News and Insights

Federal Alternative Fuel Credit Extended Through December 2011

Tax Development Feb 08, 2011

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Act”), which was signed by the President in December, renews and retroactively reinstates the Federal Alternative Fuel Credit (“Alternative Fuel Credit”) under Internal Revenue Code Section 6426(d), which expired December 31, 2009. The Act provides that the reinstated Alternative Fuel Credit will continue through December 31, 2011.

The Alternative Fuel Credit applies to alternative fuel used by a taxpayer in, or sold by a taxpayer for use in, aviation, a motor vehicle, or a motorboat. The amount of the credit permitted is $0.50 per gallon of liquid alternative fuel and, in the case of non-liquid alternative fuel, $.050 per gasoline gallon equivalent. A quantity of non-liquid alternative fuel is considered equivalent to one gasoline gallon if its Btu content is 124,800.

The term “alternative fuel” includes:

  • Liquefied petroleum gas, commonly known as propane
  • P Series fuels
  • Compressed or liquefied natural gas
  • Liquefied hydrogen
  • Any liquid fuel derived from coal through the Fischer-Tropsch process according to certain carbon capture requirements
  • Compressed or liquefied gas derived from biomass
  • Liquid fuel derived from biomass

The Department of Treasury (“Treasury”) issued a special rule for the year 2010, which provides guidance for a one-time submission of claims covering periods during 2010. The rule provides for a 180-day period beginning February 2, 2011 for submission of such claims. Such claims must be paid by the Treasury no later than 60 days after receipt.

The Fuels and Excise Tax practice at Ryan specializes in detailed review techniques that minimize client site disruptions, while properly identifying available alternative fuel credits. Ryan’s process provides the detailed documentation and licensing requirements, including responses to information document requests from the Internal Revenue Service, required to achieve sustainable alternative fuel credits. In addition, Ryan provides tailored recommendations to maximize future credits, as well as audit defense for alternative fuel credit claims.