KPMG article: Fuel tax refund implementation encounters appropriation hurdles
Section 6435’s fuel tax refund for downstream parties stalls due to appropriation limitations.
Pub. L. No. 119-21 (known as the “One Big Beautiful Bill Act” (OBBBA)) introduced a long-awaited fuel tax refund provision, section 6435, to the Internal Revenue Code, allowing refunds of fuel excise taxes imposed on fuel that is subsequently dyed for a non-taxable use. Notably, it permits “a person” (including both the original taxpayer or downstream parties) to claim these refunds. The Department of the Treasury and IRS announced such claims, however, will not be processed pending further guidance due to a technical glitch in how refunds are appropriated.
The OBBBA does not provide a specific appropriation for section 6435 payments, so refunds must be issued through the general refund appropriation, which is available only to the extent the claimant is the same person that paid the fuel tax to which the claim relates. Absent a statutory change, Treasury and the IRS lack the authority to pay section 6435 claims to anyone other than the person that paid the fuel tax on the dyed fuel to which the claim relates.
Read a February 2026 article* prepared by KPMG LLP tax professionals that provides historical context of the issue and discusses the current guidance.
* Reproduced with permission from Tax Management Memorandum. Copyright ® 2026 by Bloomberg Industry Group, Inc. (800-372-1033) http://www.bloombergindustry.com