Ezel / Tax Rulings / KS
KS Notice 01-05 Motor Vehicle Fuel Tax 2001-08-20

How did 2001 House Bill 2011 change the Kansas ethanol producer incentive payments?

Short answer: 2001 House Bill 2011, effective July 1, 2001, revised the Kansas Qualified Agricultural Ethyl Alcohol Producer Fund. Producers already in production before July 1, 2001 receive 5 cents per gallon of agricultural ethyl alcohol sold to an alcohol blender in fiscal years 2002-2004, and 7.5 cents per gallon on gallons above their year-2000 base sales once they increase capacity by 5,000,000 gallons. Producers starting on or after July 1, 2001 receive 7.5 cents per gallon once they have sold at least 5,000,000 gallons. Beginning fiscal year 2005, all producers who increase base production by 5,000,000 gallons are paid 7.5 cents only on gallons over base sales. Payments are limited to no more than seven years per producer and no more than 15,000,000 gallons per production year.

Apply this to your situation

This page answers the general question as of 2001. Ezel answers yours, under current Kansas tax law, with citations.

Currency note: this ruling is from 2001
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Kansas Department of Revenue Notice providing general public guidance, not a private ruling issued to one taxpayer. It describes 2001 law as it stood that year; later law and rates may change the result, so verify the current statute before relying on it. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

2001 House Bill 2011, effective July 1, 2001, changed the Kansas Qualified Agricultural Ethyl Alcohol Producer Fund (the Alcohol Incentive Program), which pays qualified producers a production incentive for distilling agricultural ethyl alcohol sold to an alcohol blender:

  • Producers in production before July 1, 2001: $.05 per gallon in fiscal years 2002, 2003, and 2004, until they exceed their base sales (gallons sold in calendar year 2000) by 5,000,000 gallons in the production year; then $.075 per gallon on all gallons above base sales once capacity exceeds base by 5,000,000 gallons.
  • Producers who start on or after July 1, 2001: $.075 per gallon once they have sold at least 5,000,000 gallons in the production year. Their production year starts in the quarter the application was received.
  • All producers (from fiscal year 2005): those who increase base production by 5,000,000 gallons are paid $.075 per gallon only on gallons over base sales.
  • Caps: payments from the new account are limited to no more than seven years per producer and no more than 15,000,000 gallons per production year.

What this means for you

If you're a Kansas ethanol producer, HB2011 set your incentive rate by whether you were already operating and whether you expanded: 5 cents a gallon for established producers up to their 2000 baseline, and 7.5 cents a gallon for the expansion volume (or for qualifying new producers), subject to the seven-year and 15-million-gallon limits.

Common questions

Q: What is the base incentive for an existing producer?
A: $.05 per gallon of agricultural ethyl alcohol sold to a blender in FY2002-2004, up to the producer's year-2000 base sales.

Q: When does the higher 7.5-cent rate apply?
A: On gallons above base sales once an existing producer expands capacity by 5,000,000 gallons, or for a new producer that has sold at least 5,000,000 gallons.

Q: Are there limits?
A: Yes — no more than seven years of payments per producer and no more than 15,000,000 gallons per production year.

Citations and references

  • 2001 House Bill 2011 -- Kansas Qualified Agricultural Ethyl Alcohol Producer Fund incentive changes (effective July 1, 2001).

Subject

Alcohol Incentive Fund Changes (House Bill 2011)

Source

Original ruling text

Notice
Notice Number: 01-05
Tax Type: Motor Vehicle Fuel Tax
Brief Description: Alcohol Incentive Fund Changes (House Bill 2011)
Keywords:
Approval Date: 08/20/2001

Body:
KANSAS DEPARTMENT OF REVENUE
CUSTOMER RELATIONS

                                                NOTICE 01-05
                                            Alcohol Incentive Fund

The 2001 Kansas legislature enacted House Bill 2011, which takes effect July 1, 2001, and provides for the following
changes to the current Alcohol Incentive Program.

"The Kansas Qualified Agricultural Ethyl Alcohol Producer Fund enables qualified agricultural ethyl alcohol
producers to apply to the Department of Revenue for a production incentive for the distillation of agricultural ethyl
alcohol. During fiscal years 2002, 2003, and 2004, producers who are in production before July 1, 2001 shall receive
five cents for each gallon of agricultural ethyl alcohol sold to an alcohol blender. If such a producer increases their
agricultural ethyl alcohol production capacity on or after July 1, 2001 by 5,000,000 gallons over their base sales (the
number of gallons of agricultural ethyl alcohol sold by the producer in calendar year 2000), the producer may collect
7.5 cents for each gallon of agricultural ethyl alcohol sold to an alcohol blender that is in excess of the producer's base
sales (up to 15,000,000 gallons sold).”

“Producers who commence production on or after July 1, 2001 and who have sold at least 5,000,000 gallons of
agricultural ethyl alcohol shall receive 7.5 cents for each gallon of agricultural ethyl alcohol sold to an alcohol blender
(up to 15,000,000 gallons sold).”

This bill will affect the producers in the following manner:

Ethanol Producers in production prior to July 1st 2001:
¨ Will receive for fiscal years 2002, 2003, and 2004 a rate of $0.05 for each gallon of agricultural ethyl alcohol
produced in the state of Kansas and sold to an alcohol blender until producer exceeds base production sales by
5,000,000 gallons in the production year.
¨ Producers will receive $0.075 a gallon on all gallons in excess of base sales as soon as production capacity exceeds
base sales by 5,000,000 gallons in the production year.

Ethanol Producers that commence production on or after July 1st 2001:
¨ Will receive $0.075 for each gallon produced in the State of Kansas and sold to an alcohol blender once the producer
has sold at least 5,000,000 gallons in the production year.
¨ The production year shall start in the quarter that the application was received. A new producer’s annual period for
the production year will be based upon production start date and application to the department.

All Ethanol Producers:
¨ Beginning with fiscal year 2005, all producers who increase their base production by 5,000,000 gallons will be paid
.075 cent per gallon only on those gallons over base sales.
¨ The amounts payable from the new account shall be payable for no more than seven years to any one producer.
¨ No producer shall receive monies from the new account for more than 15,000,000 gallons, per production year.

TAXPAYER ASSISTANCE
To obtain additional copies of this or any other notice call the Kansas Department of Revenue’s voice mail forms

Page 2

request line at 785-296-4937 or download them from our web site: www.ink.org/public/kdor. If you have any
questions about this notice, please contact our Motor Fuel Tax area.
Motor Fuel Tax Correspondence
Docking State Office Building
915 SW Harrison St.
Topeka, KS 66625-8100
In Topeka call: 368-8222
Outside Topeka call toll free: 1-877-526-7738
Fax: (785) 291-3614
Notice 01-05
August 20, 2001

Date Composed: 09/05/2001 Date Modified: 10/10/2001

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