Retroactive Fuel Credit Extensions May Result in Refunds
On Dec. 20, 2019, the Further Consolidated Appropriations Act, 2020 (the “Act”) was passed into law. In part, the Act contains extensions for various fuel tax credits and incentives, including the following:
- The biodiesel mixture credit, which provides a $1.00 per gallon credit, previously expired on Dec. 31, 2017. The Act retroactively extended the biodiesel mixture credit until Dec. 31, 2022.
- The second generation biofuel producer credit, which provides a $1.01 per gallon credit, previously applied to production occurring prior to Jan. 1, 2018. The Act retroactively extended the second generation biofuel producer credit to apply to any production occurring prior to Jan. 1, 2021.
- The alternative fuel credit, which provides a 50 cent per gallon credit, previously expired Dec. 31, 2017. The Act retroactively extended the alternative fuel credit until Dec. 31, 2020.
- The alternative fuel mixture credit, which also provided a 50 cent per gallon credit, previously expired on Dec. 31, 2017. The Act also retroactively extended the alternative fuel mixture credit until Dec. 31, 2020.
- The Act clarified the definition of an “alternative fuel mixture” to specifically exclude mixtures of liquefied petroleum gas, compressed or liquefied natural gas, and compressed or liquefied gas derived from biomass.
Following the passage of the Act, the IRS released Notice 2020-8, which provides guidance for taxpayers to make a one-time claim for the biodiesel mixture credit, the alternative fuel credit, and the alternative fuel mixture credit sold or used during 2018 and 2019.
Under Notice 2020-8, a taxpayer may file a Form 8849, Claim for Refund of Excise Tax, which must include a Schedule 3, Certain Fuel Mixtures and the Alternative Fuel Credit, claiming the amount of qualifying biodiesel mixture and alternative fuel credits for 2018 and 2019.
A taxpayer claiming the credit must include all eligible fuels on a single Form 8849 and Schedule 3 and file the claim between Feb. 14, 2020 and Aug. 11, 2020.
If multiple claims are filed or if the claim is not filed by Aug. 11, 2020, the IRS may deny the taxpayer’s claim for refund for the credits.
All alternative fuel mixture claims for 2018 and 2019 must be made on Form 720X, Amended Quarterly Federal Excise Tax Return. A taxpayer claiming the alternative fuel mixture credit must file one Form 720X for 2018 claims and a separate Form 720X for 2019 claims.
For more information or to discuss any questions or concerns, please reach out to a member of our Transportation Services Group.
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