IA OKs Fuel Tax Hike With B11 Discount

STREATOR, Ill. (DTN) -- The Iowa state legislature passed a 10-cent-per-gallon increase in the motor fuel tax, and included a new differential for biodiesel blends of 11% or more in diesel fuel that provides a 3-cent discount, lowering the tax increase to 7 cents per gallon.

The bills passed Tuesday in the Senate 28-21 and in the House 53-46. It now heads to Gov. Terry Branstad for his signature. If signed, the new tax structure would go into effect 30 days from passage.

Under the legislation, "fuels impacted by this increase include ethanol-blended gasoline, unblended gasoline, diesel, biodiesel, compressed natural gas, liquid petroleum gas, liquefied natural gas, and aviation special fuel."

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The bill also creates a new 3-cent tax differential formula for biodiesel that determines fuel taxes for diesel and biodiesel. This formula goes into effect July 1 and expires at the end of FY 2020. The 10-cent hike means the rate is 32.5 cents per gallon on diesel, but if blended with at least 11% biodiesel, it is cut to a 29.5-cent tax.

The bill assumes that biodiesel consumption would comprise 21.8% of all diesel gallons sold in Iowa.

The bill extends the tax differential formula that determines fuel taxes for ethanol-blended and unblended gasoline through FY 2020.

The current tax on gasoline is 21 cents per gallon, and ethanol blends are 19 cents per gallon. The language of the bill assumes the ethanol-blended market share would remain unchanged in Iowa, averaging 72.1% from 2012 to 2014.

The law would also increases the tax on special fuel used in aircraft from 3 cents to 5 cents per gallon.

The Iowa Constitution requires that the Motor Fuel Tax be "used exclusively for the construction, maintenance, and supervision of the public highways exclusively within the state or for the payment of bonds."

(BM/AG)

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