close
Share with your friends

Federal Circuit: Alcohol fuel mixture credit reduces gasoline excise tax

Alcohol fuel mixture credit reduces gasoline excise tax

The U.S. Court of Appeals for the Federal Circuit today affirmed a decision of the U.S. Court of Federal Claims and held that a section 6426 alcohol fuel mixture credit must be treated first as a reduction of the taxpayer's section 4081 excise tax liability, with any remaining mixture credit amount treated as a section 6427 tax-free payment.

1000

Related content

The case is: Sunoco, Inc. v. United States, 2017-1402 (Fed. Cir. November 1, 2018). Read the Federal Circuit’s decision [PDF 143 KB]

Summary

The taxpayer filed income tax returns for 2004 through 2009 and claimed the mixture credit under section 6426 as a credit against its section 4081 gasoline excise tax liability for the years 2005 through 2008. The net gasoline excise tax liability was included in taxpayer’s cost of goods sold.

The taxpayer subsequently changed its position and claimed an income tax credit of  over $300 million on the grounds that it was entitled to include in cost of goods sold the gross amount of section 4081 gasoline excise tax, without regard to the mixture credit.

The IRS rejected the taxpayer’s claim, the taxpayer filed suit in the Court of Federal Claims, and the claims court granted the government’s motion for judgment on the pleadings.

The taxpayer appealed, and today the Federal Circuit affirmed. The appellate court held that the mixture credit must first be applied to reduce the taxpayer’s gasoline excise tax liability. Any remaining mixture credit is treated as a tax-free payment to the taxpayer. 

 

For more information, contact a tax professional with KPMG’s Excise Tax Practice group:

Deborah Gordon | +1 (202) 533 5965 | dkgordon@kpmg.com

Taylor Cortright | +1 (202) 533 6188 | tcortright@kpmg.com

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal