Rising fuel costs and increasingly stringent governmental regulations related to emmisions and noise restrictions are causing trucking companies to look for solutions to the traditional method of idling the truck’s main propulsion engine during rest periods to:
- Provide heat or air conditioning for the sleeper compartment
- Keep the engine warm during cold weather to avoid trouble with cold starts
- Generate electrical power for appliances
Although there are several types of idle-reducing technologies (cab and block heaters, automatic engine start-stop controls, battery-powered air conditioning systems, on-and-off truck electrification), auxiliary power units (APUs) separate themselves from other idle-reducing technologies by allowing drivers to access the full range of cabin comforts without restricting where the truck can stop.
The most common source of fuel for APUs installed on a commercial truck is diesel; however, other sources can fuel APUs, including electric and fuel cells. The Energy Improvement and Extension Act (EIEA of 2008) amended IRC §4053 to exclude nearly all APU devices from the 12% federal excise tax imposed by IRC §4051 “Imposition of Tax on Heavy Trucks and Trailers Sold at Retail.”
Many in the industry are aware of the retail excise tax exemption; however, there could be additional income tax benefits available to truckers through a credit commonly referred to as the “off-road fuel credit.” The credit is derived from the usage of previously taxed diesel fuel for an exempt use and is granted under IRC §4041(b)(1) “Exemption for Off-Highway Business Use.”
Claiming an off-road fuel credit for nonpropulsion activities is not a new idea. In a 1994 case (Hiway Dispatch, Inc. v. U.S., 858 F. Supp. 880), the taxpayer operated a long-distance trucking operation and was denied a credit for fuel consumed while its trucks idled at rest stops beside the highway, even though on-board computers recorded the amount of fuel used.
However, the advent of APUs provides a different set of facts for taxpayers. If your company utilizes APUs in its business, you may be eligible to claim the off-road fuel tax credit, which can be substantial depending on the number of units involved.
Schneider Downs has the experience and expertise necessary to develop a plan that maximizes your after-tax return on APU investments for companies in the transportation industry.
To learn more about potential income tax-saving opportunities and the requirements necessary to qualify, contact Jason Droske at (412) 697-5418 or email@example.com or any Schneider Downs Tax Advisor if you need assistance with the above tax-saving opportunities.
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