IRS guidance on alternative fuel tax credits for 2022

Background

Section 6426(d) allows a person who sells or uses alternative fuel for a motor vehicle or motorboat or in aviation to claim a $0.50 per gallon credit against their excise tax liability under Section 4081. Any excess credit under Section 6426(d) may be claimed as a payment under Section 6427(e) or as a refundable income tax credit under Section 34.

Section 6426(e) allows a blender of an alternative fuel mixture to claim a $0.50 per gallon credit against its excise tax liability under Section 4081. This credit may not exceed a person’s excise tax liability under Section 4081 for the calendar quarter for which the credit is claimed. The credit also cannot be applied against the tax imposed at the Leaking Underground Storage Tank Trust Fund financing rate.

The credits and payments expired for sales and use after Dec. 31, 2021, but have been revitalized temporarily under the IRA. The IRA reinstates these credits and payments for sales and use through Dec. 31, 2024. The IRA also directs the secretary of the U.S. Department of the Treasury to provide for a 180-day claim submission period under Sections 6426(d) and 6427(e) for the period beginning Jan. 1, 2022, and ending on Sept. 30, 2022.

Claiming the credit

Alternative fuel tax credit claims

• Claimants must submit claims on Form 8849, “Claims for Refund of Excise Taxes,” and include Schedule 3, “Certain Fuel Mixtures and the Alternative Fuel Credit.”
• Claimants must claim the eligible credits and payments for the first, second, and third calendar quarters of 2022 on a single Form 8849 and Schedule 3.
• Claims may be submitted electronically or by mail.
• All claimants must be registered by the IRS under Section 4101. Unregistered claimants may apply for registration by filing Form 637, “Application for Registration (for Certain Excise Tax Activities).”
• Claimants must have and maintain adequate records to substantiate claims.
• All claims must be submitted during the 180-day period beginning on Oct. 13, 2022, and ending on April 11, 2023. Claims submitted under the provisions of Notice 2022-39 prior to Oct. 13, 2022, will be deemed as having been filed on Oct. 13, 2022.

Alternative fuel mixture claims

• Claimants must make claims for the first and second quarters of 2022 on Form 720-X, “Amended Quarterly Federal Excise Tax Return.”
• All claimants must be registered by the IRS under Section 4101. Unregistered claimants may apply for registration by filing Form 637.
• Claims may not exceed claimants’ Section 4081 excise tax liability incurred in the calendar quarter.
• Claimants must have and maintain adequate records to substantiate claims.
• The claim period for the alternative fuel mixture credit for the first and second calendar quarters of 2022 begins on Oct. 13, 2022, and claims must be made within three years from the time the original return was filed or two years from the time the excise tax was paid, whichever is later.

Looking ahead

Taxpayers subject to excise taxes under Section 4081 or unsure of whether Notice 2022-39 affects them should consult with their tax advisers to determine and confirm eligibility for the alternative fuel tax credit or the alternative fuel mixture credit. Taxpayers that qualify for the credits should prepare and file claims in accordance with the provisions of Notice 2022-39, making sure to strictly adhere to all required procedures and deadlines.

Taxpayers that previously filed protective or anticipatory claims covered by Notice 2022-39 that do not conform with the new procedures provided in the notice should refile their claims to comply with procedures provided in the notice. The IRS will not treat as perfected any protective or anticipatory claims previously filed with the IRS that are not timely supplemented in accordance with the new procedures in the notice. Additionally, taxpayers should make sure to retain documentation substantiating their eligibility to claim these credits.