Kansas E85 Laws and Incentives
State Incentives
Cellulosic Ethanol Production Incentive
The Kansas Development Finance Authority (KDFA) is authorized to issue revenue bonds to cover the costs of construction or expansion of a biomass-to-energy facility. A qualifying biomass-to-energy facility includes an industrial process plant that produces at least 500,000 gallons of cellulosic alcohol fuel, liquid or gaseous fuel, or energy in a quantity having a British thermal unit (BTU) value equal to, or greater than, 500,000 gallons of cellulosic alcohol fuel. In addition, any newly constructed or expanded biomass-to-energy facility is exempt from state property taxes for a period of up to 10 taxable years immediately following the taxable year in which construction or installation is completed. Expansion of an existing biomass-to-energy facility means expansion of the facility’s production capacity by at least 10%. (Reference Kansas Statutes 74-8949b, 79-32,233, and 79-229)
Renewable Fuel Retailer Incentive
Beginning January 1, 2009, a licensed retail motor fuel dealer may receive a quarterly incentive for selling and dispensing renewable fuels, including biodiesel. Qualified motor fuel dealers are eligible for up to $0.065 for every gallon of renewable fuel sold and up to $0.03 for every gallon of biodiesel sold, if the required threshold percentage is met. The threshold percentage for the incentive payment will increase on an annual basis from 10% for renewable fuel and 2% for biodiesel in 2009 to 25% for each fuel type beginning on January 1, 2024. Funds will be allocated from the Kansas Retail Dealer Incentive Fund.
Biodiesel is defined as a renewable, biodegradable, mono alkyl ester combustible liquid fuel derived from vegetable oils or animal fats that meets the specifications adopted by rules and regulations of the Secretary of Agriculture pursuant to current law. The specification must meet the ASTM D6751-07 specification for biodiesel fuel (B100) blend stock for distillate fuels, but may be more stringent regarding biodiesel quality and usability. Renewable fuels are defined as combustible liquids derived from grain starch, oil seed, animal fats, or other biomass; or produced from biogas source, including any non-fossilized, decaying, organic matter which is capable of powering spark ignition machinery. (Reference Kansas Statutes 79-34,170 through 79-34, 176)
Alternative Fuel Vehicle (AFV) Tax Credit
TThe state offers an income tax credit worth up to 40% of the incremental or conversion cost for qualified AFVs placed into service after January 1, 2005, as outlined in the table below. Qualified AFVs include vehicles that operate on a combustible liquid derived from grain starch, oil seed, animal fat, or other biomass, or produced from a biogas source.
| GVWR | Credit |
|---|---|
| Less than 10,000 lbs. | Up to $2,400 |
| 10,000 to 26,000 lbs. | Up to $4,000 |
| Over 26,000 lbs. | Up to $40,000 |
Alternatively, a tax credit in an amount not to exceed the lesser of $750 or 5% of the cost of the AFV is available to a taxpayer who purchases an original equipment manufacturer AFV. This credit is allowed only to the first individual to take title of the vehicle. For motor vehicles capable of operating on E85, the individual claiming the credit must provide evidence of purchasing at least 500 gallons of E85 between the time the vehicle was purchased and December 31 of the following calendar year. This tax credit must be deducted from the taxpayer's income tax liability for the taxable year in which the expenditures are made. In the event the credit is more than the taxpayer's tax liability for that year, the remaining credit may be carried over for up to three years after the year in which the expenditures were made.
(Reference Kansas Statutes 79-32,201)
Alternative Fueling Infrastructure Tax Credit
The state offers an income tax credit for alternative fueling stations placed in service after January 1, 2005, and before January 1, 2009. The tax credit, worth up to 40% of the total amount, may not exceed $160,000. For any fueling station placed in service after January 1, 2009, the credit amount is reduced and may not exceed $100,000. This tax credit must be deducted from the taxpayer's income tax liability for the taxable year in which the expenditures are made. In the event the credit is more than the taxpayer's tax liability for that year, the remaining credit may be carried over for up to three years after the year in which the expenditures were made. (Reference Kansas Statutes 79-32,201)
Ethanol Production Incentive
The Kansas Qualified Agricultural Ethyl Alcohol Producer Fund enables qualified agricultural ethyl alcohol (ethanol) producers to apply for a production incentive with the state Department of Revenue. If an ethyl alcohol producer who was in production prior to July 1, 2001, increases production capacity by 5,000,000 gallons over the producer's base sales, $0.075 may be collected for each gallon sold to an alcohol blender that is in excess of the producer's base sales, up to 15,000,000 gallons. Producers who began production on or after July 1, 2001, and who have sold at least 5,000,000 gallons to an alcohol blender may receive $0.075 for each gallon sold, up to 15,000,000 gallons. (Reference Kansas Statutes 79-34,163)
State Laws and Regulations
Alternative Fuel Vehicle (AFV) Acquisition Requirements
When purchasing a motor vehicle, state agencies must purchase a vehicle that is capable of operating on E85 fuel unless the vehicle model to be purchased is not available with an E85-capable engine or the cost of the vehicle is $250 or more than the cost of the comparable vehicle that does not utilize E85. When leasing a motor vehicle, state agencies must lease a vehicle that is capable of operating on E85 fuel unless no such vehicle is available for lease. (Reference Kansas Statutes 75-4617)
Regional Biofuels Promotion Plan
Kansas has joined Indiana, Iowa, Michigan, Minnesota, Ohio, South Dakota, and Wisconsin in adopting the Energy Security and Climate Stewardship Platform Plan (Platform) (PDF 2 MB), which establishes shared goals for the Midwest region, including increased biofuels production and use. Specifically, the Platform sets the following goals:
- Produce commercially available cellulosic ethanol and other low-carbon fuels in the region by 2012;
- Increase E85 availability at retail fueling stations in the region to 15% of stations by 2015, 20% by 2020, and 33% of all fueling stations in the region by 2025;
- Reduce the amount of fossil fuel that is used in the production of biofuels by 50% by 2025;
- By 2025, at least 50% of all transportation fuels consumed by the Midwest will be from regionally produced biofuels and other low-carbon transportation fuels.
The Platform also establishes a regional biofuels corridor program. The program directs state transportation, agriculture, and regulatory officials to develop a system of coordinated signage across the region for biofuels and advanced transportation fuels and to collaborate to create regional E85 corridors. The program requires standardized fuel product coding at fueling stations as well as increased education for retailers about converting existing fueling infrastructure to dispense E85. The state transportation, agriculture, and regulatory officials were required to report their corridor implementation plans to the Midwest Governors Association by April 1, 2008.
E85 Tax Rate Reduction and Definition
The minimum motor vehicle fuel tax rate on E85 is $0.17 per gallon, until July 1, 2020. Beginning July 1, 2020, the minimum tax rate on E85 will be $0.11 per gallon. E85 is defined as an alternative fuel that is a blend of denatured ethanol and hydrocarbon and typically contains 85% ethanol by volume, but must contain at least 70% ethanol by volume and complies with ASTM specification D5798-99. (Reference Kansas Statutes 79-3401 and 79-34,141)
Biofuels Use Requirement
State-owned diesel-powered vehicles and equipment must use a biodiesel blend that contains at least 2% biodiesel (B2), where available, as long as the incremental price of biodiesel is not more than $0.10 per gallon as compared to the price of diesel fuel. Further, individuals operating state-owned motor vehicles must purchase fuel blends containing at least 10% ethanol (E10), as long as these fuel blends are not more than $0.10 per gallon as compared to the price per gallon of regular gasoline fuel. (Reference Kansas Statutes 75-3744a)
Alternative Fuel Vehicle (AFV) Acquisition Requirements
Beginning in Model Year 2000 and each year thereafter, 75% of new light-duty motor vehicles acquired by the state fleet and its agencies, which are used primarily within a metropolitan statistical area or a consolidated metropolitan statistical area, are required to be AFVs. Light-duty motor vehicles include those with a gross vehicle weight rating of up to 8,500 pounds. (Reference Kansas Statutes 75-4616)
