This article provides an overview of the low sulfur diesel fuel production credit offered to qualified small business refiners and explains the definitions of key terms such as “low sulfur diesel fuel” and “qualified costs,” as well as tips for when to file Form 8896.
What is Form 8896?
Form 8896 is used by qualified small business refiners to claim a credit of 5 cents per gallon for low sulfur diesel fuel produced in a tax year. The credit is part of the general business credit, and partnerships, S corporations, and cooperatives must all file this form to claim it. Low sulfur diesel fuel is diesel fuel with a sulfur content of 15 parts per million or less, and only refineries that were active on April 1, 2003 are eligible. Qualified costs include construction, engineering, and other associated costs related to diesel fuel production. Certification must be obtained from the IRS in order to take the credit.
IRS Form 8896 – Who Needs to Fill It Out?
Partnerships, S corporations, and cooperatives must use Form 8896 to claim the Low Sulfur Diesel Fuel Production Credit, which is worth 5 cents for every gallon of low sulfur diesel fuel produced by a qualified small business refiner during the tax year. All other taxpayers are not required to fill out this form, but can claim the credit directly on line 1m in Part III of Form 3800, General Business Credit. For eligibility, the Small Business Refiner must be a refiner of crude oil with an average daily domestic refinery run or average retained production for all facilities that did not exceed 205,000 barrels for the 1-year period ending on December 31, 2002. To qualify, the refiner must also obtain certification from the IRS (consulting with the EPA) that the taxpayer’s qualified costs will result in compliance with the applicable EPA regulations.
Step-by-Step: Form 8896 Instructions For Filling Out the Document
Filling out Form 8896 is straightforward and follows a step-by-step process. First, read the General Instructions portion of the form to familiarize yourself with the purpose of the form (it is used to claim the low sulfur diesel fuel production credit) as well as the definitions of key terms (e.g. Low Sulfur Diesel Fuel, Small Business Refiner, and Qualified Costs). Part of the form details Future Developments (e.g. legislation enacted after they were published). The instructions will also require you to obtain certification from the IRS in order to take advantage of the credit, which can be done no later than June 29, 2008 or the 30 months after the first day of the first tax year in which the credit is determined. Lastly, be sure to check the TIP at the end of the document, as it warns that, unless you elect not to take the credit, your deductions will be reduced by the amount of the credit.
Below, we present a table that will help you understand how to fill out Form 8896.
| Information Required for Form 8896 | Details |
|---|---|
| Form Purpose | Claim the low sulfur diesel fuel production credit. |
| Required Information | Details about key terms, certification, and credit reduction. |
Do You Need to File Form 8896 Each Year?
Yes, partnerships, S corporations, and cooperatives must file this form each tax year in order to claim the low sulfur diesel fuel production credit. All other taxpayers are not required to file Form 8896 if they only receive the credit from a partnership, S corporation, or cooperative – they can report the credit directly on line 1m in Part III of Form 3800 instead. This showing must additionally be accompanied by certification from the IRS (in consultation with the EPA) of the qualified costs used to meet applicable EPA regulations.
Download the official IRS Form 8896 PDF
On the official IRS website, you will find a link to download Form 8896. However, to make it easier for you, we are providing the link in our article, which comes directly from the official irs.gov website! Click to download: Form 8896
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