The Treasury Department and the IRS have introduced new rules that outline how businesses can recover certain fuel taxes, offering long-awaited clarity for parts of the fuel supply chain.
The regulations, effective May 1, 2026, set out a process for reclaiming taxes on diesel or kerosene that are ultimately used for purposes exempt from taxation under the One Big Beautiful Bill Act.
The move addresses a gap that had left some companies unable to easily recoup taxes already paid. By establishing a defined refund pathway, the guidance aims to streamline how such claims are handled going forward.
Under the new framework, taxpayers who paid excise tax on clear diesel or kerosene may be eligible for a refund if that fuel is later dyed and removed from an approved terminal for a non-taxable use. The rules apply to qualifying fuel removals on or after December 31, 2025, provided all conditions are met.
To qualify, several criteria must be satisfied. The fuel must have already been taxed, and that tax cannot have been previously credited or refunded. It must then be dyed through a mechanical process and removed from an approved terminal for exempt use. Only the entity that originally paid the excise tax to the IRS can claim the refund.
"Absent a statutory change, [Treasury and the IRS] currently lack the authority to pay the claims to anyone other than the person that paid the prior fuel excise tax to the IRS," the guidance reads.
Filing a claim involves submitting Form 8849 along with Schedule 5, specifically for claims under sections 4081(e) and 6435. Claimants must also include a detailed taxpayer report with required data points. Separate filings are required if other excise tax claims are submitted at the same time.
The guidance also confirms that refunds may include the small per-gallon charge tied to the Leaking Underground Storage Tank Trust Fund. In cases where the same taxpayer both paid the original tax and later removed the dyed fuel, the payment is treated as a refund of an overpayment.
"Treasury and IRS recognize the importance of providing clarity to taxpayers through guidance that can be relied on to file claims and structure business arrangements as soon as possible,"
the agencies said in announcing the changes on April 30, 2026.
The regulations take effect immediately but are temporary. They will expire on May 1, 2029, unless replaced earlier or if Congress changes the law to allow refunds to be paid to other parties.
The IRS is inviting public feedback. Comments must be submitted within 60 days of publication in the Federal Register, and the agency will consider requests for a public hearing before finalizing permanent guidance.
In the meantime, businesses seeking refunds will need to prepare documentation showing that the same entity both paid the excise tax and later handled the qualifying dyed fuel removal.
Unless lawmakers act to expand eligibility, the IRS will continue to limit refunds to the original taxpayer. The temporary rules will remain in place until final regulations are adopted or until they expire in 2029.