A bill on its way to Governor Branstad’s desk extends a variety of tax breaks and incentives for so-called “biofuels”.
For example, the legislation creates new tax incentives for retailers who sell E-15, the slightly higher blend of ethanol. Monte Shaw of the Iowa Renewable Fuels Association says retailers will get three cents for every gallon of E-15 they sell, in the form of a refundable state income tax credit.
“It’s really a tool for retailers to use to make that decision to offer E-15,” Shaw says.
In 2006, the state began offering a similar tax incentive to retailers who started selling E-85 and sales of the highest blend of ethanol really “took off” according to Shaw.
“Now a grant program for some infrastructure costs came into effect at the same time as the retailer tax credit, so it’d be hard to say which was more important, but they were certainly an effective one-two punch. I mean, I think we had something like 12 or 13 E-85 stations at that time and now we have over 150,” Shaw says.”We think because E15 will not always take new infrastructure — it can be sold, in some cases, through existing infrastrucuture — we think that the growth rate for E15 can be even higher.”
The bill also gives retailers a tax credit for selling soybean-based biodiesel. Randy Olson of the Iowa Biodiesel Board says the value of that credit rises if the biodiesel blend is higher.
“That will encourage retailers to offer biodiesel at the pump in even greater numbers than they already do,” Olson says.
The bill sets aside $3 million to help build facilities where “biofuels” can be blended.
“That’s very important to help renewable fuels and biodiesel compete with the entrenched petroleum infrastructure that’s been in place for the last 50 to 100 years,” Olson says.
Backers of the bill call it a “job creation” package, especially the part which extends a tax credit to biodiesel plants, many of which had to close when a federal tax break was suspended.
On Wednesday the Iowa House voted 81-13 to embrace the package of state tax breaks for biofuels. The bill had passed the Iowa Senate earlier on a 48-1 vote.
About a quarter of the ethanol produced in the United States comes from plants in Iowa and about 12 percent of the U.S. biodiesel supply is produced in the state.