Iowa establishes PTC for renewable chemicals

By Erin Voegele | April 08, 2016

On April 7, Iowa Gov. Terry Branstad signed legislation establishing a production tax credit (PTC) for renewable chemicals. Branstad signed the bill at Iowa State University. Lt. Gov. Kim Reynolds and several stakeholders were on hand to witness the event.

“This legislation, the first of its kind in the nation, will help build Iowa’s renewable chemicals industry by using biomass as feedstocks for the production of building block chemicals,” said Branstad.  “Iowa is the nation’s premier leader in the renewable fuels industry and we will now build on our legacy of leveraging homegrown renewable resources to produce the next generation of building block chemicals.”

Reynolds added, “The production of biochemicals is perhaps the fastest growing segment of the bioscience industry which means it represents one of Iowa’s best opportunities for development of a high density industry cluster.  I want to commend the Iowa Legislature on passing this bill in a bipartisan fashion to put Iowa in a unique position to grow Iowa’s biorenewables industry.” 

In March, the bill, S.F. 2300, passed in the Iowa House of Representatives by a vote of 95 to 1 and the Iowa Senate by a vote of 46 to 3. The new law is scheduled to take effect July 1 and run through June 30, 2021. Producers of eligible renewable chemicals can claim a 5-cent-per-pound PTC. The credit is capped at $105 million. 

Eligible renewable chemicals are required to have at least 50 percent biobased content and not be sold or used for the production of food, feed or fuel. Cellulosic ethanol, starch ethanol or other biomass-derived ethanol, fatty acid methyl esters and butanol can be eligible to claim the credit, but only to the extent that such molecules are produced and sold for uses other than food, feed or fuel. The definition of renewable chemical also includes building-block chemicals, which can be a food additive as long as it is not primarily consumed as food and is sold for uses other than food. In addition, the definition includes supplements, vitamins, nutraceuticals, and pharmaceuticals, but only to the extent that such molecules do not provide caloric value.

Additional information on the bill can be found on the Iowa legislature website.