News Alerts

IRS Guidance on Filing 2018 & 2019 Biodiesel, Renewable Diesel and Alternative Fuel Excise Tax Credits

The IRS has issued guidance to taxpayers on how to claim the biodiesel, renewable diesel and alternative fuel excise tax credits for the 2018 and 2019 calendar years.

Claiming Biodiesel and Renewable Diesel Mixture and Alternative Fuel Excise Tax Credits

Notice 2020-08 (attached) requires taxpayers to file all claims for biodiesel and renewable diesel mixture and alternative fuel tax credits on IRS Form 8849, Schedule 3.  All claims for calendar years 2018 and 2019 should be filed on a single Form 8849.  Under this guidance claimants of biodiesel and renewable diesel mixture and alternative fuel credits cannot use Form 720 for claims for the fourth quarter of 2019 and any claims filed on that form should be refiled in accordance with Notice 2020-08. The period in which taxpayers may file claims for 2018 and 2019 begins on February 14, 2020 and runs through August 11, 2020. The IRS will accept claims filed in accordance with the notice prior to February 14, 2020 (such claims will be treated as filed on February 14, 2020 and will not be processed before that date). The IRS will issue a payment of the credit to the taxpayer within 60 days of receipt of the claim (the date of the claim being deemed February 14, 2020 for anything filed before that). Claims may be filed by mail or electronically.

The IRS guidance notes that taxpayers claiming the biodiesel, renewable diesel and alternative fuel credits as income tax credits are require to follow the usual rules of attaching their claim to their income tax return. Taxpayers who claim the second generation biofuel income tax credit should also do so on their  income tax return.

Claiming Alternative Fuel Mixture Excise Tax Credits

The guidance requires claimants of the alternative fuel mixture credit to file all claims – including the fourth quarter 2019 – on IRS Form 720X (Amended Quarterly Excise Tax Return).  A separate Form 720X must be filed for 2018 and 2019. Claims for the alternative fuel mixture credit must not exceed the claimant’s excise tax liability incurred during the quarter to which the claim relates.  The period in which taxpayers may file claims for the alternative fuel mixture credit begins on February 14, 2020.  Claimants must file within three years from when the tax return was filed or two years from when the excise tax was paid, whichever is later.

As a reminder, the statute that reinstated the alternative fuel mixture credit bars all claims for the $0.50 per gallon alternative fuel mixture credit for mixtures containing contain liquefied petroleum gas (including butane and propane), compressed or liquefied natural gas and compressed or liquefied gas derived from biomass, unless the claim was filed prior to January 8, 2018 and has not been denied.

Petroleum Activity Tax (PAT) Licensing Deadline Reminder

The Ohio Department of Taxation has issued a reminder that all OH suppliers are required to renew their license each year on or before March 1st.  The PAT Supplier’s License Application can be found on the Gateway at gateway.ohio.gov.

The following license fees apply to suppliers:

¹ Only one license fee applies to each supplier, so in the event an applicant qualifies as both rack/refinery and an importer, the license fee is $1,000 total.

Please visit the Department’s website at tax.ohio.gov or contact us at 1-888-722-8829 with any questions regarding the PAT.

Ohio Department of Taxation
Business Tax Division
P.O. Box 16158
Columbus, Ohio 43216-6158
Telephone: (888) 722-8829
Fax: (206) 666-4462

Florida Department of Revenue Fuel Tax Rates Revised

The Florida Department of Revenue posted a revised 2020 Motor Fuel Tax Rates chart that corrected a local option tax listed for Lake County. The original document posted on November 22, 2019 reported an increase to the additional local option tax for Lake County from 0 to 5 cents per gallon on motor fuel. The additional local option tax will remain 0 cents for Lake County in 2020. A credit should be generated and presented to your customer(s) if the additional 5 cents was collected in error.

Corrections to the original 2020 rate chart are listed below and may be found at floridarevenue.com/taxes/rates.

Exhibit B – 2020 State Taxes, Inspection Fee, Ninth Cent, Local Option, Additional Local Option and SCETS Motor Fuel Taxes

Exhibit D – Local Option Tax Entitled and Not Entitled to Collection Allowance (Gasoline, Gasohol, and Fuel-Grade Ethanol)

Exhibit G – Licensed Mass Transit System Provider Credit/Refund Rate (Gasoline, Gasohol, and Fuel-Grade Ethanol)

Exhibit H – Refundable Portion of Local Option and State Comprehensive Enhanced Transportation System (SCETS) Tax

You may contact the Department at 850-488-6800 if you have any additional questions or concerns.

Colorado Department of Revenue – January 2020 Environmental Response Surcharge Rate Change

Colorado fuel tax rates will remain the same in 2020; however, effective January 1, 2020, the Colorado environmental response surcharge will be increased from $75.00 to $100.00 per tank load ($0.009375 per gallon to $0.0125 per gallon).

TAX CHANGES FOR 2020

Please find attached a compilation of key state tax rate updates effective January 1, 2020.  Note that this may not cover every fuel tax related rate change.

TAX CHANGES FOR 2020

DELAWARE

Effective January 1, 2020, the Delaware Hazardous Substance Tax rate will be 1.0429%. The rate is adjusted annually.

FLORIDA

 Effective January 1, 2020, the Florida statewide tax rates on motor fuel (gasoline) will increase to $0.183 per gallon and the statewide tax rates on undyed diesel will increase to $0.183 per gallon. The state tax rate on aviation fuel will remain at $0.0427 per gallon. In addition, the minimum local option fuel tax on each gallon of motor fuel sold to licensed wholesalers is unchanged at $0.06 per gallon, while the $0.00125 per-gallon inspection fee is unchanged. The total statewide fuel tax for 2020 (exclusive of local option taxes above the minimum) will be $0.32325 per gallon for gasoline and $ 0.332 per gallon for diesel.

With respect to county motor fuel tax rates, the gasoline rate differs by county and can be found on the attached chart. Terminal suppliers must collect a minimum local option fuel tax in the amount of $0.139 per gallon and an inspection fee of $0.00125 per gallon on each gallon of motor fuel sold to licensed wholesalers. Wholesalers must remit to the Florida Department of Revenue the county tax rate above the minimum $0.139 per gallon local option fuel tax on motor fuel sold to retail dealers or end-users.

The pollutants tax is unchanged at $0.87 per barrel for petroleum products and $0.02 per barrel for ammonia.

Full details of the rate changes can be found at: https://floridarevenue.com/taxes/Documents/19B05- 03_chart.pdf

GEORGIA

Georgia’s fuel tax rates effective January 2020 are as follows: file:///C:/Users/Leanne%20Sobel/Downloads/State%20Excise%20Tax%20Rate%20-%20January%202020.pdf

*This list contains key State updates taking effect in 2020. This is not intended to be an exhaustive list. Please confirm all tax rates and license and reporting requirements with the particular State or your tax consultants.

The prepaid local tax average retail sales prices to be collected by motor fuel distributors selling motor fuel to unlicensed entities has been set at the following rates for the period January 1, 2020 – June 30, 2020 file:///C:/Users/Leanne%20Sobel/Downloads/Prepaid%20Local%20Tax%20-%20Jan%202020.pdf

ILLINOIS

 Illinois has set its prepaid sales tax on motor fuel at $0.14 per gallon for gasoline, gasohol and other motor fuels such as diesel and at $0.11 per gallon for biodiesel blends between 1% and 10%. These rates are for the period January 1, 2020 – June 30, 2020.

INDIANA

 The gasoline use tax for the period January 1, 2020 – January 31, 2020 has been set at $0.134 per gallon. The rate changes monthly.

KANSAS

The Kansas Environmental Assurance Fee is reinstated effective January 1, 2020. The fee is $0.01 per gallon imposed on all petroleum products.

MASSACHUSETTS

 Massachusetts has set its tax rates for the period January 1, 2020 – March 31, 2020 as follows:

*This list contains key State updates taking effect in 2020. This is not intended to be an exhaustive list. Please confirm all tax rates and license and reporting requirements with the particular State or your tax consultants.

MICHIGAN

For January 2020, the prepaid sales tax on gasoline will be $0.126 per gallon and on diesel will be $0.155 per gallon. These rates are updated monthly.

NEBRASKA

Nebraska has set its fuel tax rates for January 1, 2020 – June 30, 2020 at $0.293 per gallon for gasoline, diesel, gasohol, ethanol and compressed fuels. The rates for aviation gasoline (0.05 per gallon) and jet fuel (0.03 per gallon) are unchanged.

NEW JERSEY

New Jersey’s petroleum products gross receipts tax rates for the period January 1, 2020 – March 31, 2020 have been set at $0.309 per gallon for gasoline and LPG, $0.35 per gallon for diesel, $0.124 per gallon for fuel oil and $0.04 per gallon for aviation fuel. Full details can be found at https://www.state.nj.us/treasury/taxation/petroleum/rates.shtml

NEW YORK

 New York has published its petroleum business tax rates for 2020. Beginning January 1, tax rates will decrease to $0.174 per gallon for gasoline and to $0.1565 per gallon for diesel. The tax rate for jet fuel is also decreasing to $0.07 per gallon. The full schedule of tax rates are in Publication 908 which can be found at: https://www.tax.ny.gov/pdf/publications/multi/pub908_120.pdf

NORTH CAROLINA

Effective January 1, 2020 North Carolina’s motor fuel tax will decrease from $0.362 per gallon to $0.361 per gallon.

OHIO

The Ohio Department of Taxation has issued the average wholesale price of fuel to be used when determining the gross receipts of a supplier subject to the petroleum activity tax (“PAT”) for the period January 1, 2020 – March 1, 2020. The average wholesale prices are $1.798 per gallon for gasoline, $1.851 per gallon for diesel and $0.471 per gallon for propane. With the PAT rate set at $0.0065, this makes the PAT for the first quarter of 2020 $0.011687 per gallon for gasoline, $0.0120315 per gallon for diesel and

$0.0030615 per gallon for propane.

*This list contains key State updates taking effect in 2020. This is not intended to be an exhaustive list. Please confirm all tax rates and license and reporting requirements with the particular State or your tax consultants.

OREGON

Effective January 1, 2020, Oregon’s motor fuel tax will increase $0.02 per gallon to $0.36 per gallon. This increase takes effect every two years through January 2024.

PENNSYLVANIA

Beginning January 1, 2020, the Oil Company Franchise Tax Rate for gasoline will be $0.576 per gallon and the tax rate for diesel will be $0.741 per gallon. These are unchanged from 2019.

The tax rates for aviation gasoline and jet fuel will be decreased to $0.059 per gallon for aviation gasoline and $0.019 per gallon for jet fuel.

Tax rates for 2020 for alternative fuels are as follows:

UTAH

 Effective January 1, 2020 the tax rates for gasoline and diesel will increase to $0.311 per gallon. The rate for CNG, LNG and hydrogen will increase to $0.168 per GGE/DGE.

VERMONT

 Vermont has set the Motor Fuel Transportation Infrastructure Assessment (MFTIA) for the first quarter 2020 at $0.0431 per gallon and the Gasoline and Motor Fuel Tax Assessment (MFTA) for the third quarter at $0.134 per gallon.

VIRGINIA

Virginia’s motor fuel tax rates for the period January 1, 2020 – June 30, 2020 will be unchanged from the previous six month period:

*This list contains key State updates taking effect in 2020. This is not intended to be an exhaustive list. Please confirm all tax rates and license and reporting requirements with the particular State or your tax consultants.

The wholesale motor vehicle fuel sales tax rate is $0.076 per gallon for gasoline and alternative fuels and

$0.077 per gallon for diesel.

WEST VIRGINIA

 Effective January 1, 2020 West Virginia’s combined fuel tax rates (flat rate plus variable rate) are as follows:

Dyed diesel, aviation gasoline, aviation jet fuel, #1 fuel oil, heating oil, dyed biodiesel and dyed kerosene are only subject to the variable rate which is $0.1520 for 2020.

Detailed information can be found in Administrative Notice 2019-31 (https://tax.wv.gov/Documents/AdministrativeNotices/2019/AdministrativeNotice.2019-31.pdf)

*This list contains key State updates taking effect in 2020. This is not intended to be an exhaustive list. Please confirm all tax rates and license and reporting requirements with the particular State or your tax consultants.

Congress Passes Tax Extenders

Congress has passed a package of spending bills which include several energy and fuel related tax extenders. The President is expected to sign the bill.  The extenders were passed without amendment. The full text of the bill can be found at https://www.congress.gov/116/bills/hr1865/BILLS-116hr1865enr.pdf  The extenders include:

• A retroactive extension of the biodiesel and renewable diesel tax credits. The credits would be reinstated as of January 1, 2018 and be extended through December 31, 2022. The legislation includes language directing the IRS to issue a special rule for a one-time claim for 2018 and 2019 tax credits;
• A retroactive extension of the second generation biofuel producer credit. The credit would be reinstated as of January 1, 2018 and be extended through January 1, 2021;
• A retroactive extension and clarification of the alternative fuel and alternative fuel mixture credits through December 31, 2020. The clarification is language that states that an alternative fuel mixture credit is not available to mixtures of that contain liquefied petroleum gas, compressed or liquefied natural gas and compressed or liquefied gas derived from biomass. The clarifying language applies on a forward basis and, in a change to prior versions of the bill, will include the retroactive period to the extent that claims were filed after January 1, 2018 and have not yet been paid;
• Extension of the oil spill tax through 2020. The tax would be reinstated on the 1^st day of the calendar month following enactment of the legislation. If the legislation passes this week the tax will be reinstated effective January 1, 2020.

With respect to the credits that are being reinstated retroactively, taxpayers should wait until the IRS has issued its guidance on how to file before filing. Although we would anticipate that nothing will change from prior years where there has been a retroactive reinstatement the IRS has advised that claims filed prior to the issuance of the guidance will be rejected.

On the matter of the alternative fuel mixture credit being eliminated with respect to LPGs with respect to claims not filed by or paid/allowed before January 8, 2018, a separate alert will be sent with more analysis and explanation on that.

Tax Extenders Provisions on Alternative Fuel Mixtures Bar All Claims Involving Butane Not Filed Prior to January 8, 2018

The tax extenders legislation passed by Congress as part of the larger package of spending bills includes language that would bar all claims for the $0.50 per gallon alternative fuel mixture credit for mixtures containing contain liquefied petroleum gas (including butane and propane), compressed or liquefied natural gas and compressed or liquefied gas derived from biomass, unless, the claim was filed prior to January 8, 2018 (not January 1 as stated in our earlier alert) and has not been denied. This is a change from earlier iterations of the bill which barred such claims on a prospective basis.

The specific language states as follows:

(b) CLARIFICATION OF RULES REGARDING ALTERNATIVE FUEL MIXTURE CREDIT.—

(1) IN GENERAL.—Paragraph (2) of section  6426(e) is amended by striking ‘‘mixture of alternative fuel’’ and inserting ‘‘mixture of alternative fuel (other than a fuel described in subparagraph (A), (C), or (F) of subsection (d)(2))’’.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to— (A) fuel sold or used on or after the date  of the enactment of this Act, and (B) fuel sold or used before such date of  enactment, but only to the extent that claims  for the credit under section 6426(e) of the Internal Revenue Code of 1986 with respect to  such sale or use—(i) have not been paid or allowed as of  such date, and (ii) were made on or after January 8, 2018. (emphasis added)

What this means is that – if the language withstands any subsequent legal challenges related to constitutionality – all claims that have not yet been filed for any open tax period are barred as well as any claims that are pending and were filed after January 8, 2018. The language does not bar any claims that have already been paid. This therefore bars all claims for the alternative mixture credit for blends of butane and gasoline unless the original claim was made prior to January 8, 2018 – the vast majority, if not all of the outstanding claims for blending butane with gasoline were filed after the effective date of the statute. In addition, any claims for blending butane with propane would also be barred.

Given that the Chief of Staff to the Joint Committee on Taxation penned a memorandum in November speaking specifically to the cost to the Treasury of allowing a blend of butane with gasoline to claim the alternative fuel mixture credit, the change to the language has been made intentionally and appears intended to influence or be used by the government in a number of cases currently pending in federal court.

Congress To Take Up Tax Extenders This Week

Congressional leaders have reached a deal on tax extenders and are expected to take them up this week along with the floor debate and votes on a spending package. Energy related tax extenders similar to those in earlier iterations of the tax extenders legislation are included. If passed without amendment they would include:

• A retroactive extension of the biodiesel and renewable diesel tax credits. The credits would be reinstated as of January 1, 2018 and be extended through December 31, 2022. The legislation includes language directing the IRS to issue a special rule for a one-time claim for 2018 and 2019 tax credits;
• A retroactive extension of the second generation biofuel producer credit. The credit would be reinstated as of January 1, 2018 and be extended through January 1, 2021;
• A retroactive extension and clarification of the alternative fuel and alternative fuel mixture credits through December 31, 2020. The clarification is language that states that an alternative fuel mixture credit is not available to mixtures of that contain liquefied petroleum gas, compressed or liquefied natural gas and compressed or liquefied gas derived from biomass. The clarifying language applies on a forward basis and, in a change to prior versions of the bill, will include the retroactive period to the extent that claims were filed after January 1, 2018 and have not yet been paid;
• Extension of the oil spill tax through 2020. The tax would be reinstated on the 1^st day of the calendar month following enactment of the legislation. If the legislation passes this week the tax will be reinstated effective January 1, 2020.