Seventh Circuit denies butane alternative fuel mixture credit claim
TAX ALERT |
Authored by RSM US LLP
On June 29, 2021, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s rejection of energy company U.S. Venture’s refund claim for more than $33 million dollars of alternative fuel mixture credit. The court held that gasoline blends containing butane do not qualify for an alternative fuel mixture excise tax credit under IRC section 6426(e).
During oral arguments, U.S. Venture urged the appellate panel to reverse the lower court’s finding excluding butane from qualifying for the credit. The company argued that butane could be an alternative fuel under the plain language of the statute, which provides an excise tax credit to taxpayers that sell or use a mixture of an “alternative fuel” and a “taxable fuel.”
However, the appeals court rejected U.S. Venture’s argument and found the statute clear on its face. In its analysis, the court did not look beyond the language of the statute and excise tax regulations, stating its reading “is consistent with the long-standing statutory and regulatory definition of alternative fuels.” The court was critical of U.S. Venture’s technical arguments, noted that butane has been a component of gasoline for many years and was not an alternative to the current petroleum-based process for the production of gasoline.
U.S. Venture is one of a number of taxpayers litigating this issue with millions of dollars of refund claims at issue. Other cases include Vitol v. United States (on appeal to Fifth Circuit Court of Appeals); Valero Marketing and Supply Company v .United States (Western District of Texas), and Philadelphia Energy Solutions Refining and Marketing v. United States (Federal Claims Court). To date, no taxpayer has yet prevailed with its argument that butane is an alternative fuel for purposes of the alternative fuel mixture excise tax credit.
For more information on the Seventh Circuit’s ruling, refer to U.S. Venture, Inc. v. United States.
Call us at +1 213.873.1700, email us at email@example.com or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Debbie Gordon, Eugene Boakye and originally appeared on 2021-07-06.
2021 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.