U.S. Code > Title 26 Internal Revenue Code > Subtitle F—Procedure and Administration (§§ 6001—7874) > CHAPTER 65—ABATEMENTS, CREDITS, AND REFUNDS (§§ 6401—6432) > Subchapter B—Rules of Special Application (§§ 6411—6432) > § 6427. Fuels not used for taxable purposes

§ 6427. Fuels not used for taxable purposes

(a) Nontaxable uses
Except as provided in subsection (k), if tax has been imposed under paragraph (2) or (3) of section 4041 (a) or section 4041 (c) on the sale of any fuel and the purchaser uses such fuel other than for the use for which sold, or resells such fuel, the Secretary shall pay (without interest) to him an amount equal to—
(1) the amount of tax imposed on the sale of the fuel to him, reduced by
(2) if he uses the fuel, the amount of tax which would have been imposed under section 4041 on such use if no tax under section 4041 had been imposed on the sale of the fuel.
(b) Intercity, local, or school buses
(1) Allowance
Except as otherwise provided in this subsection and subsection (k), if any fuel other than gasoline (as defined in section 4083 (a)) on the sale of which tax was imposed by section 4041 (a) or 4081 is used in an automobile bus while engaged in—
(A) furnishing (for compensation) passenger land transportation available to the general public, or
(B) the transportation of students and employees of schools (as defined in the last sentence of section 4221 (d)(7)(C)),
the Secretary shall pay (without interest) to the ultimate purchaser of such fuel an amount equal to the product of the number of gallons of such fuel so used multiplied by the rate at which tax was imposed on such fuel by section 4041 (a) or 4081, as the case may be.
(2) Reduction in refund in certain cases
(A) In general
Except as provided in subparagraphs (B) and (C), the rate of tax taken into account under paragraph (1) shall be 7.4 cents per gallon less than the aggregate rate at which tax was imposed on such fuel by section 4041 (a) or 4081, as the case may be.
(B) Exception for school bus transportation
Subparagraph (A) shall not apply to fuel used in an automobile bus while engaged in the transportation described in paragraph (1)(B).
(C) Exception for certain intracity transportation
Subparagraph (A) shall not apply to fuel used in any automobile bus while engaged in furnishing (for compensation) intracity passenger land transportation—
(i) which is available to the general public, and
(ii) which is scheduled and along regular routes,
but only if such bus is a qualified local bus.
(D) Qualified local bus
For purposes of this paragraph, the term “qualified local bus” means any local bus—
(i) which has a seating capacity of at least 20 adults (not including the driver), and
(ii) which is under contract (or is receiving more than a nominal subsidy) from any State or local government (as defined in section 4221 (d)) to furnish such transportation.
(3) Limitation in case of nonscheduled intercity or local buses
Paragraph (1)(A) shall not apply in respect of fuel used in any automobile bus while engaged in furnishing transportation which is not scheduled and not along regular routes unless the seating capacity of such bus is at least 20 adults (not including the driver).
(4) Refunds for use of diesel fuel in certain intercity buses
With respect to any fuel to which paragraph (2)(A) applies, if the ultimate purchaser of such fuel waives (at such time and in such form and manner as the Secretary shall prescribe) the right to payment under paragraph (1) and assigns such right to the ultimate vendor, then the Secretary shall pay the amount which would be paid under paragraph (1) to such ultimate vendor, but only if such ultimate vendor—
(A) is registered under section 4101, and
(B) meets the requirements of subparagraph (A), (B), or (D) of section 6416 (a)(1).
(c) Use for farming purposes
Except as provided in subsection (k), if any fuel on the sale of which tax was imposed under paragraph (2) or (3) of section 4041 (a) or section 4041 (c) is used on a farm for farming purposes (within the meaning of section 6420 (c)), the Secretary shall pay (without interest) to the purchaser an amount equal to the amount of the tax imposed on the sale of the fuel. For purposes of this subsection, if fuel is used on a farm by any person other than the owner, tenant, or operator of such farm, the rules of paragraph (4) of section 6420 (c) shall be applied (except that “liquid taxable under section 4041” shall be substituted for “gasoline” each place it appears in such paragraph (4)).
(d) Use by certain aircraft museums or in certain other aircraft uses
Except as provided in subsection (k), if—
(1) any gasoline on which tax was imposed by section 4081, or
(2) any fuel on the sale of which tax was imposed under section 4041,
is used by an aircraft museum (as defined in section 4041 (h)(2)) in an aircraft or vehicle owned by such museum and used exclusively for purposes set forth in section 4041 (h)(2)(C), or is used in a helicopter or a fixed-wing aircraft for a purpose described in section 4041 (l), the Secretary shall pay (without interest) to the ultimate purchaser of such gasoline or fuel an amount equal to the aggregate amount of the tax imposed on such gasoline or fuel.
(e) Alcohol, biodiesel, or alternative fuel
Except as provided in subsection (k)—
(1) Used to produce a mixture
If any person produces a mixture described in section 6426 in such person’s trade or business, the Secretary shall pay (without interest) to such person an amount equal to the alcohol fuel mixture credit or the biodiesel mixture credit or the alternative fuel mixture credit with respect to such mixture.
(2) Alternative fuel
If any person sells or uses an alternative fuel (as defined in section 6426 (d)(2)) for a purpose described in section 6426 (d)(1) in such person’s trade or business, the Secretary shall pay (without interest) to such person an amount equal to the alternative fuel credit with respect to such fuel.
(3) Coordination with other repayment provisions
No amount shall be payable under paragraph (1) or (2) with respect to any mixture or alternative fuel with respect to which an amount is allowed as a credit under section 6426.
(4) Registration requirement for alternative fuels
The Secretary shall not make any payment under this subsection to any person with respect to any alternative fuel credit or alternative fuel mixture credit unless the person is registered under section 4101.
(5) Limitation to fuels with connection to the United States
No amount shall be payable under paragraph (1) or (2) with respect to any mixture or alternative fuel if credit is not allowed with respect to such mixture or alternative fuel by reason of section 6426 (i).
(6) Termination
This subsection shall not apply with respect to—
(A) any alcohol fuel mixture (as defined in section 6426 (b)(3)) sold or used after December 31, 2011,
(B) any biodiesel mixture (as defined in section 6426 (c)(3)) sold or used after December 31, 2011,
(C) except as provided in subparagraph (D), any alternative fuel or alternative fuel mixture (as defined in subsection (d)(2) or (e)(3) of section 6426) sold or used after December 31, 2011, and
(D) any alternative fuel or alternative fuel mixture (as so defined) involving liquefied hydrogen sold or used after September 30, 2014.
[(f) Repealed. Pub. L. 109–59, title XI, § 11151(a)(1), Aug. 10, 2005, 119 Stat. 1968]
[(g) Repealed. Pub. L. 104–188, title I, § 1606(a), Aug. 20, 1996, 110 Stat. 1839]
(h) Blend stocks not used for producing taxable fuel
(1) Gasoline blend stocks or additives not used for producing gasoline
Except as provided in subsection (k), if any gasoline blend stock or additive (within the meaning of section 4083 (a)(2)) is not used by any person to produce gasoline and such person establishes that the ultimate use of such gasoline blend stock or additive is not to produce gasoline, the Secretary shall pay (without interest) to such person an amount equal to the aggregate amount of the tax imposed on such person with respect to such gasoline blend stock or additive.
(2) Diesel fuel blend stocks or additives not used for producing diesel
Except as provided in subsection (k), if any diesel fuel blend stock is not used by any person to produce diesel fuel and such person establishes that the ultimate use of such diesel fuel blend stock is not to produce diesel fuel, the Secretary shall pay (without interest) to such person an amount equal to the aggregate amount of the tax imposed on such person with respect to such diesel fuel blend stock.
(i) Time for filing claims; period covered
(1) General rule
Except as otherwise provided in this subsection, not more than one claim may be filed under subsection (a), (b), (c), (d), (h), (l), (m), or (o) by any person with respect to fuel used during his taxable year; and no claim shall be allowed under this paragraph with respect to fuel used during any taxable year unless filed by the purchaser not later than the time prescribed by law for filing a claim for credit or refund of overpayment of income tax for such taxable year. For purposes of this paragraph, a person’s taxable year shall be his taxable year for purposes of subtitle A.
(2) Exceptions
(A) In general
If, at the close of any quarter of the taxable year of any person, at least $750 is payable in the aggregate under subsections (a), (b), (d), (h), (l), (m), and (o) of this section and section 6421 to such person with respect to fuel used during—
(i) such quarter, or
(ii) any prior quarter (for which no other claim has been filed) during such taxable year,
a claim may be filed under this section with respect to such fuel.
(B) Time for filing claim
No claim filed under this paragraph shall be allowed unless filed during the first quarter following the last quarter included in the claim.
(C) Nonapplication of paragraph
This paragraph shall not apply to any fuel used solely in any off-highway business use described in section 6421 (e)(2)(C).
(3) Special rule for mixture credits and the alternative fuel credit
(A) In general
A claim may be filed under subsection (e)(1) by any person with respect to a mixture described in section 6426 or under subsection (e)(2) by any person with respect to an alternative fuel (as defined in section 6426 (d)(2)) for any period—
(i) for which $200 or more is payable under such subsection (e)(1) or (e)(2), and
(ii) which is not less than 1 week.
In the case of an electronic claim, this subparagraph shall be applied without regard to clause (i).
(B) Payment of claim
Notwithstanding subsection (e)(1) or (e)(2), if the Secretary has not paid pursuant to a claim filed under this section within 45 days of the date of the filing of such claim (20 days in the case of an electronic claim), the claim shall be paid with interest from such date determined by using the overpayment rate and method under section 6621.
(C) Time for filing claim
No claim filed under this paragraph shall be allowed unless filed on or before the last day of the first quarter following the earliest quarter included in the claim.
(4) Special rule for vendor refunds
(A) In general
A claim may be filed under paragraph (4)(C) or (5) of subsection (l) by any person with respect to fuel sold by such person for any period—
(i) for which $200 or more ($100 or more in the case of kerosene) is payable under paragraph (4)(C) or (5) of subsection (l), and
(ii) which is not less than 1 week.
Notwithstanding subsection (l)(1), paragraph (3)(B) shall apply to claims filed under subsections (b)(4), (l)(4)(C)(ii), and (l)(5).
(B) Time for filing claim
No claim filed under this paragraph shall be allowed unless filed on or before the last day of the first quarter following the earliest quarter included in the claim.
(j) Applicable laws
(1) In general
All provisions of law, including penalties, applicable in respect of the taxes imposed by sections 4041 and 4081 shall, insofar as applicable and not inconsistent with this section, apply in respect of the payments provided for in this section to the same extent as if such payments constituted refunds of overpayments of the tax so imposed.
(2) Examination of books and witnesses
For the purpose of ascertaining the correctness of any claim made under this section, or the correctness of any payment made in respect of any such claim, the Secretary shall have the authority granted by paragraphs (1), (2), and (3) of section 7602 (a) (relating to examination of books and witnesses) as if the claimant were the person liable for tax.
(k) Income tax credit in lieu of payment
(1) Persons not subject to income tax
Payment shall be made under this section only to—
(A) the United States or an agency or instrumentality thereof, a State, a political subdivision of a State, or any agency or instrumentality of one or more States or political subdivisions, or
(B) an organization exempt from tax under section 501 (a) (other than an organization required to make a return of the tax imposed under subtitle A for its taxable year).
(2) Exception
Paragraph (1) shall not apply to a payment of a claim filed under paragraph (2), (3), or (4) of subsection (i).
(3) Allowance of credit against income tax
For allowances of credit against the income tax imposed by subtitle A for fuel used or resold by the purchaser, see section 34.
(l) Nontaxable uses of diesel fuel and kerosene
(1) In general
Except as otherwise provided in this subsection and in subsection (k), if any diesel fuel or kerosene on which tax has been imposed by section 4041 or 4081 is used by any person in a nontaxable use, the Secretary shall pay (without interest) to the ultimate purchaser of such fuel an amount equal to the aggregate amount of tax imposed on such fuel under section 4041 or 4081, as the case may be, reduced by any payment made to the ultimate vendor under paragraph (4)(C)(i).
(2) Nontaxable use
For purposes of this subsection, the term “nontaxable use” means any use which is exempt from the tax imposed by section 4041 (a)(1) other than by reason of a prior imposition of tax.
(3) Refund of certain taxes on fuel used in diesel-powered trains
For purposes of this subsection, the term “nontaxable use” includes fuel used in a diesel-powered train. The preceding sentence shall not apply with respect to—
(A) the Leaking Underground Storage Tank Trust Fund financing rate under sections 4041 and 4081, and
(B) so much of the rate specified in section 4081 (a)(2)(A) as does not exceed the rate applicable under section 4041 (a)(1)(C)(ii).
The preceding sentence shall not apply in the case of fuel sold for exclusive use by a State or any political subdivision thereof.
(4) Refunds for kerosene used in aviation
(A) Kerosene used in commercial aviation
In the case of kerosene used in commercial aviation (as defined in section 4083 (b)) (other than supplies for vessels or aircraft within the meaning of section 4221 (d)(3)), paragraph (1) shall not apply to so much of the tax imposed by section 4041 or 4081, as the case may be, as is attributable to—
(i) the Leaking Underground Storage Tank Trust Fund financing rate imposed by such section, and
(ii) so much of the rate of tax specified in section 4041 (c) or 4081 (a)(2)(A)(iii), as the case may be, as does not exceed 4.3 cents per gallon.
(B) Kerosene used in noncommercial aviation
In the case of kerosene used in aviation that is not commercial aviation (as so defined) (other than any use which is exempt from the tax imposed by section 4041 (c) other than by reason of a prior imposition of tax), paragraph (1) shall not apply to—
(i) any tax imposed by subsection (c) or (d)(2) of section 4041, and
(ii) so much of the tax imposed by section 4081 as is attributable to—
(I) the Leaking Underground Storage Tank Trust Fund financing rate imposed by such section, and
(II) so much of the rate of tax specified in section 4081 (a)(2)(A)(iii) as does not exceed the rate specified in section 4081 (a)(2)(C)(ii).
(C) Payments to ultimate, registered vendor
(i) In general With respect to any kerosene used in aviation (other than kerosene described in clause (ii) or kerosene to which paragraph (5) applies), if the ultimate purchaser of such kerosene waives (at such time and in such form and manner as the Secretary shall prescribe) the right to payment under paragraph (1) and assigns such right to the ultimate vendor, then the Secretary shall pay the amount which would be paid under paragraph (1) to such ultimate vendor, but only if such ultimate vendor—
(I) is registered under section 4101, and
(II) meets the requirements of subparagraph (A), (B), or (D) of section 6416 (a)(1).
(ii) Payments for kerosene used in noncommercial aviation The amount which would be paid under paragraph (1) with respect to any kerosene to which subparagraph (B) applies shall be paid only to the ultimate vendor of such kerosene. A payment shall be made to such vendor if such vendor—
(I) is registered under section 4101, and
(II) meets the requirements of subparagraph (A), (B), or (D) of section 6416 (a)(1).
(5) Registered vendors to administer claims for refund of diesel fuel or kerosene sold to State and local governments
(A) In general
Paragraph (1) shall not apply to diesel fuel or kerosene used by a State or local government.
(B) Sales of kerosene not for use in motor fuel
Paragraph (1) shall not apply to kerosene (other than kerosene used in aviation) sold by a vendor—
(i) for any use if such sale is from a pump which (as determined under regulations prescribed by the Secretary) is not suitable for use in fueling any diesel-powered highway vehicle or train, or
(ii) to the extent provided by the Secretary, for blending with heating oil to be used during periods of extreme or unseasonable cold.
(C) Payment to ultimate, registered vendor
Except as provided in subparagraph (D), the amount which would (but for subparagraph (A) or (B)) have been paid under paragraph (1) with respect to any fuel shall be paid to the ultimate vendor of such fuel, if such vendor—
(i) is registered under section 4101, and
(ii) meets the requirements of subparagraph (A), (B), or (D) of section 6416 (a)(1).
(D) Credit card issuer
For purposes of this paragraph, if the purchase of any fuel described in subparagraph (A) (determined without regard to the registration status of the ultimate vendor) is made by means of a credit card issued to the ultimate purchaser, the Secretary shall pay to the person extending the credit to the ultimate purchaser the amount which would have been paid under paragraph (1) (but for subparagraph (A)), but only if such person meets the requirements of clauses (i), (ii), and (iii) of section 6416 (a)(4)(B). If such clause (i), (ii), or (iii) is not met by such person extending the credit to the ultimate purchaser, then such person shall collect an amount equal to the tax from the ultimate purchaser and only such ultimate purchaser may claim such amount.
(m) Diesel fuel used to produce emulsion
(1) In general
Except as provided in subsection (k), if any diesel fuel on which tax was imposed by section 4081 at the regular tax rate is used by any person in producing an emulsion described in section 4081 (a)(2)(D) which is sold or used in such person’s trade or business, the Secretary shall pay (without interest) to such person an amount equal to the excess of the regular tax rate over the incentive tax rate with respect to such fuel.
(2) Definitions
For purposes of paragraph (1)—
(A) Regular tax rate
The term “regular tax rate” means the aggregate rate of tax imposed by section 4081 determined without regard to section 4081 (a)(2)(D).
(B) Incentive tax rate
The term “incentive tax rate” means the aggregate rate of tax imposed by section 4081 determined with regard to section 4081 (a)(2)(D).
(n) Regulations
The Secretary may by regulations prescribe the conditions, not inconsistent with the provisions of this section, under which payments may be made under this section.
(o) Payments for taxes imposed by section 4041 (d)
For purposes of subsections (a), (b), and (c), the taxes imposed by section 4041 (d) shall be treated as imposed by section 4041 (a).
(p) Cross references
(1) For civil penalty for excessive claims under this section, see section 6675.
(2) For fraud penalties, etc., see chapter 75 (section 7201 and following, relating to crimes, other offenses, and forfeitures).
(3) For treatment of an Indian tribal government as a State (and a subdivision of an Indian tribal government as a political subdivision of a State), see section 7871.