IRS Releases New Excise Tax Calculation for Propane

News
A legislative alert issued by the National Propane Gas Association (NPGA) reports that the Internal Revenue Service (IRS) Feb. 23 released a new excise tax rate calculation for propane. NPGA advises that, with 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, the excise tax rate on propane is $0.135 per gallon, resulting in a 26% reduction from the previous rate. The excise tax equalization, which became law last year, applies to fuel sold on or after Jan. 1, 2016. According to IRS calculations, propane has about 74% 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 about $0.37 per gallon. The new Form 720 can be downloaded at irs.gov/uac/Form-720,-Quarterly-Federal-Excise-Tax-Return; instructions for Form 720 can be found at irs.gov/pub/irs-pdf/i720.pdf; the new Schedule 3, Form 8849, can be downloaded at http://files.ctctcdn.com/a7b3299a001/3a6b7adb–344e-48ee-80e5-075608a19f75.pdf.

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