Propane and Compressed Natural Gas Tax Credits Reinstated – Refund Claims Can Be Filed Beginning on February 14, 2020

The IRS has provided helpful guidance on requesting refunds for the 2018 and 2019 years for the Alternative Fuel Credit (more commonly known as Propane Tax Credit and Compressed Natural Gas Tax Credit). This credit expired after December 31, 2017 but has been retroactively reinstated by the Taxpayer Certainty and Disaster Tax Relief Act of 2019, signed by the President on December 20, 2019.  The credit enables taxpayers that use propane or liquefied petroleum gas (LPG) for off-highway business use in equipment like forklifts or compressed natural gas (CNG) in vehicles to receive a 50-cent per-gallon credit. 

Notice 2020-8 provides taxpayers the option to use a streamlined method for filing refund claims. For 2018 and 2019 only, taxpayers can file one form 8849, along with the Schedule 3 to claim refunds for both years. The IRS will accept one-time claims for the 2018 and 2019 alternative fuel tax credits during the 180-day period between February 14, 2020 and August 11, 2020.

If the taxpayer follows these procedures, the IRS should issue the refund within 60 days after the claim is received or it will pay interest from the claim filing date. The IRS will not process any claims filed on Form 8849 after August 11, 2020.

Alternatively, taxpayers can use the more cumbersome method of amending their 2018 tax return to include the Form 4136 to request the credit. Taxpayers would also need to file the Form 4136 with their 2019 income tax returns. This method would clearly cause the IRS to provide the refunds later than the method provided in Notice 2020-8.

Another important requirement is that claimants must be registered with the IRS as an alternative fueler to file for the alternative fuel credit. If not already registered, the taxpayer may apply by filing Form 637 – Application for Registration (For Certain Excise Tax Activities).

Our advice to taxpayers is to begin to gather the necessary information now, so the Form 8849 can be filed shortly after February 14, 2020. Please contact your Schneider Downs tax advisor with any questions or if you need further assistance.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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