Law Restores Federal Refundable Tax Credit for Propane Use

Recent legislation retroactively restored the federal refundable tax credit for propane use, which originally expired December 31, 2014. It’s now extended for fuel used through December 31, 2016.

As in previous years, the credit is 50 cents per gallon or gasoline-gallon equivalent and remains refundable. Depending on your propane use—if you have a forklift powered by propane, for example—this credit could add up to substantial savings for your business in the form of a check from the federal government. Unlike refunds for taxes paid on fuel, receipt of this credit may not be taxable income.

If you filed a federal tax return within the past three years and didn’t claim a credit, you may have an opportunity to claim it by filing an amended return thanks to retroactive reinstatements.

There are several points to note:

  • Taxpayers must register in advance with the IRS before claiming the credit.
  • Partnerships must allocate the credit to each partner and include a statement with Schedule K-1 (Form 1065).
  • If you file Form 720, Quarterly Federal Excise Tax Return, you may be required to claim any available credits on that form before claiming the credit on your federal tax return.

The same federal legislation also extended tax incentives for:

  • Biodiesel and biodiesel mixtures
  • Alternative fuel infrastructure, including fueling equipment for natural gas, propane, biodiesel, and other alternative fuels
  • Certain producers and blenders of alternative fuels

Each incentive has specific documentation, registration, and reporting requirements.

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For more information on tax credits and other strategies that may benefit your business as well as the regulations you’ll need to know when you implement them, contact your Moss Adams tax professional.