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SF 2503

A bill for an act modifying the sales or use tax refund for biodiesel production, and including retroactive applicability provisions.

2025-2026 Regular Session

The bill temporarily boosts Iowa biodiesel refunds from 4 to 5 cents per gallon for 2026, then reverts to 4 cents in 2027–2028, with retroactive application to Jan 1, 2026.

Attached to HF 2786.
#biofuels #processingandproduction #salestaxes #taxrefunds #usetaxes
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WeVote Research Nonpartisan
Bill Summary · SF 2503

Summary: Senate File 2503 (SF 2503) – Biodiesel Production Sales/Use Tax Refund

Jurisdiction: Iowa | Session: 2025-2026 | Bill Type: Act modifying biodiesel sales/use tax refund; retroactive applicability

Purpose and intent

  • To adjust the state sales and use tax refund for biodiesel producers temporarily.
  • Specifically, increase the refund rate from 4 cents per gallon to 5 cents per gallon for a defined period, with a staged return to 4 cents in 2027–2028, and to apply changes retroactively to January 1, 2026.

Key provisions and changes

  1. Refund rate change and timing

    • For calendar year 2026 (starting January 1, 2026, but before January 1, 2027):
      • The designated refund rate increases from 4 cents to 5 cents per gallon of biodiesel produced in Iowa.
    • For calendar year 2027 (starting January 1, 2027, but before January 1, 2028):
      • The designated refund rate reverts to 4 cents per gallon.
    • The bill does not change the established repeal date:
      • The refund program remains in place with a sunset on January 1, 2028, unless further action is taken.

  2. Refund calculation

    • The refund amount is calculated by multiplying the designated rate (4 or 5 cents per gallon, depending on the year) by the total number of gallons of biodiesel produced by the producer in the state during the applicable calendar year quarter (the text specifies quarterly calculations, but typical practice is annualized for per-year refunds; the bill text notes quarterly production in the calculation).

  3. Retroactive applicability

    • The act applies retroactively to January 1, 2026, for biodiesel gallons produced on or after that date.
    • This retroactive feature means producers could be eligible to receive the higher 5-cent rate for production beginning January 1, 2026, if production occurred during that period.

  4. Explanatory notes (non-binding)

    • The provided explanation confirms:
      • 2026: 5-cent rate.
      • 2027: 4-cent rate.
      • 2028: Reverts to 4 cents, with the repeal date remaining January 1, 2028.
    • The bill does not alter the repeal date or the general framework of the refund program.

Who is affected

  • Biodiesel producers operating in Iowa who receive the state sales or use tax refund for biodiesel production (up to the program cap of 25.0 million gallons per producer per calendar year under current law).
  • The program affects producers’ refunds, not the refund mechanism itself or other fuels’ tax refunds.

Financial and fiscal impact

  • Fiscal note indicates:
    • Net effect on General Fund in Fiscal Year 2027: estimated decrease of $1.7 million.
    • Net effect on the State Education (SAVE) Fund in FY2027: estimated decrease of $0.3 million.
  • Assumptions include:
    • Up to eight biodiesel producers participate in the program.
    • Biodiesel production expected to grow around 3.5% annually.
    • Refunds are capped at 25.0 million gallons per producer per calendar year.
    • Refunds are claimed in the quarter after production.
    • The 2026–2027 timing of refunds translates into the noted fiscal impacts.

Procedural and timeline aspects

  • Effective date: Retroactive to January 1, 2026 for qualifying production.
  • Transition: 2026 effective at 5-cent rate; 2027 reverts to 4-cent rate; 2028 remains at 4 cents with the existing repeal date unchanged.
  • Enacted changes are prospective within the retroactive framework and would affect refunds claimed for gallons produced starting January 1, 2026.

Summary takeaways

  • SF 2503 temporarily increases the biodiesel production refund from 4 to 5 cents per gallon for 2026, then reverts to 4 cents for 2027 and 2028, with no change to the sunset date (January 1, 2028).
  • The act applies retroactively to January 1, 2026, potentially increasing refunds for production from that date forward.
  • Fiscal impact estimates: approximately $1.7 million reduction to General Fund and $0.3 million reduction to the SAVE Fund in FY 2027.

Compiled from official sources — confirm details with the bill’s official record.

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