Tuesday,
October 6, 2026 – President Trump yesterday signed an Executive Order, “Emergency Tax
Relief on Diesel Fuel,” intended to provide temporary relief from high
diesel fuel prices. The Order directs the Treasury Department to provide
conditional federal excise tax deferral and specified penalty relief for
highway sales and use of dyed diesel from October 5 through December 31,
2026.
Importantly, the Executive Order does not itself authorize highway
sales or on-highway use of dyed diesel fuel. Whether relief is
available, whom it covers, and on what conditions depend on Treasury
determinations and guidance not yet issued. State actions also may be
necessary. EMA members, therefore, should proceed with caution.
The White House estimates savings of about $60 on a 250-gallon fill
up from the 24.4 cents-per-gallon federal tax, and more than $100 per
fill up where states also suspend their fuel taxes. The Agriculture
Department (USDA) estimates approximately $640 million in combined
federal and state savings across approximately 224.6 million harvested
acres.
What the Order Directs
Conditional tax deferral (§ 2(a)–(b)). Within five days
(October 10, 2026), Treasury, in consultation with the Secretary of War
as appropriate, must determine whether relief is authorized under
Internal Revenue Code § 7508A, which authorizes Treasury/IRS to postpone
certain federal tax deadlines for up to one year. This determination
includes whether a qualifying event has occurred and which taxpayers are
affected. If Treasury makes those determinations, it is to defer payment
of diesel fuel excise taxes imposed by § 4041(a)(1)(A) or §
4041(b)(1)(B) and incurred from October 5 through December 31, 2026, for
the covered taxpayers only. To the extent the law allows, the deferral
will be without penalties, interest, additional amounts, or additions to
tax.
Penalty relief (§ 2(c)). Additionally, within five days
(October 10, 2026), Treasury must direct the IRS to announce that it
will not impose penalties under § 6715(a)(1) or (a)(2) when dyed diesel
is sold for use or used on the highway during that period. The
announcement must also address penalties for failure to make semimonthly
deposits.
Implementing guidance (§ 3). Treasury must issue guidance
identifying:
the specific relief and any conditions on it;
its legal basis;
the covered taxpayers, persons, locations, acts and
liabilities;
the applicable periods; and
the date by which postponed taxes must be paid.
Other agencies (§§ 5–8). The other directives in the
Executive Order are:
Treasury must determine and publicly announce how the IRS will
allocate fuel-tank inspection and sampling resources during the relief
period.
FMCSA must coordinate with states, industry and labor
organizations while continuing all compliance enforcement, including
audits, inspections and monitoring.
USDA and the White House Office of Intergovernmental Affairs are
to promote dyed diesel access for farmers and encourage corresponding
state action.
Key Issues for EMA Members
Deferral is not forgiveness. Section 4 of the Executive
Order directs Treasury only to explore ways, including legislation, to
eliminate the deferred liability. It does not eliminate it. The
§ 4041(a)(1)(A) tax applies to sales of diesel for use in highway
vehicles, so marketers could be among the taxpayers liable for 24.4
cents per gallon when the deferral ends. Pending guidance on covered
taxpayers and payment dates, marketers should consider documenting any
such sales and customer use.
Federal penalty relief does not resolve EPA or state
restrictions. The § 6715 announcement addresses only federal excise
tax penalties, and the Order must be implemented consistent with
applicable law (§ 9(b)).
EPA’s fuel regulations generally prohibit visible red dye in highway
diesel unless EPA grants a waiver. This Order does not direct EPA to
act, and no waiver had been issued as of this writing. Dyed fuel used on
the road must still meet the 15 ppm ULSD standard. High-sulfur heating
oil and locomotive or marine fuel may not be used in highway
vehicles.
State fuel taxes, licensing and reporting requirements, and dyed-fuel
prohibitions also continue to apply unless a state acts. States,
including Alabama, Arkansas, Indiana, Louisiana, Missouri, Nebraska,
North Carolina, North Dakota, Oklahoma and Texas, have issued emergency
relief. These state orders vary, and many are limited to agricultural
vehicles, state highways, or short time periods.
Supply impacts. Added demand during harvest and the start of
heating season could strain dyed diesel and heating fuel supplies.
A separate program. The IRS has also issued temporary
regulations implementing the separate § 6435 refund mechanism for
tax-paid fuel later removed from a terminal as dyed fuel for nontaxable
use. That program is distinct from the relief under this Order.
Next Steps
Treasury’s § 7508A determination and the IRS penalty announcement are
due by about October 10. EMA will engage with Treasury, IRS, EPA, DOT in
the coming days, as appropriate, and will provide updates, including on
state actions, as details become available. EMA Members should wait for
the applicable federal and state guidance before changing their
dyed-diesel sales, tax collection, recordkeeping or compliance
practices.
EMA members with questions can contract EMA regulatory counsel Jeff
Leiter (jleiter@bmalaw.net) or
Jorge Roman (jleiter@bmalaw.net).
