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...Continued from page 17 mental entities can claim the “excess credit” as
a cash payment, others are limited to claiming
liquified propane) for such a purpose in the United the “excess credit” as a refundable income tax
States credit
The rate of tax varies depending on the
liquid; in the case of propane the tax rate is 18 3 Qualifying vehicles
cents per energy equivalent of a gallon of gas- The IRS regulations provide guidance on
oline, or approximately 13 5 cents per gallon what constitutes a “motor vehicle” for purposes of
Significantly, the tax on use does not apply in sit- the Alternative Fuel Tax Credit Under these rules,
uations where the alternative fuel was previously the term includes “all types of vehicles propelled
subject to tax on sale: if propane is sold to a user by motor that are designed for carrying or towing
in a sale subject to the Section 4041 fuel excise loads from one place to another, regardless of
tax, the seller (and not the user) is the person that the type of load or material carried or towed and
can claim the Alternative Fuel Tax Credit Thus, whether or not the vehicle is registered or required
where the Section 4041 fuel excise tax applies, to be registered for highway use ” The regulation
qualifying individuals and entities are generally explicitly includes “forklift trucks” as an example,
able to use the Alternative Fuel Tax Credit to fully and excludes “farm tractors, trench diggers, pow-
offset their liability er shovels, bulldozers, road graders or rollers, and
In some cases, a person eligible for the Al- similar equipment which does not carry or tow a
ternative Fuel Tax Credit may claim the credit as load ”
either a direct cash payment from the U S Trea-
sury Department or as a refundable income tax Registration requirement
credit to the extent its allowable Alternative Fuel Under IRS guidance, an individual or entity
Tax Credit exceeds its Section 4041 fuel excise tax must be registered as an “alternative fueler” in
liability in a given quarter Under the relevant stat- order to claim the Alternative Fuel Tax Credit
utes and IRS guidance, the following requirements Claimants can register using IRS Form 637, Appli-
apply: cation for Registration (For Certain Excise Tax Ac-
• A person can only claim the Alternative tivities) (registration code “AL”) Persons who are
Fuel Tax Credit as a cash payment or a refund- registered under another category should consult
able income tax credit if the qualifying sale or use their tax advisor with respect to their registration
occurred as part of the person’s trade or business. requirements to ensure that they receive the
Individuals with qualifying nonbusiness uses of their credit
propane are limited to using the credit to offset
their Section 4041(a) fuel excise tax liability Taxpayer-specific situations
• A person can only claim the Alternative Businesses
Fuel Tax Credit as a cash payment or a refund- Where a taxable business produces and
able income tax credit to the extent the credit ex- sells propane for use as fuel in a motor vehicle
ceeds its Section 4041 fuel excise tax liability for a or motorboat, that sale will generally both be
given quarter Any Alternative Fuel Tax Credit to subject to the Section 4041 fuel excise tax and eli-
which a person is entitled that does not exceed gible for the Alternative Fuel Tax Credit To the ex-
a person’s quarterly Section 4041 fuel excise tax tent the amount of the Alternative Fuel Tax Credit
liability must first be used as a credit against that exceeds the applicable tax in a given quarter,
tax the business will be eligible to claim a refundable
• Only tax-exempt entities and govern- income tax credit The business generally will not
18 Alabama Propane Gas Association | March / April 2020