January 01, 1994
IRS District Directors Have Been Advised Not to
Assert the Penalty Under Section 6714
WASHINGTON - IRS District Directors have been advised not
to assert the penalty under section 6714 of the Internal Revenue Code in cases where, due
to extreme and unexpected weather conditions, dyed diesel fuel is mixed with undyed
kerosene or similar products after removal from the terminal, and the resulting fuel is
sold or used for heating purposes during the current heating season. The penalty will be
asserted, however, against any person using such mixtures for a taxable use.
In general, diesel fuel may be removed tax free from a terminal only if it is dyed to a
concentration specified in the regulations under section 4082 of the Internal Revenue
Code. Section 6714 of the Internal Revenue Code imposes a penalty for willfully altering
the composition or strength of any dyeing done pursuant to those regulations.
During cold weather, it is necessary to add fuels, including kerosene or similar
products, to improve the viscosity of diesel fuel sold or used for heating purposes. To
the extent those products are not dyed, their addition may dilute the strength of the dye
below the minimum level required by the regulations. The IRS recognizes that extreme and
unexpected weather conditions may necessitate the addition of such undyed products to dyed
diesel fuel after the fuel has been removed from the terminal.
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