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Iowa Legislature Raises Gas Tax on Over 1 Billion Gallons of E10 While Modifying and Extending Biofuels Excise Tax Differentials

 

On their first day back from an over two-month hiatus, state lawmakers in the Iowa Senate and the Iowa House of Representatives voted unanimously to modify and extend excise tax differentials for ethanol and biodiesel. The creation of an excise tax differential for E15 plus blends strikes a competitive imbalance between those with infrastructure compatible with the sale of E15 and those without. Independent operators serving as the fabric of Iowa’s rural fuel distribution network will be disproportionately impacted by this legislation. Beginning on July 1, 2020, Iowa’s previous excise differential for E10 plus blends will be replaced with a differential favoring E15 plus blends. On July 1, all gasoline products containing up to 14 percent ethanol will be taxed at a rate of $0.30 cents-per-gallon. E15 plus blends will be taxed at a rate of $0.24 cents-per-gallon. Through June 30, Iowa’s existing excise tax rates of $0.305 cents-per-gallon on clear gasoline and $0.29 cents-per-gallon on E10 plus blends will apply. Iowa’s biofuels excise tax differential, including both ethanol and biodiesel, will be extended through July 1, 2026.

Championed by State Senator Randy Feenstra and State Representative Louie Zumbach, the legislation will increase by 1 cent-per-gallon the excise tax rate on 1.284 billion gallons of E10 sold in Iowa. E10 accounts for 82 percent of all gasoline gallons sold in Iowa. The legislation will increase the excise taxes paid by Iowans on gasoline by $8.3 million. Lobbyist declarations for Senate File 2403 are available here

State lawmakers’ E15 policy now includes a 10 cent-per-gallon refundable income tax credit from June 1 through September 15 and a 3 cent-per-gallon refundable income tax credit from September 16 through May 31 to pair with the new 6 cent-per-gallon excise tax differential. Lawmakers passed the differential in part to support state ethanol interests vital to the farms and rural communities critical to Iowa’s economy.  [Interestingly, 64% of the locations selling E15 in Iowa are owned and operated by three companies.]As the state’s E15 policy takes shape lawmakers will need to step up and address the infrastructure barrier facing the majority of the retail fuel industry or E15 growth will be limited to urban areas at the expense of Iowa’s rural fuel distribution network.

Anticipated Excise Tax Rates Effective July 1, 2020:

 

Fuel Type

Current Rate

Rate Effective July 1, 2020

Gasoline
No Ethanol

$0.305

$0.300

Ethanol blended
Gas, E10-E14

$0.290

$0.300

E15 Plus Gasoline
Blends 

$0.290

$0.240

E16 – E85

$0.290

$0.240

Alcohol

$0.290

$0.240

Biodiesel B11 or Higher

$0.295

$0.301*

Diesel including
B0 – B10

$0.325

$0.325

Tax State







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