Biodiesel Laws and Incentives in Iowa
The list below contains summaries of all Iowa laws and incentives related to biodiesel.
Laws and Regulations
Alternative Fuel Vehicle (AFV) Demonstration Grant Authorization
The Iowa Department of Natural Resources (Department) may award demonstration grants to individuals who purchase vehicles that operate on alternative fuels, including but not limited to E85, biodiesel, compressed natural gas, electricity, solar energy, or hydrogen. Individuals may use the grants to conduct research connected with the fuel or vehicle. Grant funding to purchase the vehicle is available if the Department retains the title of the vehicle, the vehicle is used for research, and the proceeds from the eventual sale of the vehicle are used for additional research. Grants are subject to funding availability.
(Reference Iowa Code 214A.24)
Alternative Fuel Vehicle Acquisition Requirements
At least 10% of new vehicles purchased by institutions under the control of the state fleet director, including the Iowa Department of Transportation, Board of Directors of Community Colleges, Board of Regents, Commission for the Blind, and Department of Corrections must be capable of operating on alternative fuels. Alternative fuels include E85, B20, natural gas, propane, solar energy, and electricity. Vehicles and trucks purchased and directly used for law enforcement and off-road maintenance work are exempt from this requirement.
The state fleet shall purchase motor vehicles and light trucks so that the average fuel efficiency of new vehicles purchased that year equals or exceeds the average fuel economy standard for the model year as established under 15 U.S.C. §2002. Motor vehicles operating using gasoline or diesel fuel shall use the highest possible classification of ethanol or biodiesel. Exemptions apply. Vehicles that use biodiesel and ethanol blends must display a brightly colored, highly visible renewable fuel sticker. Beginning July 1, 2023, and annually thereafter, the Iowa Department of Administrative Services must submit a report detailing the use of ethanol and biodiesel blends in state fleet vehicles to the governor and Iowa General Assembly.
(Reference Iowa Code 8A.360, 8A.362, 8A.368, 216B.3, 260C.19A, 262.25A, 307.21 and 904.312A)
Biodiesel Fuel Use
The Iowa Department of Transportation (IDOT) may purchase biodiesel for use in IDOT vehicles through the biodiesel fuel revolving fund created in the state treasury. The fund consists of money received from the sale of Energy Policy Act of 1992 credits IDOT has banked and other income IDOT has obtained or accepted for deposit in the fund.
(Reference Iowa Code 307.20)
Biofuel Specifications
Ethanol-blended gasoline must conform to ASTM D4814, E85 must conform to ASTM D4806, renewable diesel fuel must conform to ASTM D975, and biodiesel-blended fuel containing at least 6%, but no more than 20%, biodiesel must conform to ASTM D7467. Biodiesel blended fuel containing more than 20% biodiesel must conform to standards set by the Iowa Department of Agriculture and Land Stewardship. Additionally, biobutanol must be an agriculturally derived isobutyl alcohol that meets ASTM D7862 for butanol for blending with gasoline for use as a motor fuel. Gasoline blended with biobutanol must conform to ASTM D4814. The state defers to the U.S. Environmental Protection Agency for potential changes in specifications.
(Reference Iowa Code 214A.2)
Biofuel and Renewable Fuel Quality Program
The Iowa Department of Agriculture and Land Stewardship (Department) must establish and administer programs to audit motor fuel facilities, including biofuel processing and production plants, to screen and test motor fuel, including renewable fuel, and to inspect motor fuel sold by dealers, including retail motor fuel dealers. Biofuels include ethanol, biobutanol, and biodiesel. Renewable fuel is defined as a combustible liquid derived from biomass or produced from a biogas source, such as biofuel and biofuel blended with gasoline. The Iowa Central Community College must test motor fuels, biofuels, and renewable fuels to ensure they meet Departmental standards for motor vehicle use.
(Reference Iowa Code 214A.1, 214A.2, 214A.2B, and 214A.2C )
Renewable Fuel Labeling Requirement
If ethanol blended gasoline is blended higher than the standard, the dispenser must be affixed with decals stating the classification of the ethanol blended gasoline is for use in flexible fuel vehicles. If biobutanol blended gasoline is being dispensed, the decal must identify the classification of biobutanol blended gasoline. The Iowa Department of Agriculture and Land Stewardship (Department) may approve applications to place a decal in a special location on a pump with special lettering or colors that are clear and conspicuous to the consumer.
(Reference Iowa Code 214A.21A)
State Incentives
Alternative Fuel Vehicle (AFV) Grants
The Iowa Economic Development Authority (IEDA) provides grants for projects that benefit Iowa ratepayers and support the implementation of the Iowa Energy Plan, including the purchase of AFVs. Eligible applicants include Iowa businesses, colleges and universities, and private and nonprofit organizations. For more information, including eligibility requirements, see the IEDA Iowa Energy Center Grant Program website. This program expires on July 31st, 2029.
(Reference Iowa Code 17A.7 and Iowa Administrative Code 261.404)
Biodiesel Blend Retailer Tax Credit
Retailers selling biodiesel are eligible for a state income tax credit. Credit amounts are based on biodiesel blend level and available in the following amounts:
| Biodiesel Blend Level | Credit Amount per Gallon Sold |
|---|---|
| 11% to 19% | $0.05 |
| 20% to 29% | $0.07 |
| 30% and higher | $0.10 |
The tax credit expires January 1, 2028.
(Reference Iowa Code 422.11P)
Biodiesel Production Tax Credit
Qualified biodiesel producers are eligible for a tax credit of $0.04 per gallon of biodiesel produced. Biodiesel producers may claim the tax credit for up to 25,000,000 gallons of biodiesel. The tax credit expires January 1, 2028.
(Reference Iowa Code 423.4(9))
Biofuel Infrastructure Grants
The Renewable Fuels Infrastructure Program provides financial assistance to qualified 85% ethanol (E85-capable) and biodiesel retailers. Cost-share grants are available to upgrade or install new E85 or biodiesel infrastructure. From January 1, 2026 through July 1, 2030, ethanol projects must be E85 capable or otherwise E40 or greater. Ethanol grants are capped at $75,000 per site, with 70% to 90% of project costs covered based on a tiered system for sites. Retail biodiesel projects must store and dispense B20+ or use blender pumps with B5+ or B11+ available depending on the season. Biodiesel awards cover 70% of costs up to $50,000 per site.
Biodiesel distributors may apply for cost-share grants for infrastructure upgrades and installations at biodiesel terminal facilities. Facilities blending or dispensing blends ranging from 2% biodiesel (B2) to 98% biodiesel (B98) are eligible for up to 50% of the total project, up to $50,000. Facilities blending or dispensing B99 or B100 are eligible for up to 50% of the total project, up to $100,000.
The Renewable Fuels Infrastructure Board receives administrative support from staff within the Iowa Department of Agriculture and Land Stewardship and has the authority to determine the eligibility of applicants. For more information, refer to the Renewable Fuels Infrastructure Program website.
(Reference Iowa Code 159A.13-159A.15)
Diesel Emission Reduction Project Funding
The Iowa Department of Transportation (Iowa DOT) provides funding for the replacement, retrofit, or conversion of medium- and heavy-duty (MHD) on-road diesel vehicles with new diesel or alternative fuel vehicles. Grants are also available for off-road diesel vehicle replacements and repowers. Grants are available for MHD school buses, transit buses, and trucks. Non-road vehicles and equipment may also be eligible for funding. Eligible applicants include government, nonprofit, and private entities that own or operate diesel fleets and equipment. Additional restrictions apply. This grant program is partially funded by Iowa’s portion of the Volkswagen Environmental Mitigation Trust. For more information, including eligible vehicles, see the IowaDOT Diesel Emission Reduction Act Website.
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