Mixture Credit Exclusion from Income Update

Jun 26, 2019

Sunoco Seeks Relief From Supreme Court; American Fuel and Petrochemical Manufacturers File a Brief in Support

On May 24, 2019, Sunoco, Inc. (Sunoco) sought to appeal the decision of the United States Court of Appeals for the Federal Circuit in Sunoco, Inc. v. The United States (2017-1402) which denied Sunoco’s claim for a refund of federal income taxes paid on the alcohol fuel mixture credit claimed pursuant to 26 U.S.C. § 6426(b). Like the Federal Court of Claims before it, the Court of Appeals found that the mixture credit is a reduction in excise tax liability and nothing more. The appeal – known as a  petition or writ of certiorari – is filed with the Supreme Court and asks the Court to consider whether, in its opinion, the legal principles at the heart of the case are sufficiently important to grant review. If the Court considers the legal principles sufficiently important to grant review, the Court will grant the writ of certiorari and a hearing date will be set.

The question presented in the writ of certiorari is, very simply, whether the “Federal Circuit properly held that tax credits operate as a reduction of tax liability rather than as a payment of taxes owed.” The writ points out that the answer is critical because if a credit operates as a payment of taxes, the taxpayer may typically exclude that payment from gross income, whereas if the a credit operates as a reduction of tax liability it increases the taxable income. The writ argues that the Supreme Court should grant review because the correct treatment of tax credits is a recurring question impacting many tax programs and, in the instant case, the decision of the Federal Circuit results in disparate treatment between two taxpayers that both created a biofuel mixture for no clearly articulated reason.

In an amicus brief, filed in support of Sunoco on June 24, 2019, the American Fuel and Petrochemical Manufacturers trade association stated that the decision of the Federal Circuit adversely affects its members and subjects “some producers of ethanol-gasoline blends to income tax” on the alcohol mixtures credits while allowing other taxpayers to “claim the subsidy tax-free with no apparent reason for making that distinction.” The brief argues that all claimants of the credit – who engaged in activity Congress sought to encourage – should be entitled to the full benefits of the credit. It further argues that where the tax credit and tax are calculated independently of one another, the credit is a payment of the tax and not a reduction of tax liability, unless Congress explicitly states otherwise.

Once the government has filed its Brief in Opposition (or waived its right to do so) and Sunoco has filed a Reply Brief if it chooses, the Court will confer on whether to consider moving the case forward or deny the petition. At least four justices must vote to grant review for the case to move forward.


Oscar L. Garza & Associates, P.C. is a Houston-based boutique law firm specializing in transactional tax and trade matters surrounding all aspects of the oil and petroleum industry.  With over 20 years of experience counseling clients operating in all aspects of the oil and petroleum sector our lawyers have an in-depth knowledge of the industry, enabling us to provide quality service and creative solutions to our clients.  Please visit our website at www.olgarza.com.  For more information please contact:


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