Are You Leveraging the Biodiesel and Alternative Fuels Tax Credit?

July 2020

Many companies use alternative fuels in their operations, such as utilizing propane for their forklifts, but they may not be aware of the Biodiesel and Alternative Fuels tax credit. Prior to 2018, Congress allowed a credit of $0.50 per gasoline-gallon-equivalent used during the year on the company’s annual income tax return. For propane, this credit is calculated to about $0.37 per gallon used during the year. While this credit expired in 2017, Congress resurrected it in December 2019 and made it retroactive for 2018 in Notice 2020-8. The current legislation has this tax credit set to expire after 12/31/2020, unless Congress extends the date again.

What’s even more beneficial about the Biodiesel and Alternative Fuels tax credit is that the IRS simplified the reporting for the expired credit. Taxpayers are able to claim both 2018 and 2019 on a single form outside of the tax return, thereby avoiding the preparation of amended returns. However, it’s important to note two things:

1) Form 8849 “Refund of Excise Taxes” is due August 11, 2020

2) To complete the claim, you will need to have a registration number from the IRS which can be obtained using Form 637.

If you are unable to complete Form 8849 by August 11, 2020, or if you need to apply for a registration number, then the credit can be claimed with Form 4136 “Credit for Federal Tax Paid on Fuels”. This form needs to be filed with your annual tax return and would require amending 2018 and 2019 returns, if already filed. At the very least, if you do not want to amend prior year returns, you can still claim alternative fuel used in 2020 on your 2020 tax return.   

RBI member Cray Kaiser is here to help if you have further questions about the Biodiesel and Alternative Fuels tax credit.