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2018 State Tax Credit Update

 

Beginning January 1, 2018, Iowa petroleum marketers may begin taking advantage of a new state tax incentive program in place to promote sales of biodiesel. The newly structured biodiesel retail tax credit will now have a two-tiered incentive approach replacing the previous retail tax credit of 4.5 cpg on blends of B5+ sold to end-users. Under the new tax incentive structure, blended gallons of B5-B10 will remain eligible for a 3.5 cpg tax credit. New this year is a 5.5 cpg tax credit made available for blends containing B11 or greater. The tax credit available for B11 blends and greater will be made available to marketers in addition to the state of Iowa’s 3 cpg excise tax advantage offered for the same gallons. As a friendly reminder to all members, any sale to an end-user through a meter is eligible to receive the benefit of the state tax credit, including sales from transports, tankwagons, or at a traditional retail location.

PMCI will be focused on the preservation of our state biofuel tax credit program in Iowa. With budget concerns being a major point of emphasis during the 2018 legislative session, we are prepared to show lawmakers the success that the program has had in growing sales of biofuels in Iowa. Stay tuned, we may be calling on you to help protect the program.

The following is a summary of the additional state tax incentives available to PMCI members:

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 2018 calendar year, retailers must have replaced 23 percent of their gasoline sales with renewable fuels to qualify for the top incentive of 8 cpg on 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. 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.

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. For the E-85 tax credit, Iowa defines E-85 as containing between 70%-85% by volume ethanol.

E-15 Plus Tax Credit

In 2011, the Iowa 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: the tax credit rate is 3 cpg sold throughout the year, except June 1 through September 15, when the rate increases to 10 cpg.

State Taxes

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