Final Extension of Temporary Relief for Fuel Removals Destined for Nontaxable Use Due to West Shore Pipeline Shutdown

Part III - Administrative, Procedural, and Miscellaneous

Final Extension of Temporary Relief for Fuel Removals Destined for Nontaxable Use

Due to West Shore Pipeline Shutdown

Notice 2021-04

SECTION 1. PURPOSE

This notice provides the final extension of the temporary dyed fuel relief initially

provided for the period beginning on October 31, 2017, and ending on May 3, 2018, in

section 3.02 of Notice 2017-30, 2017-21 I.R.B. 1248. The temporary dyed fuel relief

was extended (i) through December 31, 2018 by section 3 of Notice 2018-39, 2018-20

I.R.B. 582, (ii) through December 31, 2019, by section 3 of Notice 2019-04, 2019-02

I.R.B. 282, and (iii) through December 31, 2020, by section 3 of Notice 2020-04, 2020-

04 I.R.B. 380. The final extension of the temporary dyed fuel relief will begin on

January 1, 2021, and end on December 31, 2021. A claimant may submit a refund

claim for the Internal Revenue Code § 4081(a)(1) tax imposed on undyed diesel fuel

and kerosene for fuel that is (i) removed from a Milwaukee or Madison terminal; (ii)

entered into a Green Bay terminal within 24 hours of removal from the Milwaukee or

Madison terminal; and (iii) subsequently dyed and removed from that Green Bay

terminal.

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SECTION 2. BACKGROUND

The West Shore Pipeline is a 650-mile pipeline system that transported refined

petroleum products to the northeastern part of Wisconsin for over 50 years. The West

Shore Pipeline was the only pipeline serving Green Bay and northeastern Wisconsin.

The West Shore Pipeline segment between Milwaukee and Green Bay closed on March

10, 2016, for repairs, testing and inspections. On June 22, 2016, this segment of the

West Shore Pipeline was shut down indefinitely after integrity concerns were detected.

Due to this unanticipated complete shut down and the then uncertain future of this

section of the pipeline, Green Bay and northeast Wisconsin expected to have material

fuel shortages for a relatively long period of time

10, 2016, for repairs, testing and inspections. On June 22, 2016, this segment of the

West Shore Pipeline was shut down indefinitely after integrity concerns were detected.

Due to this unanticipated complete shut down and the then uncertain future of this

section of the pipeline, Green Bay and northeast Wisconsin expected to have material

fuel shortages for a relatively long period of time. In response to this shut down and the

expected fuel shortages, the Governor of Wisconsin issued Executive Orders on May 6,

2016, September 7, 2016, and November 4, 2016, declaring energy emergencies. On

April 21, 2017, the Wisconsin Department of Administration issued a statement that the

West Shore Pipeline Company notified the state that the company would not replace the

aging pipeline that runs from north of Milwaukee to Green Bay. A Wisconsin

Department of Administration official said the state would continue working with its

partners to develop a long-term solution.

Since the March 2016 shutdown of this segment of the West Shore Pipeline, fuel

has been transported to Green Bay via vessel, or has been removed from the

Milwaukee or Madison terminals and then transported via tank trucks and/or rail cars to

Green Bay terminals. The Department of the Treasury (Treasury Department) and the

Internal Revenue Service (IRS) recognized in Notice 2017-30 that there is no

mechanism under existing law that permits a refund of the § 4081(a)(1) tax imposed

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upon removal of taxable fuel from a Milwaukee terminal when that fuel is transported to

and entered into a Green Bay terminal, and then removed from the Green Bay terminal

as dyed fuel destined for a nontaxable use

rtment) and the

Internal Revenue Service (IRS) recognized in Notice 2017-30 that there is no

mechanism under existing law that permits a refund of the § 4081(a)(1) tax imposed

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upon removal of taxable fuel from a Milwaukee terminal when that fuel is transported to

and entered into a Green Bay terminal, and then removed from the Green Bay terminal

as dyed fuel destined for a nontaxable use. Accordingly, the Treasury Department and

the IRS provided administrative relief in the form of a temporary refund mechanism for

the first tax paid on the taxable fuel when it is removed from a Milwaukee terminal,

transported to and entered into a Green Bay Terminal, and later removed from that

Green Bay terminal as dyed fuel destined for a nontaxable use. This temporary relief

was available for the period beginning on October 31, 2017, and ending on May 3,

2018. Section 3 of Notice 2018-39 extended this temporary relief for the period

beginning on May 4, 2018, and ending on December 31, 2018. Additionally, Notice

2018-39 expanded the temporary relief to include refund claims for fuel that is taxed on

removal from a Madison terminal, transported to a Green Bay terminal, and then

removed from that Green Bay terminal as dyed fuel. The expanded temporary dyed

fuel relief was extended through December 31, 2019, by section 3 of Notice 2019-04,

2019-02 I.R.B. 282, and was further extended through December 31, 2020, by section 3

of Notice 2020-04, 2020-04 I.R.B. 380.

The temporary administrative relief provided during the years following the

permanent shutdown of the segment of the West Shore Pipeline between Milwaukee

and Green Bay has provided the affected position holders time to renegotiate relevant

contracts, otherwise adopt business solutions pertaining to the shipment of fuel by

vessel to Green Bay or by truck or rail from the Milwaukee and Madison terminals to the

Green Bay terminals, and pursue legislative solutions

the

permanent shutdown of the segment of the West Shore Pipeline between Milwaukee

and Green Bay has provided the affected position holders time to renegotiate relevant

contracts, otherwise adopt business solutions pertaining to the shipment of fuel by

vessel to Green Bay or by truck or rail from the Milwaukee and Madison terminals to the

Green Bay terminals, and pursue legislative solutions. Accordingly, this is the final

extension of the temporary administrative relief for fuel that is (i) removed from a

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Milwaukee or Madison terminal; (ii) entered into a Green Bay terminal within 24 hours of

removal from the Milwaukee or Madison terminal; and (iii) subsequently dyed and

removed from that Green Bay terminal for a nontaxable use.

Upon expiration of this temporary administrative relief, a payment equal to the

aggregate amount of tax imposed on such fuel under § 4081 may be available to the

ultimate purchaser of the fuel under § 6427(l)(1). Under § 6427(l)(1), if any diesel fuel

on which tax has been imposed under § 4081 is used by any person in a nontaxable

use, the Secretary of the Treasury or his delegate (Secretary) shall pay (without

interest) to the ultimate purchaser of the fuel an amount equal to the amount of tax

imposed. Section 48.6427-8(b)(1)(ii) provides that a claim with respect to diesel fuel

under § 6427(l)(1) is allowable if, among other conditions, the claimant produced or

bought the fuel and did not sell it in the United States.

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retary of the Treasury or his delegate (Secretary) shall pay (without

interest) to the ultimate purchaser of the fuel an amount equal to the amount of tax

imposed. Section 48.6427-8(b)(1)(ii) provides that a claim with respect to diesel fuel

under § 6427(l)(1) is allowable if, among other conditions, the claimant produced or

bought the fuel and did not sell it in the United States.

SECTION 3. FINAL EXTENSION OF TEMPORARY DYED FUEL RELIEF

For the period beginning on January 1, 2021, and ending on December 31, 2021,

if any person (that is, the position holder) that removes diesel fuel or kerosene that

satisfies the requirements of § 4082 from a Green Bay terminal establishes to the

satisfaction of the Secretary that a prior tax was paid with respect to the removal of such

fuel from a Milwaukee or Madison terminal, then an amount equal to the prior tax paid

shall be allowed as a refund (without interest) to the position holder in the same manner

as if it were an overpayment of tax imposed by § 4081.

Notice 2017-59, 2017-45 I.R.B. 484, provides guidance on how persons eligible

for relief under section 3.02 of Notice 2017-30 may submit claims for refund. Sections

3.02, 3.03, and 3.04 of Notice 2017-59 describe the conditions and procedures required

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to make such claims.

The relief described in this section is not available with respect to any transaction

for which one or more conditions set forth in section 3.02 of Notice 2017-59 are not

satisfied or for any refund claim that fails to comply with the procedures set forth in

sections 3.03 and 3.04 of Notice 2017-59. For purposes of this notice, any reference in

Notice 2017-59 to removals from a Milwaukee terminal shall be read to also include

removals from a Madison terminal.

SECTION 4. EFFECTIVE DATE

The temporary dyed fuel relief described in section 3 of this notice applies to

removals of dyed diesel fuel and kerosene from Green Bay terminals on or after

January 1, 2021, and on or before December 31, 2021.

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is notice, any reference in

Notice 2017-59 to removals from a Milwaukee terminal shall be read to also include

removals from a Madison terminal.

SECTION 4. EFFECTIVE DATE

The temporary dyed fuel relief described in section 3 of this notice applies to

removals of dyed diesel fuel and kerosene from Green Bay terminals on or after

January 1, 2021, and on or before December 31, 2021.

SECTION 5. DRAFTING INFORMATION

The principal author of this notice is Natalie Payne of the Office of Associate

Chief Counsel (Passthroughs & Special Industries). For further information regarding

this notice contact Ms. Payne on (202) 317-6855 (not a toll-free call).