PCS Tax Insight
Private Company Services Publication
May 19, 2011
Forklifts, golden eggs? – an easy and quick refundable credit may be available for those taxpayers that use a forklift in warehouse
In 2005, Congress enacted the Safe, Accountable, Flexible and Efficient
Transportation Equity Act of 2005 to encourage the use of alternative fuels. The legislation created the Alternative
Fuel credit (AFC), a 50 cents-per-gallon credit for alternative fuels. The credit is
scheduled to expire on December 31, 2011. However, this credit has been extended several times by Congress
since its original enactment in 2006.
As recently as December 2010, the
credit was extended by the Tax Relief,
Reauthorization, and Job Creation Act of 2010 (H.R. 4853).
The credit may provide significant tax benefit to private companies that use
forklifts, loaders, and other strictly off-
highway machinery in the course of
business. The credit is easy to claim
and is refundable. Some taxpayers may be able to accelerate the benefits of the
credit by claiming the credit on a weekly basis.
The AFC is available for users or sellers
of alternative fuels used in off-road,
business vehicles. Alternative fuels are
defined in Internal Revenue Code section 6426(d)(2) and specifically
include liquefied petroleum gas,
otherwise known as propane. Under
section 6426(d)(2), propane qualifies as
a special motor fuel (now alternative fuel). It also defines “motor vehicle” using the definition in Reg. sec. 48.4041-8(c), which specifically
includes forklifts as motor vehicles.
a forklift qualifies for the AFC, if all
other conditions are met, as discussed below.
How to claim the credit
The credit amount is the product of 50
cents and the number of gallons of
alternative fuel used to power the
motor vehicle. If the alternative fuel is
not in liquid form, the credit is
computed using the gasoline gallon equivalent in terms of energy value.
The credit is claimed as either an excise tax credit or an income tax credit.
Amounts that exceed tax liability are
fully refundable. The general
procedure for claiming the credit is as
Taxpayers with no excise tax liability
may be able to accelerate their AFC
refund claim from an annual basis with
Form 4136 to a quarterly basis using
Form 8849, Claim for Refund of Excise
Taxes. Form 8849 is due on the last day of the first quarter following the
quarter in which the claimant used or
sold the alternative fuel included in the
claim. This is especially beneficial to qualifying taxpayers that extend their federal income tax returns, which are
often filed eight and a half months after year-end.
If a taxpayer’s AFC claim is greater than
$200, and the claim spans at least one week, the taxpayer can file Form 8849
to claim credits on a weekly basis, further accelerating the timing of
Taxpayer must register with the
IRS by filing Form 637,
Application for Registration
(For Certain Excise Tax
Activities), as an “Alternative
Even if a taxpayer chooses not to
accelerate the credit claim, any amount
claimed on the annual federal income tax return may be used to reduce the
amount of required estimated tax
2. If the taxpayer has an excise tax
liability, the AFC is claimed on Form 720, Quarterly Federal Excise Tax Return.
3. After offsetting any excise tax
liability, the excess of the AFC
may be taken as a yearly
income tax credit on Form
4136, Credit for Federal Tax Paid on Fuels, attached to the
annual federal income tax return.
payments resulting in the current period cash savings.
Claiming the credit in past years
Taxpayers with pre-2010 tax years for
which the statute of limitations for
refunds has not expired that qualify for
the AFC still may be able to claim the credit. The taxpayer will first need to
register with the IRS, and either file
Form 720X, or file Form 4136 with an
amended federal income tax for that tax
year. The registration need not have
been in place at the time of the original.
PwC Private Company Services Tax Insight 2
the time the claim is filed.
Of particular note are claims made for the 2010 tax year. Originally, the AFC
was available only through tax years ending in 2009; however, Congress
extended the credit through December 31, 2011, with retroactive applicability to alternative fuel used or sold during
2010. IRS Notice 2011-10, 2011-6
I.R.B. 463, provides a special procedure to file a one-time claim for credit for the
alternative fuel used or sold during
2010. If a taxpayer meets certain
requirements included in this notice, the taxpayer is eligible to file all of its
2010 claims for the credit on one Form 8849, on or before August 1, 2011. Taxpayers that filed “protective” or
anticipatory claims in 2010 must re-file their claims as specified in Notice 2011- 10.
A key to a possible tax
All AFC claimants should maintain
proper documentation to substantiate
the claims made. In the event of an IRS examination, the primary inquiry from the IRS will relate to the acquisition of
the alternative fuel. In the case of propane, supplies are most often
obtained through an outside vendor, so the invoices from the vendor should be
retained for all claim periods and should state clearly the volume of
propane purchased. The IRS also may
request documentation of actual use or
sale of the alternative fuel. For
propane, if there are no direct records
of the fuel used, secondary records may
be useful, such as types of forklifts
used, average propane consumption per
type of forklift, and average hours of use for forklifts.
S corporations and electing large
partnerships that claim the AFC using Form 4136 receive the credit and any related refund at the entity level.
Partnerships that do not claim the
credit using Form 8849 or Schedule C
of Form 720 must include as a footnote
on Schedule K-1 the necessary
information for partners to claim their allocated share of the credit.
How PwC can help
PwC may be able to assist taxpayers in
claiming the AFC by determining
eligibility for the credit and assisting
with registration and credit
acceleration. PwC personnel also may help taxpayers analyze the best way to claim a refund or credit for the sale or
use of alternative fuels, as well as by preparing or reviewing the necessary
forms. For clients that have never claimed the AFC, PwC can review
records to identify if there is an
opportunity to obtain a refund by filing amended returns.
PwC Private Company Services Tax Insight 3
Richard P. Stovsky 216-875-3111 firstname.lastname@example.org Kenneth Hunter 203-539-4218 email@example.com Daniel J. Wiles 201-414-4586 firstname.lastname@example.org Jason Spitzer 202-346-5287 email@example.com This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Private Company Services Tax News 4
Richard P. Stovsky 216-875-3111 firstname.lastname@example.org
Kenneth Hunter 203-539-4218 email@example.com
Daniel J. Wiles 201-414-4586 firstname.lastname@example.org
Jason Spitzer 202-346-5287 email@example.com
This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Private Company Services Tax News 4