IRS Issues Special One-Time Claim Procedures for Retroactive Tax Credits

By Mark S. Morgan, Esq., NEFI Regulatory Counsel

The IRS has issued special one-time claim procedures — IRS Notice 2018-21 — for payment of the $1.00-per-gallon biodiesel blender credit, and the $0.50-per gallon alternative fuel credit and alternative fuel mixture credit. Congress retroactively reinstated the credits for calendar year 2017 under the Bipartisan Budget Act of 2018. The credits were not reauthorized for calendar year 2018 or beyond.

 

2017 Biodiesel Blender Credit

The biodiesel blender credit applies to qualified diesel fuel and heating oil blends that comply with the ASTM D6751 standard for biodiesel. The IRS special procedures allow for a single one-time payment covering the entire 2017 claim period. The IRS is providing a straight refund of $1.00 per gallon taken on IRS Form 8849. The IRS established the following procedure to file a claim for payment of the 2017 biodiesel blender credit:

The special claim procedure requires the use of a single IRS Form 8849 and IRS Form 8849 (Schedule 3) to claim all biodiesel blend volumes created during calendar year 2017. The IRS will not accept multiple claims or quarterly filings for biodiesel blends created during calendar year 2017.

The IRS is allowing a one-time single claim for all biodiesel blender credits (IRC Section 6426(c)) earned during calendar year 2017.

The claim amount is $1.00 for each gallon of qualified biodiesel blended into diesel fuel or heating oil during calendar year 2017. Claimants are not required to first take the credit against existing motor fuel excise tax liability on IRS Form 720X before filing a claim for payment on IRS Form 8849 as is normally required.

Claimants must have a valid IRS 637M certificate in order to make a claim. Claimants who do not have a valid 637M certificate must first obtain one from the IRS before filing a claim for 2017 retroactive credits.

Claims for payment of the full $1.00 per gallon credit must be made on IRS Form 8849 Claim for Refund of Excise Taxes and IRS Form 8849 (Schedule 3) Certain Fuel Mixtures and the Alternative Fuel Credit.

Follow instructions on IRS Forms 8849 and 8849 Schedule 3.

Enter 2017 volume in gallons of biodiesel blended into diesel fuel or heating oil on IRS Form 8849 (Schedule 3) line 2.

The period for filing special one-time refund claims is limited. The claim period begins on April 2, 2018 and ends on September 29, 2018. The IRS will not accept any biodiesel blender claims after September 29, 2018.

Claims may be filed electronically, or mailed to Internal Revenue Service, P.O. Box 312, Covington, KY 41012-0312. Write “Fuel Mixture Claim” on the claim envelope.

Alternately, the biodiesel credit claim may be taken as a credit against claimant’s annual income tax return on IRS Form 4136 for tax year 2017.

 

2017 Alternative Fuel Credit

The IRS is also accepting retroactive claims for alternative fuel sold or used during calendar year 2017. The IRS is allowing a special one-time single refund claim for all alternative fuel credits (IRC Section 6426(d)) earned during 2017. The IRS allows a person that sells or uses alternative fuel as a fuel in a motor vehicle, motorboat or aviation to claim a $0.50-per-gallon credit against the claimant’s motor fuel excise tax liability (relating to the tax imposed on diesel fuel and alternative fuel).

The IRS has established the following special procedure to file a claim for payment of the 2017 alternative fuel credit:

The special claim procedure requires the use of a single IRS Form 8849 and IRS Form 8849 (Schedule 3) to claim the alternative fuel credits earned during calendar year 2017. The IRS will not accept multiple claims or quarterly filings for alternative fuel used during calendar year 2017.

Alternative fuels include liquefied petroleum gas; P Series; compressed or liquefied natural gas; liquefied hydrogen, qualified liquids derived from coal (including peat); compressed or liquefied gas derived from biomass; and liquid fuel derived from biomass.
Alternative fuels subject to the $0.50-per-gallon credit do not include ethanol, methanol, biodiesel, or any fuel (including lignin, wood residues, or spent pulping liquors) derived from the production of paper or pulp.

Procedures for filing the alternative fuel claim are the same as for the biodiesel credit above, except the credit is $0.50-per gallon and the credit is taken on line 3 of IRS Form 8849 Schedule 3.

Again, the period for filing special one-time refund claims is limited. The claim period begins on April 2, 2018 and ends on September 29, 2018. The IRS will not accept any alternative fuel credit claims after September 29, 2018.

Alternately, the alternative fuel credit claim may be taken as a credit against claimant’s annual income tax return on IRS Form 4136 for tax year 2017.

 

2017 Alternative Fuel Mixture

Lastly, the IRS is also accepting retroactive claims for alternative fuel mixture credits (IRC Section 6426(e)). The alternative fuel mixture credit is $0.50 per gallon for each gallon of alternative fuel used to produce an alternative fuel mixture for sale or use in a trade or business. The alternative fuel mixture credit claim must be filed on IRS Form 720X and taken against any existing motor fuel excise tax liability. Any amount in excess of existing motor fuel excise tax liability may be taken as a refund on IRS Form 8849 and 8849 Schedule 3.

The IRS established the following procedure to file a claim for the 2017 alternative fuel mixture credit:

The claim period for the 2017 alternative fuel mixture credit begins on April 2, 2018. The IRS will deem any alternative fuel mixture credit filed before April 2, 2018, as filed on April 2, 2018. Claims for the alternative fuel mixture credit must be made within three years from the time the return was filed or two years from the time the tax was paid, whichever is later.

Alternative fuels subject to the $0.50-per-gallon alternative fuel mixture credit do not include ethanol, methanol, biodiesel, or any fuel (including lignin, wood residues, or spent pulping liquors) derived from the production of paper or pulp.

Claimants must file for the alternative fuel mixture credit on IRS Form 720X Amended Quarterly Excise Tax Return. IRS Form 720X is used to make adjustments to excise tax liability filed on IRS Form 720, Schedule C.

Claimants must follow the directions on IRS Form 720 X.

Claimants must enter 2017 amounts of the alternative mixture credit claim on line 2 of IRS Form 720X.

Claimants must identify the type of alternative fuels in the mixture for which the credit is being claimed, along with the number of alternative fuel gallons used to produce the mixture. This is the same information filed on IRS Form 720, Schedule C, line 13 Quarterly Federal Excise Tax Return.

Claims may be filed electronically, or mailed to Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-009.

Claimants may not file for a credit amount that exceeds motor fuel excise tax liability for the quarter. Instead, claimant must adjust multiple quarters so that credits never exceed liability for the quarter.

In order to file a claim for credit, claimants must have the appropriate IRS 637 registration. Claimants without a registration must file for one on IRS Form 637 Application for Registration (For certain Excise Tax Activities).

 

Obtaining IRS Forms

Claimants may use paper forms or file electronically. Electronic filing forms are now on the IRS electronic reporting portal.

Click here for IRS Form 720X.
Click here for IRS Form 637.
Click here for IRS Form 8849.
Click here for IRS Form 4136.

IRS Notice 2018-21, outlining the special claim procedures for 2017 retroactive biodiesel blender credits, alternative fuel credits and alternative fuel mixture credits, is available at irs.gov/pub/irs-drop/n-18-21.pdf.

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