The IRS has previously released procedures for claiming refunds on biodiesel and alternative fuel tax credits. The procedures are related to the tax credits that were retroactively reinstated for the years 2018 and 2019.
The procedures allow taxpayers to claim the above credits generated in both 2018 and 2019 tax years on one form, Form 8849, Claim for Refund of Excise Taxes. Taxpayers must file the form by August 11, 2020.
Fuel Tax Credits That Expired Originally in 2017
Several excise credits originally expired in 2017. These included:
- Section 6426 alternative fuel credits
- Section 6426 alternative fuel mixture credits
- Section 6426 biodiesel mixture credits
- Section 40 second-generation biofuel credits
- Section 40A credits for agri-biodiesel, biodiesel mixtures, and biodiesel
The 2019 Taxpayer Certainty & Disaster Tax Relief Act reinstated these credits retroactively for 2018 and 2019.
Biodiesel and Alternative Fuel Mixture
The IRS will refund the Section 6426 biodiesel and alternative fuel mixture credits. These are claimable as a refundable payment under Section 6427. Taxpayers can claim these credits on Form 8849. They also can alternatively claim them as income tax credits. Taxpayers can do this on Form 4139 and include the form with their income tax returns.
Alternative Fuel Mixtures
The tax credit for alternative fuel mixtures is not refundable. Taxpayers must claim it through the amendment of Form 720 by filing Form 720-X. They must file this using the normal procedure, combining all four quarters of the tax year on one form.
The IRS’s position remains that it is necessary to reduce deductions for the original excise tax. The IRS has also excluded some fields from qualification for this tax credit.
- Compressed natural gas
- Liquefied petroleum gas
- Liquefied natural gas
- Any liquefied or compresses gases originating from biomass
The IRS has extended this fuel credit to the end of the 2020 tax year. Taxpayers must make a claim on Form 720 using the normal procedure.
Biodiesel Income Tax Credit
Section 40A provides an equivalent income tax version of Section 6426 biodiesel mixture credits. There are also credits for agri-biodiesel and general biodiesel. Taxpayers must claim the credits with annual tax returns on Form 6478. Also, the normal procedure applies. This means taxpayers must amend their returns for 2018 to claim credits for that tax year. However, they can make 2019 claims with their 2019 returns. The IRS extended this credit to the end of the 2022 tax year. The statute specifically requires taxpayers to include these credits as part of their income.
Section 40 offers nonrefundable income tax credits for second-generation biofuel. Taxpayers must claim these credits with the normal procedure. This involves filing Form 6478 along with annual tax returns. Prospectively, the IRS has extended the credit for 2020.
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