# Prop. Treas. Reg. § 48.6427-12: Alcohol, alternative fuel, biodiesel, and renewable diesel. Proposed regulation, not in force. REG-155087-05, 73 FR 43890, published 2008-07-29 . Interprets 26 U.S.C. § 6427. Par. 22. Section 48.6427-12 is added to read as follows: (a) In general. This section contains special rules for payments related to fuels containing alcohol, alternative fuel, biodiesel, and renewable diesel. Other rules for these payments are in §§ 48.6426-1 through 48.6426-7. (b) Coordination with excise tax credit. If the aggregate amount a person receives as a payment under section 6427(e) with respect to sales and uses of mixtures during a calendar quarter exceeds the amount allowed under § 48.6426-7(a), the excess constitutes an excessive amount for purposes of section 6206 and such amount, as well as the civil penalty under section 6675, may be assessed as if it were a tax imposed by section 4081. If the excessive amount is repaid to the government, with interest from the date of the payment (section 6602), on or before the due date of the Form 720, “Quarterly Federal Excise Tax Return,” for the calendar quarter, the claim for the excessive amount will be treated as due to reasonable cause and the penalty under section 6675 will not be imposed with respect to the claim. If a person claims an income tax credit under section 34 in lieu of a payment under section 6427(e) with respect to sales and uses of mixtures during a calendar quarter and the aggregate amount claimed as an income tax credit with respect to such sales and uses exceeds the amount allowed under § 48.6426-7(a)(2), the income tax rules related to assessing an underpayment of income tax liability apply. The section 6675 penalty for excessive claims with respect to fuels does not apply in the case of section 34 income tax credits. Similar rules apply to excessive claims under sections 34 or 6427 with respect to sales and uses of alternative fuel. (c) Payment computation for certain blenders —(1) In general. This paragraph (c) applies to a blender for any calendar quarter in which the blender's entire tax liability under section 4081 is based solely on the volume of alcohol in alcohol fuel mixtures, biodiesel in biodiesel mixtures, renewable diesel in renewable diesel mixtures, or alternative fuel in alternative fuel mixtures. If this paragraph (c) applies for a calendar quarter, the blender may use the following procedure to determine the amount it may claim as an income tax credit under section 34 or a payment under section 6427(e) with respect to each mixture that it sells or uses during the quarter: (i) First, determine the amount allowed under section 6426 as a credit on Form 720 by multiplying the volume of untaxed liquid used to produce the mixture by the tax imposed per gallon on the untaxed liquid. (ii) Then, determine the total credit and payment allowable by multiplying the volume of untaxed liquid used to produce the mixture by the tax credit rate per gallon. (iii) Then, subtract the amount determined in paragraph (c)(1)(i) of this section (the section 6426 credit amount) from the amount determined in paragraph (c)(1)(ii) of this section. This difference is the amount of the payment or income tax credit that may be claimed with respect to that mixture. (2) Example. The following example illustrates the provisions of this paragraph (c): (i) P is a biodiesel mixture producer. P produces blended taxable fuel outside of the bulk transfer/terminal system by adding biodiesel that is agri-biodiesel to taxed diesel fuel. See §§ 48.4081-1(c)(1) and 48.4081-3(g). P has no § 4081 liability other than its liability as a blender on its sale of the biodiesel mixture. During the period August 1 through August 10 (at which time the tax rate on diesel fuel is $0.244 per gallon and the claim amount on agri-biodiesel is $1.00 per gallon), P uses 5,000 gallons of agri-biodiesel to produce a biodiesel mixture. P determines that it may claim $3,780 as a payment under section 6427(e) with respect to this mixture. P computes this amount by— (A) Multiplying 5,000 (gallons of agri-biodiesel) × $0.244 (tax imposed per gallon) = $1,220; (B) Multiplying 5,000 (gallons of agri-biodiesel) × $1.00 (tax credit rate per gallon) = $5,000; and (C) Subtracting $1,220 from $5,000 = $3,780. (ii) On August 11, P files Form 8849 for the period August 1-August 10. To avoid an excessive claim, P limits the claim on Form 8849 to $3,780 reporting 3,780 gallons of agri-biodiesel. (iii) On Form 720 P reports liability for IRS No. 60(c) of $1,220 (5,000 gallons × $.244) and claims a credit on Schedule C for $1,220 for period August 1-August 10, reporting on Schedule C 1,220 gallons of agri-biodiesel. (d) Effective/applicability date. This section is applicable on and after the date these regulations are published as final regulations in the Federal Register .