Extension of temporary relief for fuel removals in Wisconsin

Dec 23, 2020
Dec 23, 2020
0 min. read

Final extension from Treasury related to West Shore Pipeline shutdown

On Dec. 22, 2020, the Treasury Department issued an advance copy of Notice 2021-04. The notice provides a final extension of temporary relief for fuel removals destined for nontaxable use due to the West Shore Pipeline shutdown in Wisconsin.  


The West Shore Pipeline is a 650-mile pipeline system that transported refined petroleum products to the northeastern part of Wisconsin for over 50 years. It was the only pipeline serving Green Bay and northeastern Wisconsin. A segment of the pipeline between Milwaukee and Green Bay closed on March 10, 2016 for repairs, testing and inspections. On June 22, 2016, this segment was closed indefinitely after integrity concerns were detected. In response to the shutdown and expected fuel shortages, the Governor of Wisconsin issued executive orders declaring national emergencies. On April 21, 2017, the Wisconsin Department of Administration issued a statement that the West Shore Pipeline Company would not replace this section of the pipeline.  

Since the shutdown, fuel has been transported to Green Bay via vessel or has been removed from terminals in Milwaukee and Madison and transported via truck or rail car to Green Bay. Under applicable excise tax rules, tax is imposed on removals of fuel from terminals, even if the fuel is re-entered into another terminal. Even if a first tax was imposed on fuel removed from a terminal, if that fuel is re-entered into a second terminal and subsequently removed, tax is imposed a second time on the same gallons of fuel. A credit may generally be claimed only for the second tax imposed on the fuel under statutory claim rules.  

In the case of diesel fuel or kerosene that is destined for a nontaxable use, fuel is generally dyed red upon removal at the terminal rack. If fuel is dyed red, tax is not imposed.  

Treasury Guidance

Because of the pipeline shutdown, an issue arose with claiming a credit for the first tax imposed on fuel removed from Madison or Milwaukee terminals and trucked to Green Bay terminals. If this fuel was subsequently removed from the terminal as dyed fuel, there is no statutory mechanism in the Code to recover the first tax imposed on the fuel to the person that paid the tax. Only downstream end users could claim this credit.  

Thus, in response to comments from affected stakeholders, Treasury issued guidance providing administrative relief in the form of a temporary refund mechanism for the first tax paid on diesel fuel and kerosene related to the West Shore Pipeline closure. Initial guidance was issued beginning Oct. 31, 2017 and has been extended numerous times.

Notice 2021-04

Notice 2021-04 extends the IRS administrative relief through Dec. 31, 2021. No further extensions of relief will be provided to taxpayers. After expiration of the administrative relief, the downstream end-user customers will be the only permissible claimant of the refunds.    

WNT Observations

The IRS guidance has provided affected businesses time to renegotiate relevant contracts, otherwise adopt business solutions pertaining to shipment of fuel to Green Bay and pursue legislative solutions. Fuel sellers in Wisconsin should be mindful of the one year extension of relief and make plans to prepare alternative solutions for obtaining dyed diesel fuel and kerosene in the Green Bay area beginning in 2022.  

RSM contributors

  • Trina Pinneau

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