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Pay attention to the alternative fuel tax credit, it could save you money

08/11/2015  |  By: Tim Sturm, CPA, Shareholder, Tax Services


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In the world of taxes, there are literally thousands of pages of legislation that tuck policy initiatives into the structure of taxing businesses.

Paying attention to the details can put money back into your company’s pocket.

A good example is the alternative fuel tax credit, which for several years has been part of the federal government’s program to increase the use and development of alternative fuels, as well as reduce pollutants.

If your business uses tow trucks, forklifts or any vehicle that runs on propane, another liquefied petroleum gas or alternative fuel, you could be eligible for a 50-cent tax credit for every gallon that you buy.

The credit can quickly add up.

For example, a business with heavy warehouse operations using 500,000 gallons of propane a year would get a $250,000 tax credit. A smaller company that uses 6,000 gallons per years would receive a credit of $3,000.

What’s particularly advantageous about the alternative fuel tax credit is that it is relatively easy to claim.

You must first register with the IRS as an "Alternative Fueler," which means filing Form 637 with the agency. Once you have registered, you will receiver a registration number. This number is used to report the gallons of alternative fuel purchased for use in your business for the covered period when filing your federal tax return. This is done by filing Form 4136 with your return. Most suppliers will provide that information to a business at the end of year, making it even easier to track and file.

Even better, if you have not taken the credit before, the IRS allows you to get the credit for the three previous years once you have received your registration number.

The Alternative Fuel credit is a "Refundable Credit.” If your business owes taxes, the credit is applied against them. If it doesn't, it is refunded to you.

The incentive was implemented as part of the Bush-era tax credits. And, like others from that time, the credit has been routinely extended past its expiration. Last year, for example, it was one of the credits extended at the end of the year so that businesses could claim it retroactively for 2014.

If Congress continues its current pattern, it could be extended for 2015, which makes it worth watching.

The bottom line is that if you think there is a tax credit out there that could apply to your industry, ask your CPA about it. Scan information from industry associations to stay up to date on what types of tax benefits might be available. The extra effort could be found dollars and a lighter tax bill.