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IRS Provides Limited Waiver of Fuel Penalty Due to Hurricane Irma; Response Follows Shortage of Ultra Low Sulfur Diesel

Categories Tax Tips (Fed)

WASHINGTON – The Internal Revenue Service today announced it will not impose a penalty on certain uses of certain adulterated fuels that do not comply with applicable Environmental Protection Agency (EPA) regulations, in response to shortages of Ultra Low Sulfur Diesel (ULSD) fuel caused by Hurricane Irma.

On Sept. 13, the EPA issued a “No Action Assurance (NAA) for the Use of Non-Ultra Low Sulfur Diesel in Limited Diesel-Powered Highway and Nonroad Vehicles and Equipment” letter to the State of Florida.

According to the letter, the EPA will not pursue action for the use of certain diesel reserves of approximately 4 million gallons of dyed diesel fuel that has a sulfur content that is over 15 but no greater than 20 parts per million (ppm). The NAA imposes several conditions on the use of such fuel.

Both the EPA and Florida have requested that, consistent with the EPA NAA, the IRS waive its penalties for the use of non ULSD fuel that has a sulfur content of 20 ppm or less under these circumstances. Consequently, the IRS will not impose the adulterated fuel penalty on any uses that fully comply with the EPA’s NAA.

This relief is effective from Sept. 13, through Sept. 22, 2017, or until such dyed diesel reserves are exhausted, whichever is earlier. Because the reserves to which this relief applies are of dyed diesel fuel, the relief issued in IR-2017-149 is also available, provided the operator or the person selling the fuel pays the tax of 24.4 cents per gallon for any such fuel used on the highway.

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