Welcome to Green Tax, Vol. 2. Each quarter we will provide a recap of some of the important energy tax issues of the last quarter, including court rulings, IRS rulings and guidance, legislative activity, and more.
Opinions and Rulings
• Collateral Estoppel Closes Door on Fuel Credit Case
o On June 8, the Fifth Circuit issued its opinion in ETC Sunoco Holdings LLC v. United States, No. 21-10937 (5th Cir. 2022). The court affirmed the district court’s ruling, which held that the doctrine of collateral estoppel barred the taxpayer from litigating its fuel mixture tax credit claim because the Court of Federal Claims decided the same issues in a prior decision involving the same parties but different tax years.
• Fuel Mixture Tax Credit Not a “Payment”
o On April 22, the Sixth Circuit issued its
opinion in
Delek US Holdings Inc. v. United States, No. 21-5257 (6th Cir. 2022). The Sixth Circuit found that the fuel mixture tax credit under section 6426 is not a payment of tax and instead reduces fuel excise tax liability for purposes of calculating costs of goods sold.
• Butane-Gasoline Mixtures Not Entitled to Alternative Fuel Mixture Credit
o On July 6, the Fifth Circuit denied the taxpayer’s petition for rehearing en banc in Vitol Inc. v. United States, No. 20-20237 (5th Cir. 2022) with 6 judges voting in favor of a rehearing (9 votes were required for a rehearing). The Fifth Circuit (in a 2-1 split) had found that butane does not qualify as an alternative fuel under section 6426.
• Oil Spill Tax Ruled Unconstitutional
o On May 23, the Fith Circuit unanimously denied the government’s
petition for rehearing
en banc in
Trafigura Trading LLC v. United States, No. 21-20127 (5th Cir. 2022). The Fifth Circuit had ruled that section 4611(b), which provides for user fees payable to the Oil Spill Liability Trust Fund, was unconstitutional.
IRS Rulings
• IRS Announces corrected Section 45 PTC Amounts for 2022
o On May 6, the IRS
released corrected credit amounts for the section 45 production tax credit (PTC). For 2022, the statutory 1.5 cent credit for electricity generation increased to 2.6 cents (and remained at 1.3 cents for technologies entitled to one-half of the credit amount).
• Lessee Not Entitled to Section 30D EV Credit
o In PLR 202219007 (May 13, 2022), the IRS ruled that a tax owner of qualified electric motor vehicles was not entitled to tax credits under section 30D because it was not the owner under state law.
• Payment of Utility Customers’ Bills Not Reportable
o In PLR 202221002 (May 27, 2022), the IRS
ruled that utility was not required to file information reports for reducing or eliminating past due customer bills with state disaster relief funds because the use of such funds was not reportable compensation under section 6041.
• Nuclear Decommissioning Trust Remains Qualified
o In PLR 202223008 (June 10, 2022), the IRS
ruled that the planned transfer of a nuclear plant (including its liabilities and nuclear decommissions trusts) under a purchase agreement would not cause the qualified fund to become disqualified. No gain or loss would be recognized on the proposed transfer.
• Proportionate Method for Normalization Given IRS Approval
o In PLR 202225004 (June 24, 2022), the IRS
ruled that the taxpayer could use a proportionate method to determine the amount of depreciation-related excess deferred taxes (EDIT) subject to normalization. Previously, the IRS had only approved use of the “with and without” method.
Legislation
• In light of gas and electricity prices rising, US Senator Ron Wyden (D-Oregon) provided a
Statement at the Finance Committee Hearing with Treasury Secretary Janet Yellen on July 7, 2022 regarding a bill proposing to lower consumer energy costs and prevent climate catastrophes. The Senator touted the proposed
Clean Energy for America Act that “would put the US on a path to cut emissions in half by 2030” and “save the average household $500 per year.”
• H.R. 7099, the Stop Gas Price Gouging Tax and Rebate Act, introduced by Rep. Peter A. DeFazio (D-OR), would impose an excise tax of 50% of the excessive windfall profits of a producer of crude oil (including crude oil condensates and natural gasoline) that has an average daily worldwide production of crude oil of at least 300,000 barrels for the taxable year, and had gross receipts in excess of $1 billion for its last taxable year during 2005. The bill requires payment of energy price rebates to eligible individuals. Access and track the bill text
here.
• H.R. 7871, People Over Petroleum Act, introduced by Rep. McEachin, (D-VA), would repeal or limit certain fossil fuel subsidies benefitting large oil companies and provide relief from rising gas prices for individual taxpayers via a 2022 direct cash gas prices rebate for the first taxable year beginning in 2022. Access and track the bill text
here.
Other News
• Superfund Tax Is Back
o Following a 27-year hiatus, the Superfund chemicals tax, an excise tax imposed on manufacturers, producers and importers of specified chemicals and on importers of specified taxable substances that contain Taxable Chemicals was reinstated on July 1, 2022. Read more in our
alert.
• Solar Panel Imports Temporarily Duty-Free
o In response to intense political pressure arising from the ongoing dispute between domestic solar project developers and domestic solar module manufacturers, the Biden Administration declared a national emergency with respect to the reliability of the nation’s electric grid and authorized duty-free entry of solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam so long as such solar cells and modules are not already subject to antidumping or countervailing duties. Read more in our
alert.
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