Bill > SSB1131

Introduced Session

BACKGROUND —— GRAIN DEALERS AND WAREHOUSE OPERATORS. This bill amends provisions regulating marketers of grain, referred to as grain dealers purchasing grain (Code chapter 203), and warehouse operators storing grain under bailment (Code chapter 203C), administered by the department of agriculture and land stewardship (DALS). DIVISION I BACKGROUND —— GRAIN DEPOSITORS AND SELLERS S.F. _____ INDEMNITY FUND. A person selling grain to a licensed grain dealer (seller) or a person depositing grain with a licensed warehouse operator (depositor) may be reimbursed for a loss incurred by the failure of the licensee to honor a contractual obligation regarding the transaction (Code section 203D.6). A payment is made from the grain depositors and sellers indemnity fund (indemnity fund) upon a determination that the claim is eligible for payment by the Iowa grain indemnity fund board (indemnity board) acting in cooperation with DALS. DIVISION I BACKGROUND —— FEES. In addition to license fees deposited into the general fund of the state (Code sections 203.6 and 203C.33), each licensee may be required to pay either one or two special fees (indemnity fees) to support the indemnity fund, referred to as a participation fee and per-bushel fee. The licensed grain dealer’s participation fee is calculated according to the following formula: the assessment rate of not more than $0.014 multiplied by all bushels of purchased grain during the grain dealer’s prior fiscal year with a minimum of $50 and no maximum limit. The licensed grain dealer’s per-bushel fee is calculated according to a similar formula: the assessment rate of not more than $0.25 multiplied by all bushels of purchased grain for the grain dealer’s assessment year with no minimum and a $500 maximum limit. The qualifying term “purchased grain” equals the total number of bushels purchased from sellers minus a number of exempt bushel purchases, including those purchased under credit-sale contract (Code section 203D.1). Purchased grain is reported to DALS as “paid company-owned” (Code section 203D.1). The licensed warehouse operator’s participation fee is $0.014 multiplied by the number of bushels of storage capacity of the warehouse (Code section 203D.5). DIVISION I BACKGROUND —— INDEMNITY BOARD REVIEW OF INDEMNITY FUND. The indemnity board must annually review the debits of and credits to the indemnity fund and by May 1 determine whether the balance triggers a waiver or reinstatement (Code S.F. _____ section 203D.5). The triggered waiver or reinstatement is effective on the first day of the following assessment year (September 1). If a waiver is triggered on the last day of an assessment year, a licensee is subject to pay the outstanding amount of the participation fee that is otherwise owing for the current assessment year. However, a licensed grain dealer is no longer obligated to pay the outstanding amount of the per-bushel fee otherwise owing for that period, unless the amount is delinquent (Code section 203D.5). The board must reinstate the indemnity fees if assets in the fund are $3 million or less. DIVISION I BACKGROUND —— CREDIT-SALE CONTRACTS. A credit-sale contract (also referred to as deferred-payment contract, deferred-pricing contract, or price-later contract) involves a transaction for the sale of grain in which the sales price is to be paid to the seller by the licensed grain dealer more than 30 days after the delivery of the grain to the licensed grain dealer (Code section 203.1). The delayed price arrangement may be made on the basis of an expectation of higher price or deferred tax liability. For regulations regarding the use of credit-sale contracts by licensees, see Code sections 203.3, 203.8, 203.15, 203.17, and 203C.17. DIVISION I BACKGROUND —— PAYMENT OF CLAIMS. A claim by a seller or depositor (claimant) for the reimbursement of a loss from the indemnity fund begins on the incurrence date which is when the grain dealer’s or warehouse operator’s state license ceases or when the grain dealer or warehouse operator files a petition in bankruptcy, as elected by the claimant (Code section 203D.6). The claim must meet eligibility requirements, meaning that it is timely filed, there is evidence of a loss incurred by a claimant, and the claim derives from a covered transaction. For a claimant who is a seller, a covered transaction requires that title be transferred with six months of the incurrence date. A covered transaction excludes sale by credit-sale contract. The value of a loss incurred by a seller S.F. _____ is based on the grain’s sales price. If the sold grain was unpriced, the value of a claim is presumed to be based upon the price paid on the incurrence date at the nearest terminal. For a claimant who is a depositor, a covered transaction requires that the grain must have been delivered to a licensed warehouse operator. Generally, the value of the depositor’s claim is based on the grain’s fair market value. A seller or depositor is entitled to be reimbursed 90 percent of a loss but not more than $300,000. DIVISION I PROVISIONS —— INDEMNITY FEES TRIGGERS. The division adjusts both triggers waiving or reinstating the two indemnity fees. The division increases from $8 million to $12 million the balance in the indemnity fund required to trigger a waiver and increases from $3 million to $5 million the balance in the indemnity fund required to trigger a reinstatement. DIVISION I PROVISIONS —— INDEMNIFICATION OF LOSSES (REPAYMENT CLAIMS). The division allows a seller to file a special repayment claim against the indemnity fund as a result of the grain dealer’s bankruptcy. The special repayment process allows such a seller to recover the amount of the grain dealer payment that the seller was forced to repay to the grain dealer’s bankruptcy estate. To be timely, a seller must file a repayment claim with DALS not later than 30 days after the repayment loss is finalized by a bankruptcy court. DALS may provide notice of the repayment claim process to a seller who may file a repayment claim. If DALS chooses to provide a notice to the seller, DALS has discretion to determine a reasonable method and manner of providing such notice. The indemnity board must determine that a repayment claim is eligible for payment from the indemnity fund, including whether the repayment claim derives from a covered transaction. DALS is required to deliver notice to a seller filing a repayment claim regarding the indemnity board’s determination in the same manner as for an ordinary loss. Like an ordinary loss, the seller is entitled to receive 90 percent of a loss but not more S.F. _____ than $300,000, a deferral of payments based on insufficient moneys in the indemnity fund, subrogation, and a five-year expiration period. DIVISION I PROVISIONS —— INDEMNITY FUND (FEES AND REIMBURSEMENT BASED ON CREDIT-SALE CONTRACT TRANSACTIONS). The division provides that grain sold by credit-sale contract is considered purchased grain. Therefore, a licensed grain dealer is assessed a participation fee and per-bushel fee and a licensed warehouse operator is assessed a participation fee. The division also provides that the sale of grain by credit-sale contract is no longer excluded from the meaning of a covered transaction. A seller may therefore claim a loss resulting from the grain dealer’s breach of this type of contract. Generally, the amount of the loss equals the sales price after deducting any amount received or otherwise recovered through other legal and equitable remedies including the liquidation of assets (Code section 203D.1). In the case of a claim filed for a loss resulting from a credit-sale contract for which no price was established, the valuation would be determined in the manner described for unpriced grain. The division does not modify special regulations that apply to a licensee’s use of a credit-sale contract. DIVISION I PROVISIONS —— INDEMNITY FEES (PAYMENT DATES). The bill provides that a licensee may remit the participation fee in one installment as part of the license renewal or four successive installments not later than in the month following the end of the fund’s assessment quarter. The bill provides that the grain dealer pays the per-bushel fee on the same installment dates. DIVISION I PROVISIONS —— EMERGENCY RULES. DALS is authorized to adopt rules on an emergency basis necessary to administer the division’s provisions. When a statute authorizes emergency rulemaking, an agency may adopt a rule immediately without going through the periods of the rulemaking process known as regulatory analysis (Code section 17A.4A) S.F. _____ and notice of intended action (Code section 17A.4(3)). The division requires that such emergency rulemaking be “double barreled”. Under that process, when an agency files an emergency rule, it also files the same rule as a notice of intended action that will follow the regular rulemaking process. Normally, a rule cannot be effective prior to 35 days after its filing with the administrative rules coordinator and publication in the Iowa administrative bulletin. Under emergency rulemaking, a rule can be made effective on the date of filing and acceptance by the administrative rules coordinator or any subsequent date, as specified by the agency in the filing (Code section 17A.5(2)(b)(1)). This provision of the bill takes effect upon enactment. DIVISION I PROVISIONS —— ASSESSMENT OF FEES (CREDIT-SALE CONTRACT). A grain dealer who is a party to a credit-sale contract owing an indemnity fee assessed on grain purchased by credit-sale contract is imposed on September 1 of the first assessment quarter. DIVISION II BACKGROUND —— FUND’S ASSESSMENT YEAR. Prior to 2023, the fund’s assessment year began on July 1 and ended on June 30, which corresponded to the state fiscal year, with assessment quarters beginning July 1, October 1, January 1, and April 1. In 2023 Iowa Acts, chapter 154, the assessment year was changed to September 1, and the assessment quarters begin on September 1, December 1, March 1, and June 1. DIVISION II PROVISIONS —— FUND’S ASSESSMENT YEAR. The division restores the former assessment year and quarters. However, the division takes effect on the publication date of the issue of the Iowa administrative bulletin stating that the current indemnity fees have been waived.

Committee Categories

No sponsors listed

Other Sponsors (1)

Committee report approving bill, renumbered as SF 608. (on 03/11/2025)

Official Document