Truckers told to wait on red diesel as Treasury rules lag
President Trump's order letting truckers burn tax-deferred red diesel on highways is not working yet. Treasury has until about Oct. 10 to confirm it has the legal power and issue rules. Fuel groups warn that state laws still ban dyed fuel on roads in most places.
President Donald Trump's order on dyed diesel made headlines Monday. But on Tuesday, fuel industry groups told members not to switch fuel yet.
The order covers red-dyed diesel. That fuel is normally tax-free because it is meant for farm and off-road use. The order aims to let it be used on highways from Oct. 5 through Dec. 31. It does this by putting off the 24.4-cent-a-gallon federal tax and waiving federal penalties.
The catch is that the order does not work on its own. Treasury has five days, until about Oct. 10, to decide whether federal law lets it postpone the tax, Energy Marketers of America said. The IRS must also announce that it will not fine people for selling or using dyed fuel on the road. As of Tuesday, no IRS guidance had been published, the fuel advisory firm Breakthrough said.
Deferred does not mean forgiven. The order only tells Treasury to "explore avenues, including legislation," to erase the bill. "Plan as if the deferred tax will be owed," Breakthrough advised.
State laws are another hurdle. In most states, putting dyed fuel in a highway truck still breaks state law. About 10 states have offered some relief, including Alabama, Arkansas, Indiana, Louisiana, Missouri, Nebraska, North Carolina, North Dakota, Oklahoma and Texas. Much of it is limited to farm or timber use, the two groups said.
There are other rules too. EPA fuel rules generally bar visible red dye in highway diesel unless EPA grants a waiver, and none had been issued, the marketers group said. Most truck stop highway lanes do not even sell dyed fuel, Breakthrough noted.
The money at stake is modest per truck. The White House estimated about $60 in federal savings on a 250-gallon fill, and more where states also act.
Some background: Highway diesel prices are at record levels, Breakthrough noted, which is why the order drew so much attention.
What we know: Treasury and IRS steps are due around Oct. 10.
What we don't: Which taxpayers will be covered and when the deferred tax must be paid.
Where outlets agree Energy Marketers of America and Breakthrough both say the order defers but does not forgive the 24.4-cent federal tax and that Treasury guidance had not been issued as of Oct. 6.
Where they differ The White House pitches savings at the pump now, while fuel groups tell fleets to hold off until Treasury and states act.