The Internal Revenue Service (IRS) in Notice 2015-56 provides guidance for taxpayers on the proper treatment of deductions relating to tax credit claims for sales or use of alternative fuel. The Tax Increase Prevention Act of 2014 (enacted December 19, 2014) made the $0.50 alternative fuel credit retroactive for calendar year 2014. In January 2015, the IRS issued guidance in Notice 2015-3 requiring that all claims relating to the alternative fuel credits must be filed using Form 8849 and that these claims must be submitted by August 8, 2015.
The notice issued this week indicates that taxpayers must treat the tax payments as if they had offset their tax liability in 2014 even though under notice 2015-3 the 2014 claims were required to be taken as a single payment and not as an offset for 2014 tax liability. In previous years, the normal practice was to claim the credit first as an excise tax offset against the federal excise tax on the alternative fuel and then to claim any excess credit as a payment. The notice indicates that taxpayers must reduce their “excise tax liability for each calendar quarter during the 2014 calendar year by its alternative fuel credit attributable to alternative fuels sold or used during the calendar quarter.” Thus, they must treat the credits as if they had been taken against 2014 tax liability. Companies who have claimed the fuel credit for 2014 activities relating to an alternative fuel and who paid excise tax on an alternative fuel for 2014 activities should review the notice with tax counsel and determine how to proceed. The full notice is available on the IRS website.