Congress Set to Leave Town without Addressing Tax Extenders

Key Developments as reported by PMAA Dec 21, 2018

• Oil Spill Liability Tax (OSLT) to Expire on December 31, 2018
• Biodiesel Blender’s Tax Credit Isn’t Renewed

A partial government shutdown is expected to go into effect tonight as the Trump Administration is unlikely to approve a clean spending bill through February 8, 2019. There was some discussion over the last few weeks to attach a tax extenders package which would include the biodiesel blender’s tax credit, the OSLT and a host of additional tax related measures to the spending bill called “tax extenders," but Congress decided to punt the issue into early next year. Senate democrats balked at the idea of tackling tax extenders this year and will wait until democrats take control of the House next year when they will have more leverage in negotiations with Senate republicans and the White House. Other credits normally included in tax extenders legislation are the credits for the installation of qualified alternative fuel vehicle refueling property in a home or business; the Alternative Fuels Excise Tax Credit for the use of propane as a transportation fuel, known as the “propane autogas tax credit;” and the Section 25C tax credit for the installation of qualified high-efficiency residential HVAC systems and certain energy-saving home retrofits. PMAA will continue to push for these credits along with a retroactive renewal and gradual phase down of the $1 per gallon biodiesel blenders tax credit.

Meanwhile, because Congress is unlikely to extend the OSLT through 2019, PMAA will work with Congressional tax writing committees early next year to ensure that the credit isn’t applied retroactively. The 9 cents per barrel OSLT tax is imposed on crude oil at the refinery gate. Proceeds from the OSLT go into a trust fund used by the Coast Guard to pay for clean-up after accidents like oil spills. The OSLT has no tax related impact on downstream marketers, it is simply a cost passed through on finished product. The OSLT is paid by the refiner upstream. Unfortunately, some terminals break out the OSLT as a separate line item on bills of lading and invoices. This practice causes confusion downstream because the tax is paid by refiners on crude oil at the refinery gate. The OSLT is not imposed, remitted or refunded downstream. There are no OSLT floor stock taxes or OSLT tax exempt parties downstream. However, breaking out the OSLT as a separate line item gives it a perception of importance downstream. The impact of the OSLT on wholesale petroleum marketers below the terminal rack is a miniscule increase in the rack cost of finished motor fuel and heating oil. Terminal operators break out the OSLT on invoices, not because wholesale petroleum marketers need to know, but for their own accounting purposes and no other reason. There is no OSLT notice requirement for downstream parties. Some downstream wholesale petroleum marketers who break out the OSLT on invoices to their end user customers may need to adjust their accounting practices and software to reflect the expiration. However, there is no regulatory requirement to breakout the OSLT downstream of the terminal rack on invoices in the first place. To prevent this confusion now, PMAA urges jobbers to contact their suppliers to ensure that the OSLT is not listed on BOLs starting January 1, 2019.

Finally, the technical fix to Section 168 of the “Tax Cuts and Jobs Act” so that businesses can receive the 100 percent bonus depreciation benefit that Congress intended to provide in the law is unlikely to be addressed this year. Congress is expected to fix the issue early next year along with addressing tax extenders.