Ethanol Giant Fights Iowa on Credit

LINCOLN, Neb. (DTN) -- The Iowa Supreme Court may be the next stop for the nation's largest ethanol producer, Poet LLC, in its ongoing battle against the state to keep proprietary information from the public as part of a tax protest for the company's cellulosic ethanol venture deemed "Project Liberty."

The Court of Appeals of Iowa affirmed the decision of a district court that earlier denied Sioux Falls, South Dakota-based Poet's motion to shield from public disclosure documents supporting a company tax protest on the research activities tax credit.

Like many Iowa companies, Poet has applied for and received millions of dollars in the tax credits dating back to 2016.

In January 2021, the Iowa Department of Revenue notified Poet that the state was denying its tax credit claims for 2016 through 2019 and ordered the company to repay about $595,000 it received in 2017.

"Poet filed a 49-page protest challenging the tax credit denial," the court said. "Along with the protest, Poet submitted thousands of pages of exhibits detailing the research and development of its ethanol extraction method, plus financial records."

At the bottom of a cover page for the protest, Poet included the statement: "This protest and all exhibits/documents identified herein and attached hereto contain or constitute trade secret information that is protected from disclosure pursuant" to state law.

The Iowa Department of Revenue then responded in a letter to Poet, according to the court, that the protest and any documents provided "could be made available" to the public.

After Poet filed the protest, the state received two public records requests for copies of the protest documents. Poet then requested the state to delete "identifying details" in 593 pages of documents and about as many exhibits.

The Iowa Department of Revenue determined the documents were not confidential because disclosure "served a public purpose." Poet petitioned a district court in Iowa, and the court affirmed the state's decision.

In its appeal, Poet argued that disclosure of its tax protest served no public purpose because the company might not receive public funds.

"State tax returns show Poet claimed more than $1 million in tax credits from 2016 through 2019," the appeals court said in its decision. "The department requested immediate repayment of the 2017 claim. In fact, Poet concedes it received the credit for at least one of the years claimed. So substantial evidence supports the court's conclusion that Poet received tax credits before the 2021 decision that it was ineligible."

Poet also argued that if its tax protest failed, the company would not receive public funds, meaning the state would have to resolve the protest before determining whether there would be a public disclosure.

"True, the expenditure of public funds is an important reason for disclosure," the appeals court said. "But our cases don't require that money change hands or credit be conferred -- the public may be just as interested in why a taxpayer did not receive a credit or other non-economic aspects of a policy. In sum, we agree with the district court that Poet did not prove its tax protest was a communication not required by law."

Cody Edwards, an attorney representing Poet in the case, told DTN the company intends to take the case to the state's highest court.

"The state of Iowa -- which argued for public disclosure of the detailed, proprietary business information in this case -- previously concluded in the 2012 Iowa film tax credit case that Iowa's open records law does not allow public disclosure of detailed business information," Edwards said.

"Poet respectfully disagrees with the court of appeal's ruling and is seeking further review with the Iowa Supreme Court."

Neither Poet LLC nor its attorney responded to DTN's request for comment.

Poet has been developing its cellulosic ethanol technology for the better part of two decades. In 2019, then Poet-DSM Advanced Biofuels LLC announced it was pausing cellulosic ethanol production at its Project Liberty plant in Emmetsburg, Iowa, https://www.dtnpf.com/….

The technology produces ethanol using corn cobs and other corn fiber such as husks. It was at that time that Poet announced it was shifting its focus to research and development.

Poet operates 34 corn-based ethanol plants in Iowa, Indiana, South Dakota, Minnesota, Michigan, Nebraska, Ohio and Missouri.

Read more on DTN:

"POET-DSM Hits Breakthrough in Cellulosic Ethanol Production," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on social platform X @DTNeeley

(c) Copyright 2024 DTN, LLC. All rights reserved.