Update on Proclamation Related to Dyed Diesel Use

Last week, President Donald Trump and Iowa Governor Kim Reynolds issued concurrent orders suspending enforcement of regulations overseeing dyed diesel fuel use. As it stands today, the federal proclamation allows dyed diesel fuel used for a taxable purpose (on-road use) to have the federal excise tax of 24.4 cpg deferred for the period of October 5, 2026, through December 31, 2026. Executive Order 14435 directs the Secretary of the Treasury to exercise the authority to allow the excise tax deferred to be deferred without penalty, interest, additional amount, or additional tax. The federal Executive Order directs the Secretary of the Treasury to explore avenues, including future legislation to eliminate the obligation to pay the amount of excise tax deferred during the deferment period outlined in the federal order.

At the time of this publication, no further guidance has been issued by the Secretary of the Treasury.

Concurrently, Iowa Governor Kim Reynolds issued a proclamation temporarily suspending regulatory provisions of Iowa Code Section 452A.74A(1) that restrict the use of dyed diesel for highway transportation in motor vehicles hauling soybeans, corn, hay, straw, silage, stover, distillers grains, soybean meal, livestock, livestock feed, fertilizer (dry, liquid, and gas) and manure (dry and liquid) and other farm products. Regulatory provisions from the sale and use of such fuel for the same uses are also suspended. The proclamation applies to loads transported on any public road within Iowa and covers state excise tax (32.5 cpg) and state sales tax. Iowa’s proclamation expires on February 2, 2027.

Although both the federal Executive Order and state proclamation intend to provide relief to diesel end-users, Iowa’s proclamation is narrower in its scope and limits its eligibility to the movement of the products listed above. It is FUELIowa’s recommendation that fuel marketers and carriers in Iowa adhere to the terms of Iowa’s proclamation.

For Fuel marketers serving farmers and commercial end-users, if you have reason to know your end-user is not eligible for the relief granted in the state proclamation, do not sell dyed diesel fuel to your customer. In transactions where you do sell dyed diesel fuel to your customer, FUELIowa recommends documenting the sale with a state of Iowa sales tax exemption certificate. As a reminder, all dyed-diesel fuel sales in Iowa are presumed to be subject to sales tax unless a specific exemption applies. Last, with the heightened focus on dyed diesel fuel, it is a good time to review all storage tanks and retail dispensers where dyed diesel is stored or dispensed. All storage tanks and dispensers where dyed diesel fuel is available should be labeled with the following statement “Dyed Diesel Fuel, Non-Taxable Use Only, Penalty for Taxable Use.”