The brand new state law that raises the tax on gasoline and diesel by 10 cents a gallon includes a first-ever tax break for soybean-based biodiesel, similar to the tax advantage for corn-based ethanol blends.
Grant Menke, the policy director for the Iowa Renewable Fuels Association, says the industry believes this new tax break will spur usage and make blends of biodiesel more widely available.
“With the federal policy landscape as uncertain as ever and no real end in sight to that, we’re thankful to the Iowa legislature for showing leadership to drive higher use of a higher biodiesel blend,” Menke says.
The federal tax breaks for biodiesel expired at the end of 2014. The state fuel tax charged to ethanol-blended fuels is and will continue to be two-cents-per-gallon lower than what’s charged on regular gasoline. Now, the state tax on diesel that contains at least 11 percent soybean-based biodiesel will be three-cents-per-gallon less.
“We really think with this differential, it’s a point of sale benefit that consumers can choose at the pump, so they will be saving taxes by choosing higher biodiesel blends,” Menke says.
Currently in Iowa, gasoline is taxed at 21 cents per gallon, but gasoline blended with at least 10 percent ethanol is taxed at only 19 cents per gallon. Diesel has been taxed at 22.5 cents per gallon with no incentive for biodiesel. The 10-cents-per-gallon tax increase for motor fuel sold in Iowa goes into effect Sunday, along with the new three-cent per gallon break for biodiesel.
(Reporting by Jerry Oster, WNAX, Yankton; additional reporting by Radio Iowa’s O. Kay Henderson)