If your company uses off-road vehicles such as earthmoving, excavating, or loading equipment, be sure you are taking full advantage of any federal fuel tax credits that might be available. Two credits—the Alternative Fuel Excise Tax Credit and the Federal Fuel Tax Credit—are worth particular scrutiny.
Technically, the Alternative Fuel Excise Tax Credit had expired in December 2016, but the Bipartisan Budget Act of 2018, signed into law in February, extended it retroactively through the end of 2017.
The act provides a 50 cent per gallon tax credit for the use of various alternative fuels, including liquefied petroleum gas (LPG) or propane. Your company could be entitled to this credit for propane used in forklifts or other off-road vehicles, but you must register with the IRS to claim it.
Although technically it has expired again, the credit is one of several so-called “extenders,” which are routinely—and often retroactively—approved by Congress every year. There are no guarantees, but another extension is considered likely next year.
Your company could be eligible for another federal tax credit if you use diesel-powered off-road equipment. Fuel distributors collect a federal excise tax of 24.4 cents per gallon on clear diesel fuel, but no tax is collected on diesel that is dyed red and intended for off-road use only.
Large fuel distributors are usually careful to distinguish between the two types of diesel but, if for any reason, you end up using clear diesel in off-road equipment, you could be eligible for a refund of the federal excise tax you paid. You will need good records to support your claim, which is filed either annually or quarterly, depending on the size of your claim.