The Alternative Fuel Tax Credit serves as an important federal tax benefit in the United States, reducing the tax burden for businesses and individuals who use fuel for specific qualifying activities. These activities include off-highway business operations, agricultural work and aviation purposes.
To strengthen oversight of this program, the Internal Revenue Service has implemented new documentation requirements. Central to these changes is the introduction of a new form called “Statement Supporting Fuel Tax Credit (FTC) Computation – 1.” This statement serves as an educational tool, helping taxpayers understand whether their fuel usage qualifies for the credit while also providing a framework for legitimate claims. It is included in the instructions for Form 4136 for tax year 2024. The statement should be completed and attached to Form 1040, along with Form 4136.
When applying for the Alternative Fuel Tax Credit, taxpayers must now submit a complete documentation package that includes this new statement alongside the traditional Form 1040 and Form 4136. The statement requires detailed information about the applicant’s business operations and specific equipment usage, creating a more comprehensive picture of their fuel consumption patterns.
These enhanced requirements come in response to ongoing concerns about program integrity. The IRS has documented numerous instances of improper claims, where individuals or businesses have attempted to receive credits for non-qualifying fuel usage. The new statement is one approach to strengthening the program’s compliance measures, although the possibility exists for the IRS to implement more rigorous reporting requirements, define stricter eligibility criteria, and increase audit frequency.
For additional information about the Alternative Fuel Tax Credit or other tax issues, please contact Gray, Gray & Gray at 781.407.0300.