A bill to amend the Internal Revenue Code of 1986 to allow for payments to certain individuals who dye fuel, and for other purposes.
- Bill Number
- S. 1111
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-03-25: Read twice and referred to the Committee on Finance.
- Last Updated
- 2025-05-08T19:29:51Z
AI-Generated Summary
Purpose
This bill aims to provide tax refunds to certain individuals or entities involved in handling dyed diesel fuel or kerosene, which is typically used for non-taxable purposes (like off-road or heating use). By amending the Internal Revenue Code of 1986 (IRC), it reimburses the initial excise tax paid on this fuel to prevent double taxation or unnecessary costs in the supply chain.
Key Provisions
- New Refund Mechanism: Adds Section 6434 to the IRC, allowing the Secretary of the Treasury (through the IRS) to pay a refund equal to the excise tax under IRC Section 4081 for "eligible indelibly dyed diesel fuel or kerosene" removed from a terminal. No interest is paid on these refunds.
- Eligibility Requirements: Refunds are available to persons who prove they removed dyed fuel from a terminal. The fuel must:
- Have had the excise tax previously paid (without prior credit or refund).
- Be exempt from taxation under IRC Section 4082(a), which covers dyed fuels used for non-highway purposes (e.g., farming, heating).
- Penalties: References civil penalties under IRC Section 6675 for excessive or fraudulent refund claims.
- Conforming Amendments: Updates related IRC sections (e.g., 6206, 6430, 6675) to include this new provision in existing rules for tax credits, refunds, and penalties related to fuel taxes.
- Effective Date: Applies to fuel removed 180 days after the bill's enactment.
Significant Changes to Existing Law
- Introduces a targeted refund for dyed fuel handlers, expanding beyond current IRC provisions (like Sections 6420, 6421, and 6427) that mainly cover refunds for untaxed or off-highway fuel uses by end-users (e.g., farmers or local governments).
- Shifts some refund responsibility upstream in the fuel distribution process to those who dye or remove the fuel from terminals, rather than solely to final consumers.
- Integrates this into broader fuel tax refund and penalty frameworks without altering the core excise tax structure under Section 4081.
Potential Impacts
- Government Agencies: The IRS will need to process additional refund claims, potentially increasing administrative workload and costs, but it may streamline compliance by clarifying dyed fuel handling.
- Citizens and Businesses: Fuel dyers, distributors, or terminal operators (often in the energy sector) could receive direct refunds, lowering their costs and possibly reducing prices for non-taxable fuel users like farmers, construction firms, or heating oil providers. End-users may indirectly benefit from a more efficient supply chain.
- International Relations: No direct impacts, as this focuses on domestic U.S. fuel taxation.
Main Stakeholders Affected
- Fuel Industry Participants: Primary beneficiaries include terminal operators, dyers, and distributors who handle indelibly dyed diesel or kerosene, enabling them to recover taxes paid earlier in the process.
- IRS and Treasury Department: Responsible for verifying claims and issuing payments, with added enforcement for penalties.
- End-Users of Dyed Fuel: Indirectly affected, such as agricultural producers, off-road vehicle operators, and heating fuel consumers, who may see stabilized or lower fuel costs.
- Taxpayers Generally: Could face minimal indirect costs through government processing, but the bill promotes fairer tax application in the fuel sector.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens the IRC's framework for fuel tax exemptions by addressing a gap for intermediaries, potentially reducing disputes over who qualifies for refunds. Maintains penalties to deter abuse, aligning with existing anti-fraud measures.
- Constitutional: No apparent issues; it operates within Congress's taxing and spending powers under Article I, Section 8, without infringing on states' rights or individual liberties.
- Political: Could appeal to agricultural and energy lobbies by easing burdens on rural and industrial fuel uses, but may draw scrutiny over added IRS administrative expenses in a fiscally conservative context. As a bipartisan bill (introduced by Sens. Johnson and Baldwin), it reflects targeted tax relief without broad revenue changes.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (1)
Recent Actions
- 2025-03-25: Read twice and referred to the Committee on Finance.
- 2025-03-25: Introduced in Senate
Bill Versions
- To amend the Internal Revenue Code of 1986 to allow for payments to certain individuals who dye fuel, and for other purposes. — issued 2025-03-25 — PDF (4 pages)