A group of Democratic senators has asked the Treasury Inspector General for Tax Administration (TIGTA) to investigate the IRS’ legal basis for allowing liquefied natural gas tankers to claim a tax credit they say is intended for motorboats.
An August 20 letter headed up by Senator Jeff Merkley (D-OR) questions whether the IRS properly allowed companies to claim the alternative fuel excise tax (AFET) credit for fuel used to propel liquefied natural gas (LNG) tankers.
The letter, which Senate Democratic Leader Chuck Schumer (D-NY), and Senators Chris Van Hollen (D-MD), Edward Markey (D-MA), and Sheldon Whitehouse (D-RI) signed on to, also asks whether the decision was intended to reward political donors to President Trump. The lawmakers urge TIGTA to open an investigation.
Senators challenge ‘motorboat’ definition
The senators’ request centers on the qualification of LNG tankers for the AFET credit under IRC § 6426(d). That statute provides a 50-cent per gallon credit for alternative fuels sold by a taxpayer “for use as a fuel in a motor vehicle or motorboat” or “for use as a fuel in aviation.”
In their letter, the lawmakers argue that while the Internal Revenue Code does not define “motorboat,” federal shipping regulations in place since 1965 define the term as a vessel no more than 65 feet long. They contend that LNG tankers, which are typically 1,000 feet or longer, are more appropriately classified as “vessels” under IRC § 4221, a category that already receives separate tax-free treatment and is not referenced in the AFET credit statute.
The senators also note that many LNG tankers are designed to burn “boil-off” gas from their cargo for propulsion. They argue this is a necessary operational step to maintain safe tank pressure, not a new behavior incentivized by the tax credit. “Tankers burn this gas for propulsion because it allows for the utilization of a valuable resource that would be otherwise wasted and potentially hazardous,” the letter states.
Probe to examine potential political influence
The lawmakers explicitly asked TIGTA to look into whether the IRS’ decision was politically motivated. The letter requests an investigation into the role of Treasury Secretary Scott Bessent and any communications with the White House.
“We would further urge the Treasury Inspector General for Tax Administration to investigate the extent to which Secretary Bessent was involved in any decision to make LNG tankers eligible for the AFET, who Secretary Bessent may have discussed this issue with at the IRS, whether Secretary Bessent communicated with any impacted party about LNG tankers being motorboats under the AFET, and to what extent Secretary Bessent or his staff communicated with anyone in the White House, including President Trump, about a request for AFET credits for LNG tankers,” the senators wrote.
Request follows earlier inquiries to Treasury
The letter to TIGTA follows an earlier inquiry in April 2026 in which several of the same senators asked the IRS to “clarify” whether the IRS deemed companies that use LNG to propel tankers to qualify for the AFET credit. The lawmakers cited a news report that Cheniere Energy had received a “$370 million tax break” by claiming the credit.
The senators’ latest letter requests that TIGTA investigate whether the IRS has determined whether LNG tanker fuel qualifies for the AFET credit and on what basis.
“[N]ews reports and public financial filings suggest the IRS has allowed taxpayers to claim the AFET credit for fuel used on LNG tankers, without publishing any updated guidance,” the senators told TIGTA.
For more on the alternative fuel excise tax credit, see Checkpoint’s Federal Tax Coordinator 2d ¶ W-1737.1.
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