Butane Alternative Fuel Mixture Credit Cases; Latest Updates on the Court Proceedings

Sep 05, 2019

Recent filings show the IRS taking a similar approach of confusing the court as it did in Sunoco, Inc. v. The United States, the case arguing that the alcohol mixture excise tax credit should be excluded from income, in cases arguing that blends of butane and gasoline should be eligible for the alternative fuel mixture excise tax credit under 26 U.S.C. § 6426(e). At the end of June, the plaintiff in Vitol Inc. v. United States of America, (No. 4:18-cv-2275) filed a Motion for Partial Summary Judgment asking that the court find that butane is a liquefied petroleum gas. In July, the defendant United States filed a response requesting that either the Court delay consideration of the motion until the close of the discovery period or grant the United States an extension of time to respond. In its motion, the United States argues that the opinion sought was with respect to butane generally rather than the specific butane subject to the claims. How the properties of butane could be so different that different volumes may or may not be deemed to be a liquefied petroleum gas is not explained; the United States seems satisfied to simply proffer that the properties might be sufficiently different that even if butane generally is within the definition of liquefied petroleum gas, the butane subject to the case at hand may not be. In a related case filed in April, Valero Marketing & Supply Co. v. United States of America, (No. 5:19-cv-328), plaintiff Valero filed a claim for a refund of excise tax paid on alternative fuel mixtures containing butane and gasoline under the theory that such mixtures should have been eligible for the alternative fuel mixture credit. In July, the defendant United States filed a Motion to Dismiss asserting sovereign immunity, the doctrine of variance and lack of subject matter jurisdiction.

Both cases are pending at a time when Congress is considering the future of the alternative fuel mixture credit. Perhaps as a way to stall any rulings on the merits while legislation is pending, the government is arguing everything but the merits of the motions.

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