Recent Developments Regarding the Treatment of Refundable Fuel Tax Credits

Transcription

1 Recent Developments Regarding the Treatment of Refundable Fuel Tax Credits August 5, 2014 Michael E. Fincher Deloitte Tax LLP

2 Tax Accounting for Certain Renewable Fuel Incentives Technical tax issue: whether to exclude from gross income (including grossing up excise tax deductions or cost of goods sold (COGS)) refundable excise tax credits allowed for Ethanol or other alcohol fuel mixtures (section 6426(b)) Biodiesel mixtures (section 6426(c)) Alternative fuels (e.g., propane)(section 6426(d)) Alternative fuel mixtures (section 6426(e)) Many in the industry directly included the credit/payment amount in federal taxable income, or did so indirectly by reducing excise tax deductions or COGS for those amounts. 2 Treatment of Refundable Fuel Tax Credits Copyright 2014 Deloitte Development LLC. All rights reserved.

3 Section 6426 Fuel Tax Credits CCA credits and related payments not items of gross income But CCA deduction not allowed for excise taxes against which credits were applied under section 6426(a) Taxpayers currently challenging IRS s position on deductibility issue, which may impact only a portion of their credits claimed Section 6426(b) credits for ethanol or other alcohol fuel mixtures sold or used during 1/1/05 through 12/31/11 Section 6426(c) credits for biodiesel mixtures sold or used during 1/1/05 through 12/31/13 Section 6426(d) credits for alternative fuels (e.g., propane) used to propel motor vehicles, motorboats, or airplanes if sold or used during 10/1/06 through 12/31/13 (or through 9/30/14 for liquefied hydrogen) Section 6426(e) credits for alternative fuel mixtures sold or used during 10/1/06 through 12/31/11 (or through 12/31/09 for black liquor) Possible opportunity to amend open-year returns and request refunds, and/or to increase NOL carryforwards from closed years Some credits may be reinstated by Congress for 2014 and beyond 3 Treatment of Refundable Fuel Tax Credits Copyright 2014 Deloitte Development LLC. All rights reserved.

4 Additional Considerations Financial and tax accounting treatment often differ by taxpayer Note: Excise tax rules treat single-member LLCs as separate taxpayers If benefits are effectively passed through to customers, net accounting may have been used Excise taxes originally treated as similar to sales tax collections (i.e., collection and remittance - see ASC and former EITF 06-03) Netting of credits and discount paid to customer Consider gross-up approach for amended returns Claiming a deduction for full excise tax liability as if liability was satisfied by refundable credits will likely be challenged by the IRS 4 Treatment of Refundable Fuel Tax Credits Copyright 2014 Deloitte Development LLC. All rights reserved.

5 Presenter Bio Michael E. Fincher Senior Manager Michael Fincher is a Senior Manager in the Minneapolis office of Deloitte Tax LLP, with over 13 years of experience assisting clients in the area of corporate and cooperative taxation. He specializes in cooperative taxation and corporation reorganizations and consolidations (including mergers and acquisitions, spin-offs, liquidations, and dispositions). During his career with Deloitte, Michael spent two years in the National Tax office of Deloitte, located in Washington, D.C., as part of a Management Development Program assignment in the Subchapter C Group. In addition to his client responsibilities, Michael leads Deloitte sponsored training seminars in the area of corporate reorganizations, mergers and acquisitions, and accounting periods and methods at the local, regional, and national level on a regular basis. In addition, Michael is an adjunct professor at the University of Minnesota, Carlson School of Business, where he teaches the corporate consolidated returns course in the Master of Business Taxation program. Michael is a member of the American Institute of Certified Public Accountants, the Tax Committee of the National Society of Accountants for Cooperatives, and he is a licensed certified public accountant in the District of Columbia and the states of Minnesota and South Dakota. Michael holds a Masters of Science in Taxation degree from American University (Washington, D.C.), a Masters of Professional Accountancy degree, and a Bachelors of Science in Business Administration degree, both from the University of South Dakota. 5 Treatment of Refundable Fuel Tax Credits Copyright 2014 Deloitte Development LLC. All rights reserved.

6 This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. 6 Treatment of Refundable Fuel Tax Credits Copyright 2014 Deloitte Development LLC. All rights reserved.

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