United States

IRS provides temporary penalty relief for using dyed diesel fuel in LA

TAX ALERT  | 

Update – Sept. 17, 2021

On Sept. 15, 2021, in response to the continued shortages of undyed diesel fuel due to Hurricane Ida and Nicholas, the IRS announced it will extend the penalty relief provided in IR-2021-176. In IR-2021-176, the IRS announced that due to shortages of undyed diesel fuel due to Hurricane Ida, it will not impose penalties on dyed diesel fuel that is either sold for use or used on the highway for a number of parishes in the state of Louisiana. The parishes are Ascension, Assumption, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Washington, West Baton Rouge and West Feliciana. The relief is effective as of Aug. 29, 2021 and will now remain in effect through Sept. 30, 2021. In addition to the aforementioned parishes, the IRS is also providing penalty relief to the parishes of Acadia, Allen, Avoyelles, Beauregard, Calcasieu, Cameron, Evangeline, Jefferson Davis, Lafayette, Rapides, St. Landry, Vermilion and Vernon. This relief is also effective as of Aug. 29, 2021 and will also remain in effect through Sept. 30, 2021. 

Generally, if a person uses dyed diesel fuel for a taxable use, such as use in a vehicle on the highway, there is a penalty for such use. As such, the penalty relief is for any person who sells or uses dyed fuel for highway use. Moreover, for vehicle operators using the dyed diesel fuel, the relief is available only if the operator or the fuel seller pays the $24.4 cents per gallon tax that is typically applied to undyed diesel fuel used on the highways. The IRS will not impose penalties for failure to make semimonthly deposits of this tax and recommends taxpayer check IRS Publication 510, Excise Taxes, for information on the proper method for reporting and paying the tax. Notably, this waiver does not apply to the Internal Revenue Code penalty for using adulterated fuels that are not in accordance with applicable EPA regulations.

Taxpayers should seek advice from their tax preparers to determine if this waiver applies to them or if they need assistance of reporting and paying the tax.

Original – Sept. 2, 2021

On Sept. 1, 2021, in response to shortages of undyed diesel fuel due to Hurricane Ida, the IRS announced it will not impose penalties on dyed diesel fuel that is either sold for use or used on the highway for a number of parishes in the state of Louisiana. The parishes are Ascension, Assumption, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Washington, West Baton Rouge and West Feliciana. The relief is effective as of Aug. 29, 2021, and will remain in effect through Sept. 15, 2021.

Generally, if a person uses dyed diesel fuel for a taxable use, such as use in a vehicle on the highway, there is a penalty for such use. As such, the penalty relief is for any person who sells or uses dyed fuel for highway use. Moreover, for vehicle operators using the dyed diesel fuel, the relief is available only if the operator or the fuel seller pays the 24.4 cents per gallon tax that is typically applied to undyed diesel fuel used on the highways. The IRS will not impose penalties for failure to make semimonthly deposits of this tax and recommends taxpayer check IRS Publication 510, Excise Taxes, for information on the proper method for reporting and paying the tax. Notably, this waiver does not apply to the Internal Revenue Code penalty for using adulterated fuels that are not in accordance to applicable EPA regulations.

Additionally, the IRS issued guidance stating that penalties on excise tax deposits due on or after Aug. 26 and before Sept. 10, will be abated so long as the deposits are made by Sept. 10, 2021. For more information, please refer to the recent disaster relief guidance.

Taxpayers should seek advice from their tax preparers to determine if this waiver applies to them or if they need assistance of reporting and paying the tax.

RSM CONTRIBUTORS


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