116 3rd St SE
Cedar Rapids, Iowa 52401
AMES - A 10-year, $10 million tax chemical production tax credit program is a 'big deal,” according to Gov. Terry Branstad, who predicted its impact will be similar to results of state incentives for Iowa's fledgling ethanol industry in the 1980s.
Iowa is a leader in renewable energy, Branstad said at Iowa State University where he signed Senate File 2300 on Wednesday. The legislation will 'get us in the position so we can build new, cutting-edge bioindustries (by) leveraging homegrown, renewable resources to produce the next generation of building-block chemicals.”
In approving the tax credit 46-3 in the Senate and 95-1 in the House, lawmakers were responding to suggestions that Iowa is prime territory for biochemical and biofuel expansions. According to the Cultivation Corridor, a collection of public and private partners working to expand the state's biochemical and biofuel footprint, the national market for chemicals is more than $250 billion annually and will create more than 50,000 jobs by 2020.
Companies in Iowa will look at additional plants or expansions, Branstad said, 'and we can attract other companies that want to take advantage of this first-in-the-nation biochemical tax credit.”
It's all about value-added agriculture, according to a farm commodity spokesperson. The tax credit will help move grain processing beyond food and fuel to what's next.
The result will be more products, Branstad said. 'Not just food, pharmaceutical, nutraceuticals, but plastics and textiles, paints and the list goes on.”
The legislation was one of the priorities Branstad outlined in his January Condition of the State address. It also was a priority for economic development groups, including the Cedar Rapids Metro Economic Alliance.
That's because the Renewable Chemical Production Tax Credit is analogous to the research and development tax credit available to several high-tech Iowa industries, according to Gary Grant, who lobbied for the bill on behalf of the alliance.
Cedar Rapids, Grant said, is one of the largest ag processing centers in the country, and those companies involved in grain processing also are engaged in research and development.
'Sometimes we forget that advanced manufacturing and research includes ag processing,” Grant said. 'In this state, it's rather important to support the development of new products - and the jobs that go with them.”
However, the legislation was not without detractors. Sen. Herman Quirmbach, D-Ames, argued that if there is profit to be made developing new products, there is no need for a tax credit.
'Let the market do what it's good at,” said Quirmbach, who voted against the bill.
The tax credit is limited to no more than $10 million a year and is placed under the Iowa Economic Development Authority's $170 million aggregate annual tax credit cap, according to the Legislative Services Agency.
According to the LSA, the fiscal impact on the state coffers 'nets to zero.” However, if demand for the credit exceeds projections, the direct impact on the general fund will be negative.