The American Jobs Creation Act of 2004 (the Act), Public Law 108-357, made changes affecting fuel tax credits and refunds.
The following is a brief
review of some of these changes.
The credits and refunds for the nontaxable use of gasohol and, generally, the use of gasoline taxed at the full rate to produce gasohol
have been eliminated.
Credit for Alcohol Fuel Mixtures and Biodiesel (Including Agri-biodiesel) Mixtures. The Act allows two new credits against any fuel tax
liability reported on Form 720:
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The alcohol fuel mixture credit is 51 cents per gallon of ethanol (60 cents per gallon for alcohol other than ethanol).
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The biodiesel mixture credit is 50 cents per gallon of biodiesel ($1.00 per gallon of agri-biodiesel).
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Producers and importers must first take the alcohol fuel mixture credit and biodiesel mixture credit on Schedule C (Form 720)
against any
fuel tax liability. A payment is allowed for any excess credit and may be taken as a credit on Schedule C (Form 720), as a
refund on Schedule 3 (Form
8849), or as an income tax credit on Forms 4136, 6478, or 8864 as applicable. Only one claim may be made for any particular
amount of alcohol or
biodiesel.
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Persons who blend alcohol with gasoline, diesel fuel, or kerosene to produce an alcohol fuel mixture outside the bulk transfer
terminal
system must pay must pay the gasoline tax on the volume of alcohol in the mixture. See Form 720 to report this tax. You also
must be registered with
the IRS as a blender. See Form 637.
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Persons who blend biodiesel with undyed diesel fuel to produce a biodiesel mixture outside the bulk transfer terminal system
must pay the
diesel fuel tax on the volume of biodiesel in the mixture. See Form 720 to report this tax. You also must be registered with
the IRS as a blender. See
Form 637.
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Producers and importers of straight alcohol or straight biodiesel must be registered with the IRS. See Form 637.
Aviation-grade kerosene is taxed and the tax on aviation fuel has been eliminated. The credit and refund rates are the same.
Claims for Aviation-grade kerosene sold for use on a farm or for use by state and local governments can only be made by the registered
ultimate vendor.
Credits and refunds can be made to certain registered ultimate vendors if the ultimate purchaser waives its right to a claim
for credit or refund as follows.
Aviation-grade kerosene sold for nontaxable uses (other than use on a farm or use by state and local governments).
Gasoline and aviation gasoline sold to state and local governments and nonprofit educational organizations.
Undyed diesel fuel or undyed kerosene sold for use by certain intercity and local buses.
Refunds to gasoline wholesale distributors have been eliminated for fuel sold after December 31, 2004. Schedule 4 (Form 8849) will not
be revised and cannot be used for fuel sold after December 31, 2004.
Definition of off-highway vehicle. The Act provides that a vehicle with certain described features for off-highway transportation is not
treated as a highway vehicle. This provision applies to taxable periods after October 22, 2004. Fuel used in mobile machinery
in an off-highway
business use is limited to an annual claim for taxable years beginning after October 22, 2004.
Additional nontaxable uses of liquefied petroleum gas have been added.
The filled-in forms have been removed. For copies of any forms referenced in this publication, see How To Get Tax Help later.
This publication covers federal fuel tax credits you may be able to claim on your income tax return. It also covers fuel tax
refunds you may be
able to claim during the year.
This publication discusses the following subjects.
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The kinds of fuels that qualify for a credit or refund.
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The uses of fuels that qualify for a credit or refund.
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Who may claim a credit or refund.
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How to claim a credit or refund for fuel taxes.
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The alcohol fuel mixture credit.
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The biodiesel mixture credit.
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The alcohol fuel credit.
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The biodiesel fuel credit.
Comments and suggestions.
We welcome your comments about this publication and your suggestions for future editions.
You can email us at
*[email protected]. Please put “
Publications Comment” on the subject line.
You can write to us at the following address:
Internal Revenue Service
TE/GE and Specialty Forms and Publications Branch
SE:W:CAR:MP:T:T
1111 Constitution Ave. NW
IR-6406
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number,
including the area code, in
your correspondence.
