Certain taxpayers are entitled to a credit for federal excise taxes paid on gasoline and special fuels when the fuel has been used for farming purposes, for other off-highway business use, and for public transportation purposes. Generally, taxpayers may take the credit against income tax for the year in which the qualifying use occurred, not necessarily in the year of payment. In addition, if the tax credit will exceed $1000 for fuels used during any of the first three quarters of the tax year, a taxpayer is entitled to file a quarterly claim for refund for that quarter.
Farming Purposes
The owner, tenant or operator of a farm may claim a credit or refund of federal excise taxes included in the price of fuel used for farming. The Internal Revenue Service defines "farm" to include stock, dairy, fish, poultry, fruit and fur-bearing animals, and truck farms, plantations, ranches, nurseries, orchards, ranges, greenhouses, or other similar structures used primarily for the raising of agricultural or horticultural products. However, in order to qualify for the credit, the farm must be in the United States and must be operated for profit.
The tax laws limit the scope of what is considered fuel used for farming purposes by excluding fuel used off the farm, even if it is for transporting livestock, feed, crops or other equipment. Fuel used for personal activities such as lawn mowing, in processing, packaging, freezing, or canning operations, or in the process of converting maple sap into syrup is also not considered an eligible farming use of fuel.
Off-highway and Public Transportation Uses
Taxpayers who have paid federal excise taxes on fuel used for off-highway business use, for local transit systems, and for the operation of intercity, local, or school buses may be entitled to a credit or a refund.
In order to qualify for the credit for off-highway business use, the gasoline must be used in a trade or business or in an income-producing activity. The term "off-highway business use" does not include any use in a motorboat, but a credit or refund of excise taxes included in the price of fuel used in a vessel employed in the fisheries or whaling business is available.
If intercity or local transportation is furnished on nonscheduled or irregular routes, the credit is allowed only if the bus seats at least 20 adults, not including the driver.
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