A bill for an act relating to the excise tax on certain ethanol blended gasoline purchased exclusively for use in an implement of husbandry used in agricultural production.

2025-2026 Regular Session

The bill would exempt ethanol-blended gasoline with more than 85% ethanol from Iowa excise tax when used exclusively in implements of husbandry in farming.

Committee report approving bill, renumbered as SF 2493.

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Purpose and Intent

SF 2188 proposes an exemption from the Iowa excise tax on ethanol-blended gasoline (gasoline containing more than 85% ethanol by volume) when the fuel is purchased at a terminal or refinery rack exclusively for use in an implement of husbandry (agricultural equipment) used in agricultural production. The bill aims to reduce the tax burden on fuel used directly in farming operations.

Key Provisions

Exemption from Excise Tax: The excise tax under Iowa Code section 452A.3 would not be imposed or collected on ethanol blended gasoline with greater than 85% ethanol when purchased for exclusive use in an implement of husbandry used in agricultural production.

Exemption Certification:

Purchasers must substantiate the exempt purchase with an exemption certificate provided by the Iowa Department of Revenue (IDR).
The exemption certificate must be complete and correct, signed by the purchaser, and retained by the supplier.
Suppliers must retain exemption certificates for at least three years.

Departmental Verification: IDR will disallow all sales of the exempt gallonage unless proof is established via the exemption certificate.

Liability for Non-Exempt Use: If a purchaser uses or disposes of the exempt fuel in a nonexempt manner, the purchaser is solely liable for the excise tax and must remit it directly to IDR.

Relation to Other Exemptions: The bill notes that IDR already requires exemption certificates for tax-exempt sales of other fuels (compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and electric fuel).

Who/What Would Be Affected

Beneficiaries: Agricultural producers and operators who use ethanol-blended gasoline with >85% ethanol in implements of husbandry (e.g., tractors and other farming equipment) would benefit from an exemption from the excise tax when fueling those implements.

Fuel Suppliers: Gasoline suppliers at terminals/refinery racks would need to collect and retain exemption certificates to prove exempt sales, and they would be responsible for denying noncompliant exempt sales.

IDR's Administration: The Department would issue exemption certificates, maintain compliance, and disallow exempt sales without proper documentation.

Procedural and Timeline Aspects

The bill appears to be introduced in the 2025-2026 session and progressed through committee stages in 2026, with subcommittee and committee work culminating in committee reports.

Upon passage, the bill would add a new exemption provision to section 452A.16 (Exempt fuel — implements of husbandry) and require ongoing administrative processes for exemption certificates and enforcement.

The bill includes a three-year record-retention requirement for exemption certificates by suppliers.

Notes

The explanatory text references current law: the excise tax for some ethanol blends (E-15 and higher) is based on distribution shares and ranges from 24 to 30 cents per gallon, with refunds available for certain exempt uses. SF 2188 creates a targeted exemption for high-ethanol blends used in farming equipment, shifting the tax treatment for a specific use case.

Bill