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IRS provides procedures for claims related to retroactively extended fuel credits

Notice 2016-5, 2016-6 IRB

To take into effect the retroactive extension of certain fuel tax credits under the Protecting Americans from Tax Hikes (PATH) Act, IRS has issued a Notice that provides rules that taxpayers must follow to make a one-time claim for a refund of, or credit for, certain fuels sold or used during calendar year 2015. IRS also provided instructions for how a claimant may offset its Code Sec. 4081 liability with the Code Sec. 6426(e) alternative fuel mixture credit for 2015, and for how a claimant may make certain income tax claims for biodiesel, second generation biofuel, and alternative fuel.

Background.Code Sec. 6426(a) and Code Sec. 6426(c) allow a blender of a biodiesel (including renewable diesel) mixture to claim a $1.00-per-gallon credit against its tax liability under Code Sec. 4081 (relating to the tax imposed on taxable fuel). Similarly, Code Sec. 6426(a) and Code Sec. 6426(e) allow a blender of an alternative fuel mixture to claim a credit against its tax liability under Code Sec. 4081, except that the credit amount is $0.50 per gallon.Code Sec. 6426(a) and Code Sec. 6426(d) allow a person that sells or uses alternative fuel as a fuel in a motor vehicle or motorboat and in aviation to claim a $0.50-per-gallon credit against the claimant’s tax liability under Code Sec. 4041 (relating to the tax imposed on diesel fuel and alternative fuel).

Blenders of biodiesel (including renewable diesel) mixtures, and persons that sell or use alternative fuel as a fuel in a motor vehicle or motorboat and in aviation, may claim any excess credit under Code Sec. 6426(c) or Code Sec. 6426(d) as a payment under Code Sec. 6427(e) or as a refundable income tax credit under Code Sec. 34. As an alternative to the payments and credits allowed under Code Sec. 6426, Code Sec. 6427, and Code Sec. 34, a blender of a biodiesel (including renewable diesel) mixture may claim a nonrefundable income tax credit under Code Sec. 40A. For federal income tax purposes, a claimant reduces its Code Sec. 4081 excise tax liability by the amount of excise tax credit allowable under Code Sec. 6426(c) and its Code Sec. 4041 excise tax liability by the amount of excise tax credit allowable under Code Sec. 6426(d) in determining its deduction for those excise taxes or its cost of goods sold deduction attributable to those excise taxes. (Notice 2015-56, 2015-35 IRB 235)

The Code provisions that authorize these credits and payments expired for sales and uses after Dec. 31, 2014, but were reinstated by the PATH Act for sales and uses through 2016. The PATH Act directs IRS to issue guidance providing for a one-time submission of claims under Code Sec. 6426(c), Code Sec. 6426(d) and Code Sec. 6427(e) for 2015. The PATH Act requires the guidance to provide for a 180-day period for the submission of claims to begin no later than 30 days after the guidance is issued.

The PATH Act also reinstated Code provisions authorizing credits for second generation biofuel producers (Code Sec. 40(b)(6)) and biodiesel and renewable diesel used as fuel (Code Sec. 40A). The second generation biofuel producer credit expired for production after Dec. 31, 2014, and was reinstated by the PATH Act for production through 2016. The credit for biodiesel and renewable diesel used as fuel expired for sales and uses after Dec. 31, 2014, and was reinstated by the PATH Act for sales and uses through 2016.

Procedures for claiming refunds and credits.Notice 2016-5 provides the procedures for claiming 2015 biodiesel and alternative fuel incentives.

Claimants that filed “protective” or anticipatory claims during 2015 for biodiesel and alternative fuel incentives covered by Notice 2016-5 should refile their claims pursuant to the procedures provided. IRS will not treat as perfected any such protective or anticipatory claims previously filed with IRS that are not timely supplemented in accordance with these procedures.

Except as provided by Notice 2016-5, the rules in Notice 2005-4, 2005-1 CB 289 (providing guidance on alcohol and biodiesel fuel tax credits and payments), as modified by Notice 2005-62, 2005-2 CB 443 (providing guidance for certain biodiesel issues not addressed in Notice 2005-4), and Notice 2006-92, 2006-2 CB 774 (providing guidance on alternative fuel and alternative fuel mixture taxes, credits, and payments), apply to claims for 2015 biodiesel and alternative fuel incentives.

Separate procedures apply for claims for biodiesel and alternative fuelincentives,as opposed to claims for alternative fuel mixturecredits,as follows:

Claims for biodiesel and alternative fuel incentives.Notice 2016-5 provides a series of specific procedures that taxpayers must follow to make a one-time claim for payment of credits and payments allowable under Code Sec. 6426(c), Code Sec. 6427(e), and Code Sec. 6426(c), relating to biodiesel and alternative fuel incentives. For example, they must submit such claims on Form 8849, Claim for Refund of Excise Taxes, and must include Schedule 3 (Form 8849).

Although a claimant may submit its claim under this notice as early as Jan. 15, 2016, the 180-day claim period for 2015 biodiesel and alternative fuel incentives begins on Feb. 8, 2016. Consequently, all claims for 2015 biodiesel and alternative fuel incentives must be filed on or before Aug. 8, 2016. IRS will not process claims filed after that date. IRS will deem any claim that is properly submitted before Feb. 8, 2016, as filed on Feb. 8, 2016.

If IRS does not pay a 2015 biodiesel and alternative fuel incentives claim that conforms to Notice 2016-5 within 60 days after the claim is received, IRS will pay the claim with interest from the claim filing date, using the overpayment rate and method provided by Code Sec. 6621.

Claims for biodiesel and alternative fuel mixture credits.Notice 2016-5 provides a series of specific procedures that taxpayers must follow to make alternative fuel mixture credit claims allowed by Code Sec. 6426(e), including claims for the fourth quarter of 2015. For example, such claims must be made on Form 720X, Amended Quarterly Federal Excise Tax Return.

The claim period for the 2015 alternative fuel mixture credit begins on Feb. 8, 2016. Generally, claims for the Code Sec. 6426(e) 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.

Claims not affected by Notice 2016-5.Notice 2016-5 provides that it does not affect 2015 claims for:

…the nonrefundable income tax credit under Code Sec. 40(b)(6) for second generation biofuel producers;
…the nonrefundable income tax credits under Code Sec. 40A(b)(1) for biodiesel mixtures, under Code Sec. 40A(b)(2) for biodiesel (including renewable diesel), or under Code Sec. 40A(b)(4) for the small agri-biodiesel producer credit; and
…the refundable income tax credit under Code Sec. 34 for biodiesel mixtures or alternative fuel.

 

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