Iowa Passes Law to Create Biorenewable Chemical Tax Credit Program
by Joe Leo >
Iowa Passes Law to Create Biorenewable Chemical Tax Credit Program (Download a PDF of this article)
On April 6, 2016, Governor Branstad signed into law Senate File 2300 which creates the Biorenewable Chemical Tax Credit Program, a landmark piece of legislation that is expected to result in significant investment and innovation in Iowa. This legislation was supported by a diverse coalition of interested parties in Iowa, including the Iowa Cultivation Corridor and the Iowa Biotech Association, amongst other private industry and public sector supporters. This program will be administered by the Iowa Economic Development Authority which can allocate up to $105 million in tax credits to Iowa-based renewable chemical producers over the next ten years.
The Biorenewable Chemical Tax Credit Program is expected to expand on Iowa’s robust renewable fuels industry by adding a tax credit to support the production of chemicals derived from renewable sources. The renewable fuels industry expanded significantly after Iowa enacted a similar tax credit program. In January 2016, Iowa State University created a white paper to study the potential impacts of a biorenewable chemical tax credit in Iowa. The white paper suggests that up to 50,000 new jobs could be created by the tax credit program over the next ten years.
The tax credits issued under the Biorenewable Chemical Tax Credit Program are refundable, meaning eligible producers can receive a cash payment for the amount of tax credits that exceed their state tax liability. To be eligible, an applicant must be a for-profit business and it must be physically located in Iowa, among other eligibility criteria. Each eligible business which was created within the last five years may receive up to $1 million per year in tax credits for five years. For any eligible business which has been in existence for more than five years, the maximum annual credit is $500,000 for five years.
Eligible companies receive a tax credit of five cents per pound of qualifying renewable chemicals produced. Eligible renewable chemicals are created from biomass-based feedstock including sugar, crude glycerine, lignin, fat and other plant and animal derived feedstocks. Eligible renewable chemicals cannot be sold or used for the production of food, feed, or fuel.
For more information on the Biorenewable Chemical Tax Credit Program, please visit the Cultivation Corridor website at http://www.cultivationcorridor.org.
For a complete copy of Senate File 2300, please visit https://www.legis.iowa.gov/legislation/BillBook?ga=86&ba=sf2300.
Joe Leo is a member at BrownWinick and practices mainly in the areas of securities law and corporate transactions. Joe can be reached at (515) 242-2462 or firstname.lastname@example.org.