December 20, 2019
Congress approves extenders packages, which includes excise tax provisions affecting federal taxes on fuel, alcohol and manufacturers
On December 17, 2019, the US House of Representatives approved legislation (H.R. 8165 "The Further Consolidated Appropriations Act, 2020 (Act)) that would extend through at least December 31, 2020, many of the tax extender provisions that previously expired or are expiring at the end of 2019, including excise tax provisions that affect federal taxes on fuel, alcohol and manufacturers. The legislation also provides language intended to clarify certain provisions of the Alternative Fuel Mixture Credit under Section 6426(e) of the Internal Revenue Code of 1986, as amended (IRC). The legislation was passed by the Senate on December 19, 2019; President Trump is expected to sign the bill by Friday, December 20, 2019."
Fuel-related excise taxes
Under the Act, the Biodiesel Mixture Credit under IRC Section 6426(c), which expired on December 31, 2017, would be extended through December 31, 2022, while the Alternative Fuel Credit and Alternative Fuel Mixture Credit, which each expired on December 31, 2017, would be extended through December 31, 2020. The Act also would extend the refundability of the Biodiesel Mixture and Alternative Fuel Credits under IRC Section 6427(e)(6)(B) and (C).
In addition to extending the Alternative Fuel Mixture Credit (AFMC) through 2020, the Act would prospectively (beginning on January 1, 2018) modify the definition of fuels eligible to be included in a "mixture of alternative fuel" by excluding liquified petroleum gas, compressed or liquified natural gas, and compressed liquified gas derived from biomass. Perhaps most notably, otherwise valid claims that have yet to be paid or allowed "by date of enactment" and are based on a mixture containing one of the newly excluded fuels that were sold or used by December 31, 2017, will be disallowed if filed/made on or after January 8, 2018, the date of IRS Revenue Ruling 2018-2. In that ruling, the IRS concludes that butane is a taxable fuel and ineligible as an alternative fuel for AFMC purposes. (Taxpayers are currently challenging Revenue Ruling 2018-2 in several different federal courts.)
Additionally, the Act tasks the Secretary of the Treasury with releasing guidance for making one-time claims for periods that have previously expired. This guidance is anticipated to be similar to the guidance that was issued following the enactment of the previous tax extenders legislation.
Lastly, the Act also would extend the Oil Spill Liability Trust Fund financing rate through December 31, 2020.
Alcohol-related excise taxes
The Act would also extend the reduced rates on beer and wine that are set to expire on January 1, 2020 through January 1, 2021. The reduced rate on distilled spirits that is set to expire on December 31, 2019 would be extended through December 31, 2020. Additionally, the adjustment of alcohol content levels used in calculating excise taxes would be extended through January 1, 2021.
Manufacturer excise taxes
The Act would extend the reduced rates for taxes on coal (known as the Black Lung Disability Trust Fund Excise Taxes) that expired on December 31, 2018 through December 31, 2020.
The legislative text may be viewed here. We will keep you up to date as the tax package moves through the remainder of the legislative process in the coming days and guidance surrounding one-time claims is released.