Exemptions for diesel fuel and kerosene

Official textgovinfo.govlast amended Dec 31, 2024

# (a) In general

The tax imposed by section 4081 shall not apply to diesel fuel and kerosene— (1) which the Secretary determines is destined for a nontaxable use, (2) which is indelibly dyed by mechanical injection in accordance with regulations which the Secretary shall prescribe, and (3) which meets such marking requirements (if any) as may be prescribed by the Secretary in regulations. Such regulations shall allow an individual choice of dye color approved by the Secretary or chosen from any list of approved dye colors that the Secretary may publish.

# (b) Nontaxable use

For purposes of this section, the term "nontaxable use" means— (1) any use which is exempt from the tax imposed by section 4041(a)(1) other than by reason of a prior imposition of tax, (2) any use in a train, and (3) any use described in section 4041(a)(1)(C)(iii)(II). The term "nontaxable use" does not include the use of kerosene in an aircraft and such term shall not include any use described in section 6421(e)(2)(C).

# (c) Exception to dyeing requirements

Paragraph (2) of subsection (a) shall not apply with respect to any diesel fuel and kerosene— (1) removed, entered, or sold in a State for ultimate sale or use in an area of such State during the period such area is exempted from the fuel dyeing requirements under subsection (i) of section 211 of the Clean Air Act (as in effect on the date of the enactment of this subsection) by the Administrator of the Environmental Protection Agency under paragraph (4) of such subsection (i) (as so in effect), and (2) the use of which is certified pursuant to regulations issued by the Secretary.

# (d) Additional exceptions to dyeing requirements for kerosene

(1) Use for non-fuel feedstock purposes Subsection (a)(2) shall not apply to kerosene— (A) received by pipeline or vessel for use by the person receiving the kerosene in the manufacture or production of any substance (other than gasoline, diesel fuel, or special fuels referred to in section 4041), or (B) to the extent provided in regulations, removed or entered— (i) for such a use by the person removing or entering the kerosene, or (ii) for resale by such person for such a use by the purchaser, but only if the person receiving, removing, or entering the kerosene and such purchaser (if any) are registered under section 4101 with respect to the tax imposed by section 4081. (2) Wholesale distributors To the extent provided in regulations, subsection (a)(2) shall not apply to kerosene received by a wholesale distributor of kerosene if such distributor— (A) is registered under section 4101 with respect to the tax imposed by section 4081 on kerosene, and (B) sells kerosene exclusively to ultimate vendors described in section 6427(l)(5)(B) with respect to kerosene.

# (e) Kerosene removed into an aircraft

In the case of kerosene (other than kerosene with respect to which tax is imposed under section 4043) which is exempt from the tax imposed by section 4041(c) (other than by reason of a prior imposition of tax) and which is removed from any refinery or terminal directly into the fuel tank of an aircraft— (1) the rate of tax under section 4081(a)(2)(A)(iii) shall be zero, and (2) if such aircraft is employed in foreign trade or trade between the United States and any of its possessions, the increase in such rate under section 4081(a)(2)(B) shall be zero. For purposes of this subsection, any removal described in section 4081(a)(3)(A) shall be treated as a removal from a terminal but only if such terminal is located within a secure area of an airport.

# (f) Exception for Leaking Underground Storage Tank Trust Fund financing rate

(1) In general Subsection (a) shall not apply to the tax imposed under section 4081 at the Leaking Underground Storage Tank Trust Fund financing rate. (2) Exception for export, etc. Paragraph (1) shall not apply with respect to any fuel if the Secretary determines that such fuel is destined for export or for use by the purchaser as supplies for vessels (within the meaning of section 4221(d)(3)) employed in foreign trade or trade between the United States and any of its possessions.

# (g) Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out this section, including regulations requiring the conspicuous labeling of retail diesel fuel and kerosene pumps and other delivery facilities to assure that persons are aware of which fuel is available only for nontaxable uses.

# (h) Cross reference

For tax on train and certain bus uses of fuel purchased tax-free, see subsections (a)(1) and (d)(3) of section 4041.

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