On June 1, 2026, Governor Kim Reynolds signed Senate File 2493 (SF2493), creating a new excise tax exemption for certain ethanol-blended gasoline used in agricultural production. Effective July 1, 2026, the law exempts gasoline formulated with more than 85% ethanol by volume from Iowa's motor fuel excise tax when the fuel is purchased at a terminal or refinery rack exclusively for use in an implement of husbandry, such as farm equipment used in agricultural production. 

Under prior law, farmers generally paid motor fuel excise taxes on ethanol-blended gasoline and then sought refunds when the fuel qualified for an agricultural-use exemption. SF2493 changes that process for qualifying E85-plus fuel by allowing the exemption to apply at the point of purchase rather than through a refund mechanism. The legislation is intended to reduce costs and administrative burdens for farmers utilizing high-level ethanol blends in agricultural equipment. 

The new statute creates Iowa Code section 452A.16 and provides that the excise tax "shall not be imposed or collected" on ethanol-blended gasoline containing more than 85% ethanol when purchased exclusively for use in an implement of husbandry used in agricultural production. To receive the exemption, purchasers must provide an exemption certificate issued by the Iowa Department of Revenue. The certificate must be properly completed and signed by the purchaser, and suppliers are required to retain these records for at least three years. 

The law also includes safeguards to ensure that exempt fuel is used only for its intended purpose. If an individual purchases fuel under an exemption certificate and later uses or disposes of the fuel in a nonexempt manner, that purchaser becomes solely liable for the excise tax and must remit the tax directly to the Iowa Department of Revenue. The Department may also disallow exempt sales unless supported by the required exemption documentation. 

Supporters contend that higher ethanol blends can provide farmers with an additional fuel option while creating new markets for Iowa-produced ethanol. The legislation received overwhelming bipartisan support in the General Assembly, passing the Senate unanimously by a vote of 44-0 and the House by a vote of 85-1 before being signed into law by the Governor. 

For Iowa farmers utilizing equipment capable of operating on fuel containing more than 85% ethanol, SF2493 provides a direct tax exemption that may lower operating costs and simplify fuel purchases. The law reflects Iowa's continued efforts to encourage the use of higher ethanol blends while supporting innovation in agricultural equipment and fuel technology.