Rule2026-08545
Section 6435 Payments; Refunds for Previously Taxed Dyed Fuel
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 1, 2026
Effective
May 1, 2026
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains temporary regulations regarding the statutory provision providing for payments to taxpayers with respect to certain previously taxed dyed fuel. Specifically, these temporary regulations provide guidance delineating which taxpayers may claim such payments and the procedures these taxpayers must follow to claim the payments. The text of the temporary regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the proposed rules section in this issue of the Federal Register. These temporary regulations affect taxpayers that withdraw previously taxed dyed fuel from a terminal.
Full Text
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<title>Federal Register, Volume 91 Issue 84 (Friday, May 1, 2026)</title>
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[Federal Register Volume 91, Number 84 (Friday, May 1, 2026)]
[Rules and Regulations]
[Pages 23363-23369]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08545]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 48
[TD 10047]
RIN 1545-BS04
Section 6435 Payments; Refunds for Previously Taxed Dyed Fuel
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
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SUMMARY: This document contains temporary regulations regarding the
statutory provision providing for payments to taxpayers with respect to
certain previously taxed dyed fuel. Specifically, these temporary
[[Page 23364]]
regulations provide guidance delineating which taxpayers may claim such
payments and the procedures these taxpayers must follow to claim the
payments. The text of the temporary regulations also serves as the text
of the proposed regulations set forth in the notice of proposed
rulemaking on this subject in the proposed rules section in this issue
of the Federal Register. These temporary regulations affect taxpayers
that withdraw previously taxed dyed fuel from a terminal.
DATES:
Effective date: These temporary regulations are effective on May 1,
2026. The temporary regulations under Sec. 48.6435-1T expire on the
earlier of May 1, 2029, or the date of any statutory change that would
appropriate funds for the payment of claims under section 6435 to
persons other than the taxpayer that paid the section 4081 tax to which
the claim relates.
Applicability date: These temporary regulations apply to removals
of eligible dyed fuel occurring on or after December 31, 2025.
FOR FURTHER INFORMATION CONTACT: Concerning these temporary
regulations, Danielle Mayfield or Andrew Clark of the Office of
Associate Chief Counsel (Energy, Credits, and Excise Tax) at (202) 317-
6855 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
This document contains amendments to the Manufacturers and
Retailers Excise Tax Regulations (26 CFR part 48) under section 6435 of
the Internal Revenue Code (Code) relating to the determination of
payments regarding dyed diesel fuel or dyed kerosene with respect to
which excise tax under section 4081 of the Code was paid (regulations).
The regulations are issued under the authority granted by sections
6435(a), 6001, and 7805(a) of the Code.
Section 6435(a) requires that a person claiming a payment under
section 6435 establish to the satisfaction of the Secretary of the
Treasury or the Secretary's delegate (Secretary) that such person meets
the requirements under section 6435(b).
Section 6001 authorizes the Secretary to prescribe regulations
related to recordkeeping, statements, and returns.
Section 7805(a) authorizes the Secretary to prescribe all needful
rules and regulations for the enforcement of the Code, including all
rules and regulations as may be necessary by reason of any alteration
of law in relation to internal revenue.
Background
I. Overview
This document amends the Manufacturers and Retailers Excise Tax
Regulations (26 CFR part 48) to add temporary regulations providing
rules relating to claims for payment under section 6435 regarding
previously taxed dyed fuel. For the reasons discussed in Part IV of
this Background, the temporary regulations limit the claimants under
section 6435 to taxpayers that paid to the IRS the prior fuel excise
tax under section 4081 with respect to the dyed fuel.
In accordance with section 7805(e)(1), concurrent with the
publication of this Treasury Decision, the Department of the Treasury
(Treasury Department) and the IRS are publishing in the Proposed Rules
section of this issue of the Federal Register a notice of proposed
rulemaking (REG-119294-25) containing proposed regulations under
section 6435 at proposed Sec. 48.6435-1, the text of which is
identical to the text of Sec. 48.6435-1T of the temporary regulations.
Interested persons are directed to the ADDRESSES and Comments and
Requests for a Public Hearing sections of the preamble to REG-119294-25
for information on submitting public comments or requesting a public
hearing on the proposed regulations.
II. Federal Fuel Excise Taxes
Section 4081(a) imposes an excise tax (section 4081 tax) on certain
removals, entries, and sales of taxable fuel, including diesel fuel and
kerosene. Section 4081(a)(2) prescribes the tax rate for the section
4081 tax. Section 4081(a)(2)(A)(iii) prescribes a general tax rate of
24.3 cents per gallon for diesel fuel or kerosene. In addition to that
tax rate, section 4081(a)(2)(B) prescribes a tax rate of 0.1 cent per
gallon, referred to as the Leaking Underground Storage Tank Trust Fund
financing rate (LUST tax).
Under section 4082(a), diesel fuel and kerosene are exempt from the
section 4081 tax if the fuel: (i) is destined for a nontaxable use (as
defined in section 4082(b)); (ii) is indelibly dyed by mechanical
injection in accordance with Treasury regulations; and (iii) meets any
marking requirements prescribed in Treasury regulations. Section
4082(f)(1) provides that the exemption in section 4082(a) generally
does not apply to the LUST tax.
Section 48.4082-1 and Notice 2005-80, 2005-2 C.B. 953, provide
rules and conditions for the exemption provided by section 4082(a) to
apply to the removal, entry, or sale of any diesel fuel or kerosene.
III. Section 6435
Section 70525(a) of Public Law 119-21, 139 Stat. 282 (July 4,
2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA),
added section 6435 to allow recovery of the amount of the section 4081
tax paid with respect to diesel fuel or kerosene that later qualifies
as exempt from section 4081 tax under section 4082(a).
Section 6435 allows a person that establishes to the satisfaction
of the Secretary that the person removed eligible indelibly dyed diesel
fuel or kerosene (eligible dyed fuel) from a terminal to claim a
payment (without interest) equal to the amount of the section 4081 tax
previously paid with respect to such dyed fuel. Eligible dyed fuel is
diesel fuel or kerosene: (i) with respect to which tax under section
4081 was previously paid (and not credited or refunded); and (ii) that
is exempt from the section 4081 tax under section 4082(a). See section
6435(a) and (b). Section 6435 is effective for eligible dyed fuel
removed on or after December 31, 2025. See section 70525(c) of the
OBBBA.
Section 6430 provides that no refunds, credits, or payments shall
be made under subchapter B of chapter 65 for any LUST tax imposed
except with respect to fuels as otherwise provided by section 6430.
Section 70525(b)(2) of the OBBBA amended section 6430 to except from
the general rule fuels which are removed as eligible dyed fuel under
section 6435. Therefore, payments under section 6435 may include the
LUST tax.
IV. Announcement 2026-1
Announcement 2026-1, 2026-4 I.R.B 402 (released December 22, 2025),
requested that taxpayers hold any section 6435 claims until the
Treasury Department and the IRS issue guidance related to section 6435
and the process for requesting a refund. The announcement explained
that, although section 6435 is functionally similar to other rules
providing for payments to taxpayers with respect to previously paid
excise tax, section 6435 lacks a directive to treat the payments as if
they constitute refunds of overpayments of the underlying tax. Compare
section 6435 with sections 6420(e)(1), 6421(g)(1), and 6427(j)(1) of
the Code. Further, the OBBBA does not provide a specific appropriation
for section 6435 payments. The only appropriation for paying section
6435 claims is the general refund appropriation, which is available
only to the extent of an
[[Page 23365]]
overpayment under section 6402, which requires the claimant to be the
same person that paid the section 4081 tax to which the claim relates.
See 31 U.S.C. 1324(b)(1) (disbursement may be made from the refund
appropriation for ``refunds to the limit of liability of an individual
tax account''); section 6402 (permitting a refund of an overpayment
``on the part of the person who made the overpayment''). Thus, absent a
statutory change, the Treasury Department and the IRS lack the
authority to pay section 6435 claims to anyone other than the person
that paid the section 4081 tax with respect to the eligible dyed fuel
to which the claim relates.
These temporary regulations, and the cross-referenced proposed
regulations, are the forthcoming guidance referenced in Announcement
2026-1.
Explanation of Provisions
I. Overview
These temporary regulations, Sec. 48.6435-1T, provide rules to
determine eligibility for a refund under section 6435 with respect to
eligible dyed fuel (section 6435 refund) and rules for filing a claim
for a section 6435 refund (section 6435 claim).
II. General Rules
A. Overview
Section 48.6435-1T(b) provides definitions of terms used for
purposes of section 6435 and Sec. 48.6435-1T. Section 48.6435-1T(c)
provides that a person that satisfies the requirements of paragraphs
(d) through (g) of that section with respect to eligible dyed fuel may
receive a payment under section 6435 that is a refund of an overpayment
of the section 4081 tax previously paid. Section 48.6435-1T(d) provides
conditions that must be satisfied for a section 6435 refund to be
allowed to the person that paid the section 4081 tax and incorporates
and clarifies the rules in section 6435(b). Section 48.6435-1T(e)
provides reporting requirements taxpayers must satisfy to make a
section 6435 claim. Section 48.6435-1T(f) provides rules regarding the
form and content of a section 6435 claim. Section 48.6435-1T(g)
provides the claim period for section 6435 refunds.
B. Definitions
The terms defined in Sec. 48.6435-1T(b) include ``approved
terminal,'' ``eligible dyed fuel,'' and ``section 6435 refund.'' To
maintain consistency with existing fuel excise tax regulations, the
term ``approved terminal'' has the same meaning as in Sec. 48.4081-
1(b).
C. Refund to Taxpayer
Section 48.6435-1T(c) provides that the payment under section 6435
of the amount equal to the section 4081 tax paid to the IRS is the
refund (without interest) of an overpayment to the taxpayer that paid
the section 4081 tax with respect to the eligible dyed fuel. Section
48.6435-1T(c) incorporates and clarifies the rules in section 6435(a).
Section 48.6435-1T(d) makes clear that only a taxpayer that removes the
eligible dyed fuel from a terminal and also previously paid the section
4081 tax with respect to that fuel can receive a refund described in
Sec. 48.6435-1T(c).
As explained below, to the extent the claimant previously paid the
section 4081 tax, the payment described in section 6435 represents a
refund of an overpayment. Under section 6402(a), ``[i]n the case of any
overpayment,'' the IRS ``may credit the amount of such overpayment . .
. against any liability in respect of an Internal Revenue tax on the
part of the person who made the overpayment and shall . . . refund any
balance to such person.'' For a taxpayer to receive a credit or refund,
there must first be an overpayment. An overpayment is ``any payment in
excess of that which is properly due.'' Jones v. Liberty Glass Co., 332
U.S. 524, 531 (1947). An overpayment is determined by comparing the
amount by which a taxpayer's payments exceed the amount of tax properly
due. For example, a taxpayer that pays $5,000 towards a taxable period
or event but owes $4,000 in tax liability for such taxable period or
event has an overpayment of $1,000. Section 6402(a) also limits to whom
a credit or refund can be made by providing that only ``the person who
made the overpayment,'' that is, the taxpayer subject to the tax and to
whom the payments are attributed, is entitled to receive a credit or
refund of an overpayment. Roman v. United States, 61 F.4th 1366, 1370
(Fed. Cir. 2023); JetPay Corp. v. United States, 26 F.4th 239, 242 (5th
Cir. 2022); Jewell v. United States, 548 F.3d 1168, 1172 (8th Cir.
2008); DeNiro v. United States, 561 F.2d 653 (6th Cir. 1977).
Section 4081(a)(1)(A) generally imposes an excise tax on the
removal of taxable fuel (defined in section 4083(a) to include diesel
fuel and kerosene) from any refinery or terminal; the entry of taxable
fuel into the United States for consumption, use, or warehousing; and
the sale of taxable fuel to an unregistered person. In certain
circumstances, diesel fuel or kerosene with respect to which tax has
previously been imposed may be transported outside the bulk transfer/
terminal system and later entered into a terminal that is part of the
system. That fuel would also generally be subject to a second instance
of the section 4081 tax upon removal from such terminal. In other
words, the section 4081 tax may be imposed with respect to fuel more
than once. Section 4081(e) and Sec. 48.4081-7 provide a refund
mechanism that allows the person that pays the second instance of
section 4081 tax to claim a refund in the amount of the second tax paid
(without interest). However, if the fuel removed from the terminal is
destined for a nontaxable use and dyed pursuant to the provisions of
section 4082(a), then the second removal is exempt from section 4081
tax. Section 4081(e) does not apply to such a removal because there is
no second instance of section 4081 tax.
Prior to the enactment of section 6435, there was no mechanism
allowing a taxpayer to claim a refund when dyed fuel removed from a
terminal was previously taxed under section 4081. Section 6435(a)
creates such a mechanism by providing for a payment in the amount of
the section 4081 tax previously paid (and not credited or refunded)
with respect to eligible dyed fuel. However, as explained in Part IV of
the Background section, section 6435 does not include language deeming
such a payment as a refund of an overpayment of tax and lacks a
specific appropriation for section 6435 payments.
The Treasury Department and the IRS view the general appropriation
for refunds of Internal Revenue collections in 31 U.S.C. 1324(b) as
appropriating funding for section 6435 payments to the extent that the
taxpayer claiming the section 6435 payment is the same taxpayer that
paid the section 4081 tax with respect to the diesel fuel or kerosene.
Accordingly, these regulations provide that if the same taxpayer that
paid the section 4081 tax with respect to the diesel fuel or kerosene
subsequently removes that fuel from an approved terminal as eligible
dyed fuel, such taxpayer can seek a refund under section 6435 of the
section 4081 tax it paid. Construing the payment described in section
6435(a) as a refund of an overpayment on the part of the same taxpayer
that paid the section 4081 tax to the IRS with respect to the diesel
fuel or kerosene is consistent with the Supreme Court's explanation of
how to determine an overpayment in Jones v. Liberty Glass. Accordingly,
under section 6435 when a person removes from a terminal eligible dyed
fuel with respect to which the person had previously paid section 4081
tax, that person has made an overpayment
[[Page 23366]]
because, as a result of section 6435, the person has paid more section
4081 tax than is due.
These regulations are also consistent with section 6402(a)'s
requirement that only ``the person who made the overpayment'' is
entitled to receive a credit or refund of that overpayment. Reading
section 6435 in conjunction with section 6402(a), section 6435(a)
requires that the payment be made to the same taxpayer that paid the
section 4081 tax with respect to diesel fuel or kerosene and later
removes the fuel as dyed for nontaxable use. Thus, under these
regulations, the taxpayer entitled to payment under section 6435 is
``the person who made the overpayment.''
D. Reporting Requirements
The rules in Sec. 48.6435-1T(e) closely follow existing reporting
requirements under Sec. 48.4081-7(c) applicable to section 4081(e)
claims with which taxpayers are already familiar. Under Sec. 48.6435-
1T(e)(1), a taxpayer must file a section 6435 taxpayer's report with
its section 6435 refund claim. Section 48.6435-1T(e)(2) provides a
model report. This model report differs in a few respects from the
first taxpayer's report used for section 4081(e) claims as provided in
Sec. 48.4081-7(c)(2). The model report requires a taxpayer to declare
that, except for the section 6435 claim to which the report relates,
the taxpayer has not received, and will not claim, a credit with
respect to, or a refund of, the tax with respect to the diesel fuel or
kerosene to which the report relates. The model report also differs by
identifying and revoking any prior first taxpayer report filed pursuant
to Sec. 48.4081-7(c) by the taxpayer with respect to the fuel that is
the subject of the section 6435 taxpayer's report.
This approach is expected to reduce the burden on taxpayers. It
also avoids duplicate reporting for many taxpayers that also file a
first taxpayer's report with their Form 720, Quarterly Federal Excise
Tax Return, in accordance with Sec. 48.4081-7(c). A taxpayer may not
know after paying section 4081 tax with respect to a particular volume
of fuel whether it will sell the fuel as undyed fuel such that there
may be a second tax imposed under section 4081 (which may result in a
section 4081(e) refund), or whether it will later remove the fuel as
eligible dyed fuel (which may result in a section 6435 refund). As
such, a section 6435 taxpayer's report will only be filed once, when a
taxpayer makes a section 6435 claim, and need not be filed with the
taxpayer's Form 720 to which the section 4081 tax relates. Such a
report will also allow a taxpayer to automatically revoke any first
taxpayer's report with respect to the same fuel.
E. Form and Content of Claim
Section 48.6435-1T(f)(1) provides that a taxpayer must submit a
section 6435 claim on Form 8849, Claim for Refund of Excise Taxes. In
addition to the section 6435 taxpayer's report, the Form 8849 must
include a completed Schedule 5 (Form 8849), Section 4081(e) and 6435
Claims. A taxpayer cannot make a section 6435 claim on the same Form
8849 as any other claims. For example, if a taxpayer also wishes to
make section 4081(e) claims, the taxpayer must submit a separate Form
8849, and include a separate Schedule 5 (Form 8849), for those section
4081(e) claims. Section 48.6435-1T(f)(2) provides the information that
must be included in a section 6435 claim.
F. Time for Filing Claim
Section 48.6435-1T(g) provides that the time for filing a section
6435 claim begins after the removal of the eligible dyed fuel and lasts
until the end of the period prescribed by section 6511 of the Code for
filing a refund claim for the section 4081 tax paid with respect to the
fuel.
Applicability Date
The temporary regulations under Sec. 48.6435-1T apply to removals
of eligible dyed fuel occurring on or after December 31, 2025. See
section 7805(b)(2). The temporary regulations under Sec. 48.6435-1T
expire on the earlier of May 1, 2029, or the date of any statutory
change that would appropriate funds for the payment of claims under
section 6435 to persons other than the taxpayer that paid the section
4081 tax to which the claim relates.
Special Analyses
I. Good Cause
Section 553(b)(B) of the Administrative Procedure Act (5 U.S.C.
Subchapter II) provides that advance notice and the opportunity for
public comment are not required with respect to a rulemaking when an
``agency for good cause finds (and incorporates the finding and a brief
statement of reasons therefor in the rules issued) that notice and
public procedure thereon are impracticable, unnecessary, or contrary to
the public interest.''
The Treasury Department and the IRS find that good cause exists for
making these temporary regulations immediately effective without notice
and comment because failure to do so would be impracticable and
contrary to the public interest.
Section 6435 became effective on December 31, 2025, less than six
months after it was enacted as part of the OBBBA on July 4, 2025. In
addition to the implementation of this new dyed fuel payment provision,
the OBBBA contained sweeping changes to the tax code, with extensive
modifications and additions to provisions administered by the IRS,
necessitating guidance-drafting and administrative responsibilities
across the organization. Given the legal complexity and administration
challenges presented by section 6435, discussed below, it is critical
to provide taxpayers and the IRS with certainty as soon as possible
regarding the rules governing eligibility for, and the procedures for
claiming, a payment under section 6435.
Section 6435 is a complex provision that presented interpretation
challenges. Specifically, the OBBBA does not direct that these payments
be treated as refunds of overpayments of tax, nor does it provide a
specific appropriation for payments. Accordingly, the Treasury
Department and the IRS were required to determine if and how section
6435 could be implemented consistent with both Congressional intent and
the lack of a specific appropriation to make the payments contemplated
by section 6435 and then develop appropriate procedures that taxpayers
can easily follow to claim section 6435 payments.
As noted, section 6435 became effective on December 31, 2025, and
taxpayers are seeking certainty as to whether and how to file claims.
It is important to provide that certainty by the issuance of these
temporary regulations so that taxpayers understand the procedures they
need to follow in order for the IRS to be able to process claims under
section 6435 and the limitations on the IRS's ability to pay those
claims. In addition, given that these regulations limit the scope of
eligible claimants under section 6435 to taxpayers that paid the
underlying section 4081 tax, taxpayers also need certainty as soon as
possible to enable them to structure their business arrangements in a
manner that results in eligibility for the section 6435 payment.
The guidance in these regulations also preserves government
resources by discouraging taxpayers from filing claims that the IRS
lacks the legal authority to pay. Issuing this guidance quickly also
protects the Federal fisc as a delay in guidance would increase the
likelihood of unappropriated funds being disbursed.
Following notice-and-comment procedures would delay when taxpayers
receive the certainty provided by the rules and procedures in these
temporary
[[Page 23367]]
regulations. Issuing immediately effective regulations avoids wasting
resources and ensures eligible taxpayers can claim section 6435 refunds
as enacted by the OBBBA to the extent appropriations are authorized by
31 U.S.C. 1324(b). Having immediately effective regulations also
provides the IRS certainty as to appropriations boundaries regarding
section 6435 refunds and enables the IRS to process claims without
waiting for notice-and-comment regulations or risking uneven
implementation.
Because of the limited time to provide the requisite certainty to
taxpayers and the IRS without unduly delaying the ability of eligible
taxpayers to file claims that the IRS is authorized to pay, it was
impracticable to conduct notice-and-comment procedures. The limited
time available to prepare these regulations is an important factor in
finding good cause. See Petry v. Block, 737 F.2d 1193 (D.C. Cir. 1984).
Accordingly, it is in the public interest to both provide these
temporary regulations without following notice-and-comment procedures
and to make them effective immediately.
Comments are being solicited in the cross-referenced notice of
proposed rulemaking that is in the proposed rules section in this issue
of the Federal Register. Any comments will be considered before final
regulations are issued.
II. Regulatory Planning and Review
These temporary regulations are not subject to review under section
6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement
(July 4, 2025) between the Treasury Department and the Office of
Management and Budget (OMB) regarding review of tax regulations.
III. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA)
generally requires that a Federal agency obtain the approval of the
Office of Management and Budget (OMB) before collecting information
from the public, whether such collection of information is mandatory,
voluntary, or required to obtain or retain a benefit. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a valid control number
assigned by the OMB.
These temporary regulations set forth intended collections of
information to be provided to the IRS with Form 8849 and Schedule 5
(Form 8849).
The collections of information associated with these temporary
regulations include reporting and recordkeeping requirements that are
necessary to ensure that a taxpayer qualifies for a section 6435
refund. The collections will be used by the IRS for tax compliance
purposes and by taxpayers to establish eligibility for a section 6435
refund.
The reporting requirements include reporting related to claiming a
section 6435 refund, including the execution and filing of reports as
detailed in Sec. 48.6435-1T(e). The recordkeeping requirements include
that a taxpayer keep records to establish its eligibility for and the
amount of a section 6435 claim. The burden for these requirements is
included with Form 8849 and its instructions and with Schedule 5 (Form
8849) and its instructions. These forms and form instructions are
already approved under OMB control number 1545-1420.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
IV. Regulatory Flexibility Act
For applicability of the Regulatory Flexibility Act, please refer
to the cross-referenced notice of proposed rulemaking (REG-119294-25)
published elsewhere in this issue of the Federal Register.
Pursuant to section 7805(f), these temporary regulations will be
submitted to the Chief Counsel of Advocacy of the Small Business
Administration for comment on their impact on small business.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a State,
local, or Tribal government, in the aggregate, or by the private
sector, of $100 million (updated annually for inflation). These
temporary regulations do not include any Federal mandate that may
result in expenditures by State, local, or Tribal governments, or by
the private sector, in excess of that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial direct compliance costs on State and local
governments and is not required by statute, or preempts State law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive order. These temporary regulations do not
have federalism implications and do not impose substantial direct
compliance costs on State and local governments or preempt State law
within the meaning of the Executive order.
VII. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as a non-major rule as defined by 5 U.S.C. 804(2).
Statement of Availability of IRS Documents
Guidance cited in this preamble is published in the Internal
Revenue Bulletin and is available from the Superintendent of Documents,
U.S. Government Publishing Office, Washington, DC 20402, or by visiting
the IRS website at <a href="https://www.irs.gov">https://www.irs.gov</a>.
Drafting Information
The principal authors of these temporary regulations are Danielle
Mayfield and Andrew Clark of the Office of Associate Chief Counsel
(Energy, Credits, and Excise Tax). However, other personnel from the
Treasury Department and the IRS participated in their development.
List of Subjects in 26 CFR Part 48
Excise taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, the Treasury Department and the IRS amend 26 CFR part
48 as follows:
PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES
0
Paragraph 1. The authority citation for part 48 is amended by adding an
entry for Sec. 48.6435-1T in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 48.6435-1T also issued under 26 U.S.C. 6435(a) and 6001.
0
Par. 2. Add Sec. 48.6435-1T to subpart O to read as follows:
Sec. 48.6435-1T Dyed fuel refund.
(a) Overview. This section provides guidance related to section
6435 of the Internal Revenue Code (Code), including definitions, rules,
conditions, filing instructions, and reporting
[[Page 23368]]
requirements governing claims. Paragraph (h) of this section provides
an example illustrating the provisions of this section.
(b) Definitions. For purposes of section 6435 and this Sec.
48.6435-1T:
(1) Approved terminal. The term approved terminal has the same
meaning as provided in Sec. 48.4081-1(b).
(2) Eligible dyed fuel. The term eligible dyed fuel means diesel
fuel or kerosene with respect to which a tax under section 4081 of the
Code (section 4081 tax) was previously paid (and not credited or
refunded), and that is exempt from taxation under section 4082(a) of
the Code.
(3) Section 6435 refund. The term section 6435 refund means a
payment made under section 6435(a) to the person that paid the section
4081 tax to the Internal Revenue Service (IRS) with respect to eligible
dyed fuel. Under paragraph (c) of this section, such a payment is a
refund of an overpayment (without interest) under section 6402 to the
taxpayer equal to the amount of section 4081 tax previously paid by the
taxpayer with respect to such fuel.
(c) Refund of overpayment. If a person satisfies the requirements
of paragraphs (d) through (g) of this section with respect to eligible
dyed fuel, then pursuant to section 6435, an amount equal to the
section 4081 tax paid to the IRS (including any tax paid at the Leaking
Underground Storage Tank Trust Fund financing rate (LUST tax) under
section 4081(a)(2)(B)) with respect to such fuel is allowed as a refund
(without interest) to such person as an overpayment of such tax under
section 6402.
(d) Conditions to allowance of refund. A claim for refund is
allowed under section 6435 and this Sec. 48.6435-1T only if each of
the following conditions is satisfied:
(1) Section 4081 tax was imposed with respect to diesel fuel or
kerosene;
(2) The taxpayer was liable for and paid such tax to the IRS and
the tax has not been credited or refunded;
(3) The taxpayer removes from an approved terminal the diesel fuel
or kerosene, which has been dyed as provided in section 4082(a); and
(4) The taxpayer meets the reporting requirements of paragraph (e)
of this section.
(e) Reporting requirements--(1) In general. A taxpayer must file a
report with respect to the tax described in paragraph (d)(2) of this
section that is in substantially the same form as the model report
provided in paragraph (e)(2) of this section (or such other model
report as the Commissioner of Internal Revenue (Commissioner) may
prescribe) and contains all information necessary to complete such
report (section 6435 taxpayer's report). A section 6435 taxpayer's
report must be filed with the section 6435 claim to which it relates
(or at such other time, or in such other manner, as prescribed by the
Commissioner).
(2) Model section 6435 taxpayer's report.
Section 6435 Taxpayer's Report
1.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Taxpayer's name, address, and employer identification number
2.---------------------------------------------------------------------
Date and location of taxable event
3.---------------------------------------------------------------------
Volume and type of taxable fuel
4. Check type of taxable event:
____Removal at the terminal rack
____Entry into United States
____ Other:
-----------------------------------------------------------------------
Description
5. Amount of federal excise tax paid on the taxable event--------------
6. [ ] Check the box if Taxpayer previously filed a First Taxpayer's
Report under Sec. 48.4081-7 relating to the same fuel described in
this statement.
-----------------------------------------------------------------------
Year and quarter First Taxpayer's Report filed
Taxpayer hereby revokes such report with respect to the fuel
described in this statement.
Except for the section 6435 claim to which this report relates,
the undersigned taxpayer (the ``Taxpayer'') has not received, and
will not claim, a credit with respect to, or a refund of, the tax to
which this form relates.
Under penalties of perjury, Taxpayer declares that Taxpayer has
examined this statement, including any accompanying schedules and
statements, and to the best of Taxpayer's knowledge and belief, such
statements are true, correct, and complete.
-----------------------------------------------------------------------
Signature and date signed
-----------------------------------------------------------------------
Printed or typed name of person signing this report
-----------------------------------------------------------------------
Title
(f) Filing instructions for a section 6435 claim--(1) Form of
claim. A taxpayer must submit a section 6435 claim on Form 8849, Claim
for Refund of Excise Taxes, that includes the section 6435 taxpayer's
report and a completed Schedule 5 (Form 8849), Section 4081(e) and 6435
Claims, or any successor form(s). Both the Form 8849 and the included
Schedule 5 (Form 8849) must include all information and documentation
required by the forms, form instructions, and this section. A taxpayer
cannot make a section 6435 claim on the same Form 8849 as any other
claims besides another section 6435 claim. Therefore, no other
schedules or types of claims may be included with the Form 8849 on
which a section 6435 claim is made. For example, if a taxpayer making a
section 6435 claim also wishes to make section 4081(e) claims, the
taxpayer must submit a separate Form 8849, and include a separate
Schedule 5 (Form 8849), for those section 4081(e) claims.
(2) Content of claim. A section 6435 claim must contain the
following information with respect to the eligible dyed fuel covered by
the claim:
(i) Volume and type of fuel removed.
(ii) Date of removal of fuel.
(iii) Amount of section 4081 tax previously paid with respect to
such fuel.
(iv) The section 6435 taxpayer's report that relates to such fuel.
(g) Time for filing claim. A section 6435 claim may be filed any
time after the removal of the eligible dyed fuel and before the end of
the period prescribed by section 6511 of the Code for the filing of a
claim for a refund of an overpayment of the section 4081 tax paid with
respect to such fuel.
(h) Example. The following example illustrates the provisions of
this section: On June 25, 2026, X, a taxable fuel registrant, removes
10,000 gallons of undyed diesel fuel from an approved terminal at the
rack. The diesel fuel is then transported to and entered into a second
approved terminal via tank trucks. X, as the position holder of the
diesel fuel at the time of this first removal, is liable for the $2,440
section 4081 tax imposed on the removal, which includes the LUST tax.
On July 31, 2026, X timely files its Form 720 for the quarterly tax
period ending June 30, 2026, on which it reports the section 4081 tax
imposed on the removal, and pays the section 4081 tax to the IRS.
Pursuant to Sec. 48.4081-7(c)(3), X also files a first taxpayer's
report with its Form 720 with respect to the removal of the 10,000
gallons of diesel fuel. On August 10, 2026, X dyes 5,000 gallons of the
diesel fuel and removes the dyed diesel fuel from the second approved
terminal. The dyed diesel fuel is intended for use on a farm, which is
a nontaxable use. After X has removed the dyed diesel fuel from the
second approved terminal, X files a Form 8849 that only covers a
section 6435 claim, and includes a completed Schedule 5 (Form 8849) and
the required section 6435 taxpayer's report, to claim a refund in the
amount of the $1,220 section 4081 tax paid with respect to such fuel.
X's section 6435 taxpayer's report uses
[[Page 23369]]
the model report provided in paragraph (e)(2) of this section. X checks
the box in line 6 of its section 6435 taxpayer's report and identifies
the corresponding first taxpayer's report it filed for the quarterly
tax period ending June 30, 2026, thereby revoking the first taxpayer's
report to the extent of the 5,000 gallons of dyed diesel fuel. Because
X has met the conditions under paragraph (d) of this section and filed
a claim for refund in accordance with paragraph (f) of this section, X
is allowed a refund of the section 4081 tax (including the LUST tax)
that it paid to the IRS on the June 25, 2026, removal of the 5,000
gallons of diesel fuel that it later reentered, dyed, and removed.
(i) Applicability date. This section applies to removals of
eligible dyed fuel occurring on or after December 31, 2025.
(j) Expiration date. This section expires on the earlier of May 1,
2029, or the date of any statutory change that would appropriate funds
for the payment of claims under section 6435 to persons other than the
taxpayer that paid the section 4081 tax to which the claim relates.
Frank J. Bisignano,
Chief Executive Officer.
Approved: April 6, 2026.
Kenneth J. Kies,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2026-08545 Filed 4-30-26; 8:45 am]
BILLING CODE 4831-GV-P
</pre></body>
</html>Indexed from Federal Register on May 1, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.