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Publication 510

Alternative Fuel Credits(p23)

When this publication was prepared for printing, the credits for alternative fuels were scheduled to expire on December 31, 2011. To find out if the credits are extended, monitor the news media or go to, click on Forms and Publications, and then click on Changes to Current Tax Products.

Alternative fuel credit.(p23)

The registered alternative fueler (unmixed fuel) is the person eligible to make the claim. An alternative fueler (unmixed fuel) is that person that is liable for tax on alternative fuel under the rules for taxable events for Other Fuels (discussed in chapter 1) or would be liable but for an exemption for nontaxable uses. For example, you are an alternative fueler (unmixed fuel) if you buy liquefied petroleum gas in general purpose portable containers and use it as a fuel in a forklift truck. An alternative fueler also includes a person who sells for use or uses an alternative fuel in aviation.
In the case of nonliquid fuel, the credit is based on the gasoline gallon equivalent of the fuel as shown on the claim form.

Alternative fuel mixture credit.(p23)

If you used an alternative fuel to produce an alternative fuel mixture for sale or use in your trade or business, you may be eligible for a credit or refund. An alternative fuel mixture is a mixture of alternative fuel and taxable fuel (gasoline, diesel fuel, or kerosene). You must sell the mixture to any person for use as a fuel or use the mixture as a fuel.

Alternative fuel defined.(p23)

For purposes of the alternative fuel credit or alternative fuel mixture credit, alternative fuel means:
Alternative fuel does not include ethanol, methanol, biodiesel, or renewable diesel.


You must be registered by the IRS in order to take the alternative fuel credit or alternative fuel mixture credit. See Registration Requirements in chapter 1.

Carbon capture requirement.(p23)

A credit for liquid fuel derived from coal (including peat) through the Fischer-Tropsch process can be claimed only if the fuel is derived from coal produced at a gasification facility which separates and sequesters the following percentage of the facility's total carbon dioxide emissions.

Credits for fuel provide incentive for United States production.(p23)

The alternative fuel credits may not be claimed for alternative fuel that is produced outside the United States for use as a fuel outside the United States. The United States includes any possession of the United States.

Credits for fuels derived from paper or pulp production.(p23)

Credits for alternative fuels and alternative fuel mixtures for any fuel derived from the production of paper or pulp are not available for fuel sold or used on or after December 31, 2009.

How to claim the credit.(p23)

Any alternative fuel credit must first be taken on Schedule C to reduce your liability for alternative fuel and CNG reported on Form 720. Any alternative fuel mixture credit must first be taken on Schedule C to reduce your taxable fuel liability for gasoline, diesel fuel, and kerosene reported on Form 720. Any excess alternative fuel credit and alternative fuel mixture credit can be claimed on Schedule C (Form 720), Schedule 3 (Form 8849), or Form 4136.