Proposed Rule2026-08546
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
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
In the Rules and Regulations section of this issue of the Federal Register are temporary regulations regarding the statutory provision providing for payments to taxpayers with respect to certain previously taxed dyed fuel. Specifically, the temporary regulations provide guidance as to the taxpayers that may claim such payments and the procedures these taxpayers must follow to claim the payments. The text of those regulations also serves as the text of these proposed regulations. These proposed regulations would 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)]
[Proposed Rules]
[Pages 23380-23382]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08546]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 48
[REG-119294-25]
RIN 1545-BS09
Section 6435 Payments; Refunds for Previously Taxed Dyed Fuel
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In the Rules and Regulations section of this issue of the
Federal Register are temporary regulations regarding the statutory
provision providing for payments to taxpayers with respect to certain
previously taxed dyed fuel. Specifically, the temporary regulations
provide guidance as to the taxpayers that may claim such payments and
the procedures these taxpayers must follow to claim the payments. The
text of those regulations also serves as the text of these proposed
regulations. These proposed regulations would affect taxpayers that
withdraw previously taxed dyed fuel from a terminal.
DATES: Written or electronic comments and requests for a public hearing
must be received by June 30, 2026.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically via the Federal eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a> (indicate IRS and REG-119294-25) by following the
online instructions for submitting comments. Requests for a public
hearing must be submitted as prescribed in the ``Comments and Requests
for a Public Hearing'' section. Once submitted to the Federal
eRulemaking Portal, comments cannot be edited or withdrawn. The
Department of the Treasury (Treasury Department) and the IRS will
publish for public availability any comments submitted to the IRS's
public docket on <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Send paper submissions
to: CC:PA:01:PR (REG-119294-25), Room 5503, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. A plain
language summary of the proposed regulations will be made available at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed 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); concerning submissions of comments or requests for a
public hearing, Publications and Regulations Section at (202) 317-6901
(not a toll-free number) or by email at <a href="/cdn-cgi/l/email-protection#512124333d383239343023383f3622113823227f363e27"><span class="__cf_email__" data-cfemail="4c3c392e20252f24292d3e25222b3f0c253e3f622b233a">[email protected]</span></a>
(preferred).
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed 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 (proposed
regulations). The proposed regulations would be 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 and Explanation of Provisions
Temporary regulations in the Rules and Regulations section of this
issue of the Federal Register add Sec. 48.6435-1T to the Manufacturers
and Retailers Excise Tax Regulations (26 CFR part 48). The temporary
regulations relate to the statutory provision providing for payments to
taxpayers with respect to certain previously taxed dyed fuel.
Specifically, the temporary regulations provide guidance as to the
taxpayers that 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
[[Page 23381]]
text of these proposed regulations. The preamble to the temporary
regulations explains the amendments.
Proposed Applicability Date
Proposed Sec. 48.6435-1 would apply to removals of eligible dyed
fuel occurring on or after December 31, 2025. See section 7805(b)(2).
Special Analyses
I. Regulatory Planning and Review
These proposed 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.
II. 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 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 proposed regulations set forth intended collections of
information to be provided to the IRS with Form 8849, Claim for Refund
of Excise Taxes, and Schedule 5 (Form 8849), Section 4081(e) and 6435
Claims.
The collections of information in these proposed regulations would
include reporting and recordkeeping requirements that are necessary to
ensure that a taxpayer qualifies for a section 6435 refund. The
collections would be used by the IRS for tax compliance purposes and by
taxpayers to establish eligibility for a section 6435 refund.
The reporting requirements would include reporting related to
claiming a section 6435 refund, including the execution and filing of
reports as detailed in proposed Sec. 48.6435-1(e). The recordkeeping
requirements would 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.
These proposed regulations would not change or create new
collection requirements beyond the requirements that are being reviewed
and approved by OMB under the temporary regulations.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that these proposed regulations will not have a
significant economic impact on a substantial number of small entities
within the meaning of section 601(6) of the Regulatory Flexibility Act.
As discussed in Announcement 2026-1, 2026-4 I.R.B 402 (released
December 22, 2025), 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 to the IRS with
respect to the eligible dyed fuel to which the claim relates. 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. The proposed
regulations would provide needed guidance for such taxpayers on
eligibility and filing procedures for making a section 6435 claim.
These proposed regulations would establish reporting procedures,
including a model report, that allow the IRS to verify a taxpayer's
entitlement to a payment under section 6435 as contemplated by the
statute. Accordingly, the Treasury Department and the IRS intend that
the proposed rules provide clarity for taxpayers on the availability
and claim procedures for a payment under section 6435.
These proposed regulations would affect a narrow subset of
businesses within the fuel industry: taxpayers removing dyed fuel from
an approved terminal with respect to which they previously paid tax.
Because section 6435 first went into effect on December 31, 2025, no
historical data is available on the number or size of section 6435
claimants. While there is uncertainty as to the exact number of small
businesses within this group, such taxpayers are necessarily a subset
of taxpayers filing Form 720 with respect to certain taxes paid on
diesel fuel and kerosene. From 2021 to 2024, more than 85 percent of
such identifiable Form 720 filers were businesses with total positive
incomes of at least $25 million, and more than two-thirds were
businesses with total assets of at least $25 million. Moreover, under
section 4081(e), the most analogous existing provision, the vast
majority of taxpayers the IRS can identify have total positive incomes
and assets of at least $100 million. This data is constrained by issues
matching between databases, but the IRS has no reason to believe it is
skewed. As such, of the relatively few taxpayers affected by section
6435, nearly all can be expected to be predominantly large,
sophisticated businesses in the fuel industry.
Even if a substantial number of small entities are affected, the
economic impact of these proposed regulations on small entities is not
likely to be significant. The proposed regulations would provide
taxpayers with guidance regarding the eligibility and filing
requirements for section 6435, including the reporting requirements. As
explained in the PRA section, the reporting and recordkeeping
obligations imposed by these proposed regulations would include filing
a report to make a claim. It is estimated that fewer than 60 taxpayers
will prepare one or more of such reports annually and that each report
will take no more than one hour to complete.
Accordingly, the Secretary of the Treasury certifies that these
proposed regulations will not have a significant economic impact on a
substantial number of small entities. The Treasury Department and the
IRS specifically invite comments from any party, particularly affected
small entities, on the accuracy of this certification.
Pursuant to section 7805(f), this notice of proposed rulemaking has
been submitted to the Chief Counsel for the Office of Advocacy of the
Small Business Administration for comment on its impact on small
business.
IV. 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
proposed 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.
[[Page 23382]]
V. 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 proposed rules 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.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to comments that are submitted timely to
the IRS as prescribed in the preamble under the ADDRESSES heading. The
Treasury Department and the IRS request for comments on all aspects of
the proposed regulations. Any comments will be made available at
<a href="https://www.regulations.gov">https://www.regulations.gov</a> or upon request.
A public hearing will be scheduled if requested in writing by any
person that timely submits electronic or written comments. If a public
hearing is scheduled, a notice of the date, time, and place for the
public hearing will be published in the Federal Register.
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 proposed 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.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and the IRS propose to 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. 48.6435-1 in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 48.6435-1 also issued under 26 U.S.C. 6435(a) and 6001.
0
Par. 2. Add Sec. 48.6435-1 to subpart O to read as follows:
Sec. 48.6435-1 Dyed fuel refund.
[The text of proposed Sec. 48.6435-1 is the same as the text of
Sec. 48.6435-1T in the temporary rule published elsewhere in this
issue of the Federal Register].
Frank J. Bisignano,
Chief Executive Officer.
[FR Doc. 2026-08546 Filed 4-30-26; 8:45 am]
BILLING CODE 4831-GV-P
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