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Excise Tax Rates, Credits, Incentives

The growth of ethanol and biodiesel sales in Iowa is at a critical juncture. Industry has experienced rapid investment in E15 and B11, and sales are soaring. Consumer acceptance of these products takes time and investment. Only now, after years of private investment spurred by a strong commitment from the state, have we seen consumers take interest in higher blends of ethanol and biodiesel. Pulling the rug out from under these products by doing away with the tax credits that drive their sales would only serve to stymie their growth.

Preservation of these tax credits will be the primary goal of PMCI in the 2018 legislative session. The more severe the state budget concerns, the more difficult that goal will become. The good news is that we have a great success story to tell and we have the sales numbers to back it up.

2018 Motor Fuel Excise Tax Rates and Income Tax Credit Programs

Fuel Type Description

Fuel Tax Rates through June 30, 2018

Gasoline

$0.305/gal

Alcohol

$0.29/gal

Ethanol Blended Gasoline

$0.29/gal

E85

$0.29/gal

Diesel (includes B10 and lower blends)

$0.325/gal

Biodiesel B11 or Higher

$0.295/gal

Aviation Gasoline

$.080/gal

Aviation Jet

$.050/gal

Liquefied Petroleum Gas (LPG)

$0.300/ gal

Liquefied Natural Gas (LNG)

$0.325/gal

Compressed Natural Gas (CNG)

$0.310/gal

*Excise tax rate adjustments are made beginning July 1 of each calendar year.

Iowa Environmental Protection Charge Fee

Iowa petroleum marketers ceased collection of the environmental protection charge beginning January 1, 2017.

Ethanol Promotion Tax Credit (RFS Schedule)

Under the RFS schedule, retailers must maintain certain levels of renewable fuel sales to qualify for these incentives. For example, in the 2017 calendar year, retailers must have replaced 21 percent of their gasoline sales with renewable fuels to qualify for the top incentive of 8 cpg of E-100 gallons sold. If a retailer comes within two percent of reaching that goal, they would qualify for 6 cpg, and if they are within four percent of the goal, they would qualify for 4 cpg.

Year

More than 200,000 Gas Gallons Annually

Less than 200,000 Gas Gallons Annually

2017

21%

17%

2018

23%

19%

2019

25%

21%

2020

25%

25%

 

The retail dealer determines the biofuel percentage by summing pure ethanol and pure biodiesel gallons sold during the calendar year and dividing that sum by the total gasoline gallons sold during the calendar year. While the biodiesel gallons are included in the computation of the biofuel percentage to determine if the threshold is met, only the pure ethanol gallons sold are used in determining the amount of the credit. Retail dealers may elect to compute the tax credit on a site-by-site or company-wide basis. All sales to end-users are eligible for the credit, including tank wagon sales and transport deliveries, and the credit may be claimed on Iowa Form 137.

E-85 Promotion Tax Credit

Prior to CY 2011, the per gallon incentive for selling E-85 was 20 cpg and beginning January 1, 2011, it was cut in half to 10 cpg. During the 2011 legislative session, the credit was increased to 16 cpg effective January 1, 2012, and this tax credit is repealed January 1, 2025. Iowa defines E-85 as containing between 70%-85% by volume ethanol. All sales to end-users are eligible for the credit, including tank wagon sales and transport deliveries, and the credit may be claimed on Iowa Form 135.

E-15 Plus Tax Credit

In 2011, the legislature created a new E-15 tax credit that is similar in application to the current E-85 promotion tax credit. The E-15 plus tax credit is available to retailers who sell E-15 to E69 but the tax credit does not include E-85. The tax credit applies as follows: Beginning in 2014, the tax credit rate is 3 cpg sold throughout the year, except June 1 through September 15, when the rate increases to 10 cpg. This credit can be claimed in addition to the incentives received under the state of Iowa RFS (Ethanol Promotion Tax Credit) and is repealed on January 1, 2025. All sales to end-users are eligible for the credit, including tank wagon sales and transport deliveries, and the credit may be claimed on Iowa Form 138.

Biodiesel Retail Tax Credit

Under current law, a retailer can claim a 4.5 cpg gallon tax credit for every blended gallon of B5 or greater sold to an end-user. All sales to end-users are eligible for the credit, including tank wagon sales and transport deliveries, and the credit may be claimed on Iowa Form 8864.

Beginning January 1, 2018, a new retail incentive is placed on B11+ blends of 5.5 cpg. Also on this date, B5-B10 blends will see their retail credit reduced from 4.5 cpg to 3.5 cpg.

Renewable Fuel Infrastructure Grant Program

Previously, $3 million per year was allocated from the Statutory Allocations Fund to the Renewable Fuels Infrastructure Fund (RFIF). The RFIF is a cost-share grant program that assists retailers in installing and upgrading equipment to dispense renewable fuels, including ethanol and biodiesel. During the 2017 legislative session, state lawmakers provided one-time funding for the program through the Rural Infrastructure Investment Fund. Future funding of Iowa’s Renewable Fuel Infrastructure Grant Program will once again be a priority for PMCI during the 2018 legislative session. The grant program’s current balance of funds is approximately $600,000. The program board of directors will likely meet in March of 2018 and it is anticipated that the $600,000 in available funding will be dispersed to eligible applicants at that time.

To learn about upcoming deadlines for applications, click here.

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