Editorial: Biochemical tax credits: A ‘big deal’ for Iowa

Source: By Sioux City Journal Editorial Board • Posted: Tuesday, April 12, 2016

We commend the Iowa Legislature for passage this year of tax credits designed to encourage extraction of chemicals from biomass for use in consumer products such as pharmaceuticals, plastics, textiles and cosmetics.

In 2014, Iowans celebrated the start of a new chapter for the renewable fuels industry in our state as cellulosic ethanol production, which uses corn plant residue left in the field, began. Biochemical production represents another new frontier of promise for the future.

The new tax credits – $10 million each year for 10 years and described by Gov. Terry Branstad as the first of their kind in the nation – will be administered by the Iowa Economic Development Authority within its existing $170 million tax credit cap. Signed into law by Branstad on Wednesday, the tax credits will strengthen Iowa’s position as a player in a competitive $250 billion chemical industry projected to produce 50,000 new jobs by 2020.

“The production of … biochemicals is perhaps the fastest-growing segment of the bioscience industry and represents one of Iowa’s best opportunities for the development of a high-density cluster such as Silicon Valley,” according to an IEDA background statement about renewable chemical production tax credits.

Battelle (a nonprofit, independent research firm located in Columbus, Ohio) was commissioned by Iowa Partnership for Economic Progress – the state’s CEO-level, industry-led advisory board created by Branstad in 2011 – and the Iowa Business Council to provide the state with an economic development strategic plan for the future. The 18-month, $400,000 study, which was released in December 2014, was privately funded.

“One of the findings of the report,” according to the IEDA background statement, “was that while Iowa’s growth over the last decade has been strong, future growth will require taking advantage of new opportunities and sectors that promise to outpace national growth. IEDA believes that chemical production from biomass feedstocks represents such an opportunity.”

Because the state ranks second in the nation for the availability of biomass, “it is uniquely positioned to take advantage of growth in this sector,” the background statement said.

A report introduced in January, prepared by three Iowa State University professors and funded by the Iowa Biotechnology Association and the Cultivation Corridor (a public-private partnership working to expand the state’s biochemical footprint), the tax credits for biochemical production could have the same kind of impact on Iowa as did state tax credits for the ethanol industry.

“A similar opportunity now exists to make Iowa the leader in the development of the bio-based chemicals industry,” the report said.

When he signed the bill on the ISU campus in Ames, Branstad said the tax credits 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.”

It’s a “big deal,” Branstad said.