This notice provides rules claimants must follow to make a one-time claim for payment of the credits and payments allowable under §§ 6426(c), 6426(d), and 6427(e) of the Internal Revenue Code for biodiesel (including renewable diesel) mixtures and alternative fuels sold or used during calendar year 2017. This notice also provides instructions for how a claimant may offset its § 4081 liability with the § 6426(e) alternative fuel mixture credit for 2017, as well as instructions for how a claimant may make certain income tax claims relating to biodiesel, second generation biofuel, and alternative fuel. In addition, this notice provides a temporary modified safe harbor for semimonthly deposits of the oil spill liability tax imposed by § 4611, which was reinstated effective March 1, 2018.

This notice provides rules claimants must follow to make a one-time claim for payment of the credits and payments allowable under §§ 6426(c), 6426(d), and 6427(e) of the Internal Revenue Code for biodiesel (including renewable diesel) mixtures and alternative fuels sold or used during calendar year 2017. This notice also provides instructions for how a claimant may offset its § 4081 liability with the § 6426(e) alternative fuel mixture credit for 2017, as well as instructions for how a claimant may make certain income tax claims relating to biodiesel, second generation biofuel, and alternative fuel. In addition, this notice provides a temporary modified safe harbor for semimonthly deposits of the oil spill liability tax imposed by § 4611, which was reinstated effective March 1, 2018.

Notice 2018–23 provides transitional guidance regarding the requirements of Sec. 162(f), as amended on December 22, 2017, and sec. 6050X, added on December 22, 2017.

This notice provides rules claimants must follow to make a one-time claim for payment of the credits and payments allowable under §§ 6426(c), 6426(d), and 6427(e) of the Internal Revenue Code (Code) for biodiesel (including renewable diesel) mixtures and alternative fuels sold or used during calendar year 2017 (collectively, 2017 biodiesel and alternative fuel incentives). These rules are prescribed under §§ 40406, 40407, and 40415, of the Bipartisan Budget Act of 2018, Pub. L. 115–123, 132 Stat. 64 (2018) (the Act). This notice also provides instructions for how a claimant may offset its § 4081 liability with the § 6426(e) alternative fuel mixture credit for 2017, as well as instructions for how a claimant may make certain income tax claims relating to biodiesel, second generation biofuel, and alternative fuel. In addition, this notice provides a temporary modified safe harbor for semimonthly deposits of the oil spill liability tax imposed by § 4611, which was reinstated effective March 1, 2018, by § 40416 of the Act.

This notice provides the procedures for claiming 2017 biodiesel and alternative fuel incentives. Claimants that filed “protective” or anticipatory claims for biodiesel and alternative fuel incentives covered by this notice should refile their claims pursuant to the procedures provided in this notice. The IRS will not treat as perfected any such protective or anticipatory claims previously filed with the IRS that are not timely supplemented in accordance with these procedures.

Except as provided by this notice, the rules in Notice 2005–4, 2005–1 C.B. 289 (providing guidance on alcohol and biodiesel fuel tax credits and payments), as modified by Notice 2005–62, 2005–2 C.B. 443 (providing guidance for certain biodiesel issues not addressed in Notice 2005–4), and Notice 2006–92, 2006–2 C.B. 774 (providing guidance on alternative fuel and alternative fuel mixture taxes, credits, and payments), apply to claims for 2017 biodiesel and alternative fuel incentives.

This notice also prescribes a method for submitting claims for the alternative fuel mixture credit relating to alternative fuel mixtures sold or used during 2017.

This notice does not affect the income tax claims described in Section 8 of this notice.

Finally, this notice provides a special rule for tax deposits related to the reinstatement of the oil spill liability tax.

Claimants must follow the procedures listed below to make a one-time claim under this notice for credits and payments allowable under §§ 6426(c), 6426(d), and 6427(e), relating to 2017 biodiesel and alternative fuel incentives.

The 180-day claim period for 2017 biodiesel and alternative fuel incentives begins on April 2, 2018. Consequently, all claims for 2017 biodiesel and alternative fuel incentives must be filed on or before September 29, 2018. The IRS will not process claims filed after that date. The IRS will deem any claim that is submitted by the method prescribed in this notice before April 2, 2018, as filed on April 2, 2018.

If the IRS does not pay a 2017 biodiesel and alternative fuel incentives claim that conforms to this notice within 60 days after the claim is received, the IRS will pay the claim with interest from the claim filing date (April 2, 2018, in the case of claims submitted before that date) using the overpayment rate and method provided by § 6621 of the Code.

Claimants must follow the procedures listed below to claim the alternative fuel mixture credit allowable under § 6426(e) for 2017.

The claim period for the 2017 alternative fuel mixture credit begins on April 2, 2018. The IRS will deem any claim that is submitted by the method prescribed in Section 6 of this notice before April 2, 2018, as filed on April 2, 2018. Generally, claims for the § 6426(e) alternative fuel mixture credit must be made within three years from the time the return was filed or two years from the time the tax was paid, whichever is later.

This notice does not affect 2017 claims for the nonrefundable income tax credit under § 40(b)(6) for second generation biofuel producers. Taxpayers should continue to submit these claims separately on, and in accordance with, Form 6478, Biofuel Producer Credit. A taxpayer must submit Form 6478 with its income tax return in accordance with the instructions to its income tax return form. This notice also does not affect 2017 claims for the nonrefundable income tax credits under § 40A(b)(1) for biodiesel mixtures, under § 40A(b)(2) for biodiesel (including renewable diesel), or under § 40A(b)(4) for the small agri-biodiesel producer credit. Taxpayers should continue to submit these claims separately on, and in accordance with, Form 8864, Biodiesel and Renewable Diesel Fuels Credit. A taxpayer must submit Form 8864 with its income tax return in accordance with the instructions to its income tax return form. Taxpayers are reminded that under § 40A(c), credits allowable under § 40A must be reduced to the extent that any benefit is claimed under §§ 6426 and 6427 with respect to the same biodiesel (including renewable diesel).

Similarly, this notice does not affect 2017 claims for the refundable income tax credit under § 34 for biodiesel mixtures or alternative fuel. Taxpayers should continue to submit these claims separately on, and in accordance with, Form 4136, Credit for Federal Tax Paid on Fuels. A taxpayer must submit Form 4136 with its income tax return in accordance with the instructions to its income tax return form. Taxpayers are reminded that under § 34(b), credits are not allowed under § 34 for any amount properly payable under § 6427 and claimed in a timely filed claim. For this purpose, the IRS will treat as timely filed any claim submitted for amounts payable under § 6427 that conforms to the rules provided in this notice.

.01 Overview.

Section 6302 authorizes the IRS to establish the mode and time for collecting certain taxes, including the taxes imposed by § 4611. Section 40.6302(c)–1(a)(1) of the Excise Tax Procedural Regulations requires each person that is required to file Form 720 to make deposits of tax for each semimonthly period in which the tax liability is incurred. A semimonthly period is the first 15 days of a calendar month or the portion of a calendar month following the 15th day of the month. See § 40.0–1(c).

Under § 40.6302(c)–1(b)(1), the deposit for the oil spill liability tax for each semimonthly period must not be less than 95% of the amount of net tax liability incurred during the semimonthly period, unless the safe harbor in § 40.6302(c)–1(b)(2)(ii) or (iii) applies. Under the safe harbor, any person that filed a Form 720 reporting the oil spill liability tax for the second preceding calendar quarter (the look-back quarter) is considered to have met the semimonthly deposit requirement for the current quarter if: (1) the deposit for each semimonthly period in the current calendar quarter is not less than 1/6 of the net tax liability reported for the look-back quarter; (2) each deposit is made on time; (3) the amount of any underpayment is paid by the due date of the return; and (4) the person’s liability does not include any tax that was not imposed at all times during the look-back quarter.

For deposits that will be made during the third calendar quarter of 2018, the look-back quarter will be the first calendar quarter of 2018. During that look-back quarter, the oil spill liability tax will be imposed for only one month (March). Therefore, the oil spill liability tax will not be imposed at all times during the look-back quarter as required by § 40.6302(c)–1(b)(2)(ii)(D). Consequently, the safe harbor deposit rule will not be available to persons liable for the oil spill liability tax during the third calendar quarter of 2018, and each semimonthly deposit during the third calendar quarter of 2018 must not be less than 95% of the amount of net tax liability incurred during the semimonthly period.

In order to assist taxpayers in meeting their deposit obligations and in the interest of sound tax administration, the Treasury Department and the IRS have decided to allow persons liable for the oil spill liability tax to use a modified form of the safe harbor for the third calendar quarter of 2018. Use of the modified safe harbor described in section 9.02 below is voluntary.

.02 Modified Safe Harbor. For purposes of deposits of the oil spill liability tax during the third calendar quarter of 2018, persons will be considered to have met the semimonthly deposit requirement for that quarter if: (1) the deposit for each semimonthly period in the quarter is not less than 1/2 of the net tax liability reported for the look-back quarter; (2) each deposit is made on time; and (3) the amount of any underpayment is paid by the due date of the return. No affirmative election or other special filing is required in order for a person to avail themselves of the modified safe harbor provided in this notice. This modified safe harbor applies only with regard to deposits of the oil spill liability tax during the third calendar quarter of 2018.

The principal author of this notice is Michael H. Beker of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Mr. Beker on (202) 317-6855 (not a toll-free number). For further information regarding the income tax treatment of the 2017 biodiesel and alternative fuel incentives, please contact Angella Warren at (202) 317-4718 (not a toll-free number).

Section 13306 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” Pub. L. 115–97 (the “Act”), which was signed into law on December 22, 2017, amended § 162(f) of the Internal Revenue Code (“Code”) and added new § 6050X to the Code. The Department of the Treasury (“Treasury Department”) and the Internal Revenue Service (“IRS”) intend to publish proposed regulations under §§ 162(f) and 6050X. This notice provides transitional guidance under §§ 162(f) and 6050X. Specifically, as provided in section 3.01 of this notice, to ensure efficient administration of this new provision, reporting will not be required under § 6050X until the date specified in the proposed regulations. The specified date will not be earlier than January 1, 2019, and will not be earlier than the date of publication of the proposed regulations. Reporting will not be required with respect to amounts required to be paid or incurred under a binding court order or agreement entered into before the specified date. Further, section 3.02 of this notice provides transitional guidance for purposes of satisfying the identification requirement in § 162(f)(2)(A)(ii). Finally, section 4 of this notice requests comments regarding issues to be addressed in the proposed regulations.

Section 162(f)(1), as amended by the Act, disallows a deduction for amounts paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or governmental entity in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law. Section 162(f)(2) provides an exception to the general rule under § 162(f)(1). Under the exception, an amount described in § 162(f)(1) that is otherwise deductible under the Code is not disallowed if the taxpayer satisfies all of the requirements in § 162(f)(2)(A)(i), (ii), and (iii).

Section 162(f)(2)(A)(i) requires that the taxpayer establish that the amount paid or incurred (1) constitutes restitution (including remediation of property) for damage or harm that was or may be caused by violation of any law or the potential violation of any law, or (2) is paid to come into compliance with any law that was violated or otherwise involved in the investigation or inquiry into the potential violation of any law (the “establishment requirement”). Section 162(f)(2)(A)(ii) further requires that the amount paid or incurred be identified as restitution or as an amount paid to come into compliance with such law in the court order or settlement agreement (the “identification requirement”). Finally, § 162(f)(2)(A)(iii) provides that in the case of any amount of restitution for failure to pay any tax imposed under the Code, the amount is treated as if such amount were such tax if it would have been allowed as a deduction had it been timely paid. Section 162(f)(2)(A) further provides that meeting the identification requirement alone is not sufficient to meet the establishment requirement under § 162(f)(2)(A)(i).

Section 6050X(a)(1) requires the appropriate official of any government or nongovernmental entity described in § 162(f)(5) that is involved in suits or agreements described in § 6050X(a)(2) to make a return in such form as determined by the Secretary setting forth (1) the amount required to be paid as a result of the suit or agreement to which § 162(f)(1) applies; (2) any amount required to be paid as a result of the suit or agreement that constitutes restitution or remediation of property; and (3) any amount required to be paid as a result of the suit or agreement for the purpose of coming into compliance with any law that was violated or involved in the investigation or inquiry.

Under § 6050X(a)(2), amounts required to be paid as a result of a suit or agreement are required to be reported under § 6050X(a)(1) if the suit or agreement is a type described in § 6050X(a)(2)(A)(i) and the dollar threshold in § 6050X(a)(2)(A)(ii) is met. A suit or agreement is described in § 6050X(a)(2)(A)(i) if it is (1) a suit with respect to a violation of any law over which the government or entity has authority and with respect to which there has been a court order, or (2) an agreement that is entered into with respect to a violation of any law over which the government or entity has authority or with respect to an investigation or inquiry by the government or entity into the potential violation of any law over which the government or entity has authority.

Under § 6050X(a)(2)(A)(ii), the dollar threshold for reporting is met if the aggregate amount involved in all court orders and agreements with respect to the violation, investigation, or inquiry is $600 or more. However, § 6050X(a)(2)(B) requires the Secretary to adjust the $600 amount as necessary to ensure the efficient administration of the internal revenue laws.

Section 6050X(a)(3) requires the return to be filed at the time the agreement is entered into, as determined by the Secretary.

Section 6050X(b) requires every person required to make a return under § 6050X(a) to furnish to each person who is a party to the suit or agreement a written statement showing (1) the name of the government or entity, and (2) the information supplied to the Secretary under § 6050X(a)(1). This information must be furnished at the same time it is provided to the Secretary.

Section 6050X(c) defines “appropriate official” as the officer or employee having control of the suit, investigation, or inquiry or the person appropriately designated for purposes of § 6050X.

Under § 13306(a)(2) and (b)(3) of the Act, § 162(f) as amended and new § 6050X generally apply to amounts paid or incurred on or after December 22, 2017, except that they do not apply to amounts paid or incurred under any binding order or agreement entered into before that date. If the order or agreement required court approval and the approval was not obtained before that date, § 162(f) as amended and new § 6050X will apply.

Section 162(f) as amended and new § 6050X were effective on December 22, 2017, the date of the enactment of the Act. Parties to suits and agreements covered by these sections have an immediate need for guidance and have contacted the Treasury Department and the IRS with questions regarding the reporting requirement of § 6050X and the identification requirement of § 162(f)(2)(A)(ii). This section provides transitional guidance regarding those requirements.

The Treasury Department and the IRS intend to issue proposed regulations amending and adding sections to the Income Tax Regulations with respect to §§ 162(f) and 6050X. To assist in the development of the proposed regulations, this notice requests comments from the public and affected governments and nongovernmental entities, on any and all issues related to the application and implementation of §§ 162(f) and 6050X that the proposed regulations should address. In particular, the Treasury Department and the IRS request comments on:

The principal author of this notice is Christopher Wrobel of the Office of the Associate Chief Counsel (Income Tax and Accounting). For further information regarding this notice, contact Mr. Wrobel at (202) 317-7011 (not a toll-free number).