IRS to waive dyed fuel penalty in Louisiana; hurricane-related relief

The IRS will not impose a penalty when dyed diesel fuel is sold for use or used on the highway in Louisiana.

IRS to waive dyed fuel penalty in Louisiana; hurricane-related relief

The IRS today—in response to shortages of undyed diesel fuel caused by Hurricane Ida—announced that it will not impose a penalty when dyed diesel fuel is sold for use or used on the highway for a number of parishes in the state of Louisiana.

The Louisiana 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.

According to the IRS release—IR-2021-176 (September 1, 2021)—the relief is effective as of August 29, 2021, and will remain in effect through September 15, 2021.

The penalty relief is available to any person that sells or uses dyed fuel for highway use.

  • In the case of the operator of the vehicle in which the dyed fuel is used, the relief is available only if the operator or the person selling the fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use.
  • The IRS will not impose penalties for failure to make semimonthly deposits of this tax.

In general, dyed diesel fuel is not taxed when sold for uses that are exempt from excise tax—e.g., sales to farmers for farming purposes, for home heating use, and to local governments for buses.

The penalty relief does not apply with respect to the penalty for using adulterated fuels that do not comply with applicable Environmental Protection Agency (EPA) regulations.  Consequently, diesel fuel with sulfur content higher than 15 parts-per-million may not be used in highway vehicles.


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

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

 

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