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

Dec 20, 2019

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.