IRS to waive dyed diesel fuel penalty in parts of Texas; wildfire-related relief

Penalty relief from February 23, 2024, through March 22, 2024

Penalty relief from February 23, 2024, through March 22, 2024

The IRS today—in response to disruptions to the supply of fuel for diesel powered highway vehicles resulting from wildfires—announced that it will not impose a penalty when dyed diesel fuel with a sulfur content that does not exceed 15 parts-per-million is sold for use or used by diesel-powered vehicles on the highway in certain counties in Texas.

According to today’s IRS release, the penalty relief—beginning on February 23, 2024, and remaining in effect through March 22, 2024—applies to the following counties in the state of Texas: Archer, Armstrong, Bailey, Baylor, Briscoe, Carson, Castro, Childress, Cochran, Collingsworth, Cottle, Crosby, Dallam, Deaf Smith, Dickens, Donley, Fannin, Floyd, Foard, Garza, Gray, Gregg, Hale, Hall, Hansford, Hardeman, Harrison, Hartley, Haskell, Hemphill, Hockley, Hutchinson, Kent, King, Knox, Lamb, Lipscomb, Lubbock, Lynn, Moore, Motley, Nacogdoches, Newton, Ochiltree, Oldham, Parmer, Potter, Randall, Roberts, Sherman, Stonewall, Swisher, Terry, Throckmorton, Upshur, Wheeler, Wichita, Wilbarger, Yoakum and Young.

The penalty relief is available to any person that sells or uses dyed diesel fuel in vehicles suitable for highway use.

  • In the case of the operator of the highway vehicle in which the dyed diesel fuel is used, the relief is available only if the operator or the person selling such fuel pays the tax of 24.4 cents per gallon that is normally applied to un-dyed diesel fuel for highway use.
  • The IRS will not impose penalties for failure to make semimonthly deposits of tax for dyed diesel fuel sold for use or used in diesel powered vehicles on the highway in the listed counties above in the state of Texas during the relief period. 

In general, dyed diesel fuel is not taxed because it is sold for uses exempt from excise tax—e.g., to farmers for farming purposes, for home heating use, and to local governments.

For more information, contact a tax professional in the KPMG Excise Tax Practice group:

Taylor Cortright |

Rachel Smith |



The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.