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2015 Biodiesel and Alternative Fuel Claims

The IRS recently issued Notice 2016-05 which provides rules claimants must follow to make a one-time claim for payment of the credits and payments allowable under Sec. 6426(c), 6426(d), and 6427(e) of the Internal Revenue Code for biodiesel mixtures and alternative fuels sold or used during calendar year 2015.

The notice also provided instructions for how a claimant may offset its Sec. 4081 liability with the Sec. 6426(e) alternative fuel mixture credit for 2015, and provides instructions for how a claimant may make certain income tax claims for biodiesel, second generation biofuel, and alternative fuel.

Claimants that filed “protective” or anticipatory claims during 2015 for biodiesel and alternative fuel incentives should refile their claims pursuant to the procedures described below.  The IRS will not treat as filed any such claims previously filed with the IRS that are not timely supplemented in accordance with the following procedures.

How to make a one-time claim for credits and payments allowable under Sec. 6426(c), 6426(d), 6427(e):

  • Claimants must submit claims for 2015 biodiesel and alternative fuel incentives on Form 8849, Claim for Refund of Excise Taxes.
  • Claimants must include Schedule 3 (Form 8849), Certain Fuel Mixtures and the Alternative Fuel Credit, with their submission and enter amounts for 2015 biodiesel and alternative fuel incentives on Line 2 and Line 3 of Schedule 3, as appropriate.
  • Claimants must follow the instructions to Form 8849 and Schedule 3 when preparing their submission to the extent that those instructions do not conflict with this notice.
  • Each claimant must claim all 2015 biodiesel and alternative fuel incentives for which the claimant is eligible on a single Form 8849.
  • Each claimant must mail its submission to the address for Schedule 3 in the instructions to Form 8849 under Where to File. Alternatively, claimants may electronically file Form 8849 and Schedule 3 through any electronic return originator, transmitter, or intermediate service provider participating in the IRS e-file program for excise taxes.
  • Claimants are reminded that they must be registered by the IRS in order to make alternative fuel claims under Sec. 6426(d) and 6427(e) and to make alternative fuel mixture claims under Sec. 6426(e). Claimants that are not already registered by the IRS may apply to the IRS for registration by filing Form 637.
  • Claimants may not combine 2015 and 2016 claims for biodiesel and alternative fuel incentives. Claims for 2015 must be made in accordance with the rules for one-time claims prescribed in Notice 2016-05. Claims for 2016 must be made in accordance with the normal rules for filing such claims.

Claim period and due date for biodiesel and alternative fuel incentives:

  • A claimant may submit its claim as early as January 15, 2016.
  • The 180-day claim period for 2015 incentives begins on February 8, 2016.
  • All claims for 2015 biodiesel and alternative fuel incentives must be filed on or before August 8, 2016. The IRS will not process claims filed after that date.
  • The IRS will deem any claim that is submitted by the method prescribed in the notice before February 8, 2016, as filed on February 8, 2016.
  • If the IRS does not pay a 2015 claim that conforms to the notice within 60 days after the claim is received, the IRS will pay the claim with interest from the claim filing date.

How to make an alternative fuel mixture claim under Sec. 6426(e):

  • For 2015, all alternative fuel mixture credit claims allowed by Sec. 6426(e), including claims for the fourth quarter, must be made on Form 720X. The IRS is unable to process 2015 claims on the fourth quarter Form 720 due to the timing of enactment of the PATH Act. Failure to file a Form 720 and remit the Sec. 4081 tax due for any quarter in 2015 before submitting a claim allowed by Sec. 6426(e) on Form 720X will result in delayed processing of the claim and delayed payment of refunds resulting from the credit. Failure to follow the claim procedure will result in delayed processing and payment of 2015 Sec. 6426(e) claims.
  • Claimants are reminded that the claim for a Sec. 6426(e) credit for any quarter may not exceed the Sec. 4081 liability incurred in the quarter for which the credit is being claimed. Form 720X allows claimants to adjust multiple quarters on a single form 720X.

Claim period and due date for alternative fuel mixture credits:

  • The claim period for the 2015 alternative fuel mixture credit begins on February 8, 2016.
  • The IRS will deem any claim that is submitted by the method prescribed in this notice before February 8, 2016, as filed on February 8, 2016.
  • Generally, claims for the Sec. 6426(e) 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.

Background:

  • Sections 6426(a) and (c) allow a blender of a biodiesel (including renewable diesel) mixture to claim a $1.00 per gallon credit against its tax liability under Sec. 4081 (relating to the tax imposed on taxable fuel).
  • Sections 6426(a) and (e) allow a blender of an alternative fuel mixture to claim a credit against its tax liability under Sec. 4081, except that the credit amount is $0.50 per gallon.
  • Sections 6426(a) and (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 Sec. 4081 (relating to 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 6426(c) or (d) as a payment under Sec. 6427(e) or as a refundable income tax credit under Sec. 34.
  • As an alternative to the payments and credits allowed under Sec. 6426, 6427, and 34, a blender of a biodiesel (including renewable diesel) mixture may claim a nonrefundable income tax credit under Sec. 40A.
  • For federal income tax purposes, a claimant reduces its Sec. 4081 excise tax liability by the amount of excise tax credit allowable under Sec. 6426(c) and its Sec. 4041 excise tax liability by the amount of excise tax credit allowable under Sec. 6426(d) in determining its deduction for those excise taxes or its cost of goods sold deduction attributable to those excise taxes.
  • These credits and payments are authorized for sales and uses through 2016.
  • The second generation biofuel producer credit and the credit for biodiesel and renewable diesel used as fuel were reinstated for sales and uses through 2016 also.

Claims not affected by this notice:

  • This notice does not affect 2015 claims for the nonrefundable income tax credit under Sec. 40(b)(6) for second generation biofuel producers. Taxpayers should continue to submit these claims separately on Form 6478.
  • This notice does not affect 2015 claims for the nonrefundable income tax credits under Sec. 40A(b)(1) for biodiesel mixtures, Sec. 40A(b)(2) for biodiesel (including renewable diesel), or under Sec. 40A(b)(4) for the small agri-biodiesel producer credit. Taxpayers should continue to submit these claims separately on Form 8864.
  • This notice does not affect 2015 claims for the refundable income tax credit under Sec. 34 for biodiesel mixtures or alternative fuel. These claims should continue to be reported on Form 4136.

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