Several items of interest to the energy industry are included in the Trump Administration's first IRS/Treasury Priority Guidance Plan (the Plan) released on October 20, 2017. The Plan identifies and prioritizes tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. Guidance on items included on this list is not guaranteed, but an item's inclusion is worth noting. As in prior years, the IRS and Treasury will periodically update the status of Plan projects and may add projects to respond to developments arising during the Plan Year.

While the Plan does not include details, it lists unspecified guidance planned for the following items:

— Dual use of taxable liquid fuel under Treas. Reg. Section 48.4041-7
— The definition of compressed natural gas for purposes of Sections 4041 and 6426
— Claims for dyed fuel relief under Notice 2017-30
— Determination of whether gasoline blendstocks combined with taxable fuel qualify for the alternative fuel mixture credit under Section 6426(e)
— Modification, extension and phase out of the investment tax credit (ITC) for solar energy property under Section 48

The Plan also anticipates final regulations under Section 468A involving the decommissioning costs of a nuclear power plant and a revenue procedure under Section 263(a) regarding the capitalization of natural gas transmission and distribution property.

Guidance under Section 167 regarding a safe harbor for normalization is included on the Plan and was already issued on September 7, 2017, as Revenue Procedure 2017-47 (see Tax Alert 2017-1492).

Implications

The only new items on the Plan are those relating to: (1) claims for dyed fuel relief under Notice 2017-30; and (2) determination of whether gasoline blendstocks combined with taxable fuel qualify for the alternative fuel mixture credit under Section 6426(e).

The first new item is necessitated by the shutdown of the pipeline supplying terminals in Green Bay, Wisconsin. This guidance will provide procedures for claiming a refund when taxed diesel fuel delivered by truck to a Green Bay terminal is subsequently dyed and removed for a nontaxable use. The implications are minimal as the guidance will merely provide procedures for claiming previously granted relief.

The second new item is more significant. Section 6426(e) provides a credit of $0.50 per gallon or gasoline gallon equivalent for alternative fuel blended with taxable fuel. Under Section 6426(d), alternative fuel includes liquefied petroleum gas (LPG) for which the credit (determined on a gasoline gallon equivalent basis) is $0.50 per 1.353 gallons. Refiners can blend LPG with gasoline blendstocks that are treated, under Treas. Reg. Section 48.4081-1, as taxable fuel to produce finished gasoline. Refiners engaged in such blending have claimed the alternative fuel credit for the LPG used in the blending process. Although the description in the Plan is somewhat confusing, it is likely that the proposed guidance is intended to address these claims.¹ The alternative fuel credit expired on December 31, 2016. Thus, unless the credit is extended, the guidance will have only retroactive effect.

The Plan does not mention updating Revenue Procedure 2011-43, which many expected. It also does not list an update to Notice 2016-36 related to Section 118, which has also been rumored to be in the works.

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ENDNOTES

¹ Confusion arises because the description refers to gasoline blendstocks combined with taxable fuel when gasoline blendstocks are, by definition, taxable fuel. The description may be treating LPG, which is neither a gasoline blendstock nor a taxable fuel (both as defined in Section 48.4081-1), as a gasoline blendstock for purposes of the guidance project.