Ethanol Laws and Incentives in Iowa

The list below contains summaries of all Iowa laws and incentives related to ethanol.

Laws and Regulations

Alternative Fuel Tax

Alternative fuels used as vehicle fuel are taxed as follows:

• Compressed natural gas is subject to the state fuel excise tax of $0.31 per gasoline gallon equivalent, measured at 5.66 pounds (lbs.) or 126.67 cubic feet at a base temperature of 60 degrees Fahrenheit and a pressure of 14.73 lbs. per square inch;
• Liquefied natural gas is subject to the excise tax of $0.325 per diesel gallon equivalent (DGE), measured at 6.06 lbs.;
• Propane is subject to the excise tax of $0.30 per gallon;
• Hydrogen is subject to the excise tax of $0.65 per DGE, measured at 2.49 lbs.; and
• Electricity will be subject to the excise tax of $0.026 per kilowatt-hour of fuel delivered or placed into a battery or other energy storage device of an electric motor vehicle at any location in Iowa other than a residence. For electric fuel sold or dispensed for a nontaxable purpose, an exemption may be requested.

Before July 1, 2030, ethanol (E15 and higher) and biodiesel (B20 and higher) are subject to an excise tax calculated based on a distribution percentage that the Department of Revenue will determine. Additional conditions apply.

(Reference House File 976, 2025 and Iowa Code 452A.2, 452A.3, 452A.41, and 452A.86)

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)

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 )

E85 Fuel Exclusivity Contract Regulations

Any motor fuel franchisor must provide for the delivery of E85 as requested by the motor fuel dealer or allow the franchisee to purchase E85 from another source.

(Reference Iowa Code 323A)

Ethanol Blend Dispenser Requirement

An ethanol retailer selling a blend of at least 9% ethanol by volume may use gasoline storage and dispensing infrastructure that the Iowa Department of Natural Resources and state fire marshal have determined is compatible with the ethanol blend being dispensed. Exceptions may apply.

A gasoline retailer that replaces or converts gasoline storage and dispensing infrastructure to store and dispense a gasoline blend of 15% ethanol by volume (E15) or higher must guarantee the infrastructure is also capable of storing and dispensing E85.

(Reference Iowa Code 455G.31 - 455G.32)

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)

Retail E15 Access Requirements

Beginning January 1, 2026, retail gasoline fueling stations must advertise and sell E15 from at least one gasoline dispenser. The Iowa Department of Agriculture and Land Stewardship may refuse to renew, suspend, or revoke retail fuel licenses for failure to comply with access requirements. Additional requirements and exemptions may apply.

(Reference Iowa Code 214A.31-214A.37)

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)

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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