IRS Releases New Excise Tax Rate Calculation

Below is a clear explanation on the NEW federal highway excise tax calculation for propane-fueled vehicles.  It also reiterates the amount of the federal tax credit for propane used in vehicles for 2016, including off-road vehicles like forklifts and on-road vehicles 

Within the revised Form 720, there is a new calculation that claimants must complete to account for the energy content disparity between propane and gasoline.  That calculation, or the gasoline gallon equivalent (GGE), means that every 1.353 gallons of propane are taxed at $0.183-per-gallon.  Simply stated, the excise tax rate on propane is $0.135-per-gallon, resulting in a 26 percent reduction from the previous rate.

The excise tax equalization, which became law last year, applies to fuel sold on or after January 1, 2016.  According to the IRS’s calculations, propane has approximately 74 percent of the energy content of gasoline.  It is important to note that this is the new permanent rate for propane autogas.

The new calculation for the Alternative Fuel Tax Credit was released earlier this year, and has been modified for energy content for 2016.  The calculation for the credit is $0.50 for every 1.353 gallons of propane.  On a per gallon basis, propane is eligible for approximately $0.37-per-gallon.

To follow the links below, hold down your control button while clicking the link.  You will be taken directly to the link for the information required.

The new Form 720 can be found here.
The instructions for Form 720 can be found here.
The new Schedule 3 (Form 8849) can be found here.

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