Regulatory Alert

President Trump Directs Diesel Tax Relief; Federal and State Implementation Remains Unclear

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.