa Code 8A.362, 216B.3, 260C.19A, 262.25A, 307.21 and 904.312A)

Alternative Fuel Vehicle (AFV) Conversion Registration

When a motor vehicle is modified to use a different fuel type or more than one type of fuel, the vehicle's registered owner must notify the county treasurer of the new fuel type or alternative fuel types within 30 days. If the vehicle uses, or may use, a special fuel, the county treasurer will issue a special fuel identification sticker. (Reference Iowa Code 321.41)

Electric Vehicle (EV) Registration Fee

The annual registration fee for an EV is $25.00 unless the vehicle is more than five model years old, in which case the annual registration fee is reduced to $15.00. This section does not apply to low-speed EVs. (Reference Iowa Code 321.116)

Low-Speed Vehicle Access to Roadways

Low-speed vehicles are only permitted to operate on roadways with posted speed limits of up to 35 miles per hour (mph) but may cross streets with posted speed limits greater than 35 mph. (Reference Iowa Code 321.381A)