Biofuels Credits

Seth Gilson, CPA, Partner

Ethanol Incentives Across the Midwest: What Fuel Retailers Need to Know in 2025

With evolving state tax credits and incentive programs aimed at promoting higher ethanol blends, retailers across the Midwest should take note of important updates and opportunities to maximize value from biofuel sales. Here's a breakdown of the latest developments in Iowa, Missouri, Nebraska, and South Dakota—and how they affect your bottom line.

Iowa: Key Credits and Expiring Opportunities

Mid-Level Blend Tax Credit (E15–E85)
Retailers selling blends between E15 and E85 have until December 31, 2024, to claim this now-expiring credit. The program offers $0.09 per gallon and applies to all retail sites, including tank wagons. Claims must be filed using Form IA 138.

E85 Credit
Still active through December 31, 2027, this program allows retailers to claim $0.16 per gallon sold of E85 fuel. Use Form IA 135 to file. Like the mid-level blend credit, this applies to all retail operations, including mobile tank wagon sales.

Purchaser Fuel Credits
For end users, Iowa allows credits for ethanol-blended gasoline used in unlicensed vehicles or non-highway purposes. The credit levels vary:

  • Gasoline and E10–E14: $0.30/gallon
  • E15 or higher: $0.255/gallon
  • Undyed Diesel or Biodiesel: $0.325/gallon
    Claims are made using Form IA 4136.

Missouri: Retailer Incentives and Infrastructure Support

Ethanol Sales Credit
Since January 1, 2023, Missouri retailers selling E15–E85 blends have been eligible for a $0.05 per gallon credit, continuing through December 31, 2028.

Biofuel Infrastructure Incentive Program
Missouri is also supporting infrastructure investments for ethanol blends of 15% or higher and biodiesel blends of 6% or greater. Two tiers define grant eligibility:

  • Tier 1
    • Terminal companies, fuel distributors, and larger retailers
    • Reimbursement: Up to 50% of project costs or $500,000
    • $500 application fee
  • Tier 2
    • Small retailers (five or fewer stations)
    • Reimbursement: Up to 75% of project costs or $250,000
    • $300 application fee

This program is a significant opportunity for smaller businesses to modernize fueling infrastructure.

Nebraska: Tapering Tax Credits for Higher Blends

Nebraska’s Higher Blend Tax Credit Act began in 2022 and supports retailers selling E15 or higher blends at physical retail sites (excluding tank wagon sales). The credit:

  • Peaks at $0.09/gallon in 2025
  • Decreases annually to $0.05/gallon by 2028

Retailers must apply for a certificate through the Nebraska Department of Revenue website:
https://revenue.nebraska.gov/individuals/nebraska-higher-blend-tax-credit-act

South Dakota: New Program Launching in 2025

Starting January 1, 2025, South Dakota will offer a $0.05/gallon credit for E15 sold through physical retail sites. This forward-looking incentive aims to increase ethanol adoption statewide.

What This Means for Your Business

Whether you're operating in one or several of these states, the takeaway is clear: Ethanol tax credits can significantly improve margins and support infrastructure investment. However, deadlines are approaching—especially in Iowa—and credit values may decrease over time, as seen in Nebraska.

Retailers should:

  • Review current and upcoming programs
  • File appropriate forms on time
  • Evaluate investment in infrastructure where grants are available
  • Monitor expiration dates closely

Staying informed and proactive can mean the difference between missed opportunities and optimized returns in the renewable fuels market.

 

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