Company ordered to be more specific about why public shouldn’t see Iowa tax credit appeal

Source: By Tyler Jett, Des Moines Register • Posted: Tuesday, January 3, 2023

Bales of cellulosic field refuse sit on a farm outside Emmetsburg, with a banner advertising Project Liberty, cellulosic ethanol production project by Poet Biorefining.

In a legal case about whether a tax appeal from the country’s largest ethanol producer is an open record, Iowa Department of Revenue Director Kraig Paulsen has asked the company to make more specific arguments.

In a Dec. 20 order, Paulsen wrote that attorneys for ethanol maker Poet did not build a precise enough case when they argued that the company’s tax credit appeal is exempt from public records laws because the information would reveal trade secrets. The Department of Revenue has a 46-year-old policy that tax appeals generally are public information.

Poet’s lawyers have argued that the department cannot disclose the company’s appeal because doing so would damage the business, revealing to competitors how Poet operates and stripping the company of a competitive advantage. But Paulsen wrote in his order that Poet’s attorneys didn’t make a good argument because they didn’t explain which specific trade secrets the appeal’s release would expose.

Paulsen wrote that the lawyers carried the burden of proving that public disclosure would hurt the company, and that they had failed to make their case in arguments over the last 18 months.

“However,” he wrote, “in light of the volume and complexity of (Poet’s) appeal file, the Director believes additional clarification from the parties is warranted.”

The case concerns South Dakota-based Poet’s request for research activities credits, which are tax benefits for companies conducting research in the state. At some point after Poet received a credit, Department of Revenue officials determined that the activity the company described as research did not qualify.

Poet appealed the Department of Revenue’s decision. State Sen. Joe Bolkcom, D-Iowa City, a longtime critic of the research activities credit, filed a records request in 2021 to view Poet’s appeal.

According to Paulsen’s order, the Department of Revenue has treated tax appeals as open records since at least 1976. But Poet filed a motion to block the appeal’s disclosure in July 2021. Bolkcom’s records request has been pending since.

Bolkcom, who will leave office when the new legislative session begins, said he requested Poet’s appeal because he wants to see how much money the company received from the tax credit. He said he was frustrated by Paulsen’s decision to let Poet’s attorneys refine their trade secret argument.

“How many swings at the grapefruit do they get?” Bolkcom said. “Make a ruling and move on.”

He has said he doubts many companies that have received the credits actually were researching new products, and noted that ethanol has long been produced.

A spokesperson for Poet declined to comment Friday. An Iowa Department of Revenue spokesperson did not respond to an email seeking comment.

Poet has 12 plants in Iowa, which is the nation’s top producer of ethanol and corn, the primary ingredient in the biofuel, which is mixed into the nation’s gasoline supply under federal law. The company’s founders, Jeff and Tammy Broin, are major political funders, providing about $95,000 a year to federal candidates from 2008 to 2021. The company’s political action committee, meanwhile, contributed $300,000 a year during that stretch.

The company has benefitted from the research activities credit, receiving at least $16.8 million from 2016 to 2021, according to the limited details that Department of Revenue discloses on the credit.

Fifteen months after Poet moved to block Bolkcom’s records request, Paulsen held a closed-door hearing on the issue Oct. 10.

In addition to asking Poet in his Dec. 20 order to provide more details about its trade secrets argument, Paulsen rejected two other arguments from the company’s lawyers about why the appeal should be exempt from public records.

Poet’s lawyers argued that the appeal is exempt because the law does not apply to some documents that companies provide government agencies. Paulsen, however, wrote that the exemption only applies if the documents don’t serve a public purpose.

“There is a public purpose for disclosure of research activities tax credit appeals ― to help voters and other members of the public to determine whether the research activities credit is good public policy and to evaluate whether the Department is administering the credit effectively,” Paulsen wrote.

Poet’s lawyers also argued that the appeal is exempt from open records laws because the law does not apply to some communication between private people and government officials. But Paulsen wrote that the exemption covers three categories of communication: employment applications, whistleblower complaints and public safety issues.

The exemption also only applies if the government did not require the communication from the private actor. He said the Department of Revenue requires Poet to file an appeal if the company wants the research activities credit.

“While a taxpayer is not required to file a tax appeal, those who do file an appeal are bound by those rules and statutes,” Paulsen wrote. “Embedded in the relevant statutes and rules is a presumption that tax appeals are public records.”

Paulsen’s order does not give Poet a firm deadline for when it needs to provide more details about its trade secrets argument. Instead, the director told the company to update him within 90 days of when Poet finished appealing his decision to a judge ― assuming Poet does appeal.

Paulsen said the records are still exempt from public disclosure laws until he makes another ruling on the trade secrets issue.

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at, 515-284-8215, or on Twitter at @LetsJett.