IRS Waives Penalties for On-Highway Use of "Dyed Diesel" Through Year-End Under President Trump's Diesel Executive Order…Federal Enforcement Also Halted
The Internal Revenue Service said on Oct. 14 it will impose no federal penalties through Dec. 31 on dyed diesel used on public highways or sold for highway use, following President Donald Trump's Oct. 5 Executive Order 14435, "Emergency Tax Relief on Diesel Fuel." The IRS said it will also conduct no federal on-highway enforcement against dyed diesel during the period.
Dyed diesel is tax-exempt fuel for off-highway uses such as farming, construction and heating. It is dyed red so enforcement agencies can identify highway use and assess penalties and back taxes, according to the White House fact sheet. Diesel used on highways is ordinarily subject to federal and state excise taxes.
The executive order directed the Treasury secretary to act within five days: to determine whether relief is available under Internal Revenue Code section 7508A, including what event made relief available and which taxpayers were affected; where possible, to postpone payment of the diesel excise taxes arising from Oct. 5 through Dec. 31, 2026; to attach no penalties, interest or additions to the postponed taxes to the extent permitted by law; to have the IRS announce within five days that it will impose no section 6715 penalties on the sale or highway use of dyed diesel during the same period; and to find a way, including legislation, to eliminate the postponed taxes themselves.
The secretary of agriculture was directed to help farmers in high-demand areas obtain dyed diesel. The secretary of transportation was directed to coordinate with states, industry and labor groups while continuing existing safety enforcement. The director of the White House Office of Intergovernmental Affairs was directed to encourage more states to adopt the same policy.
The White House said in its fact sheet that "for example, a truck driver can save over $100 per refill (about 134,274 won)." It is a White House example, and the fact sheet does not explain how it was calculated. The White House blamed higher diesel prices on the Russia-Ukraine war, a shortage of global refining capacity and refinery closures in some states.
The administration paired the order with other fuel measures, the fact sheet said. The Transportation Department waived hours-of-service rules for truck drivers hauling gasoline and diesel so they can drive longer. The White House said Trump negotiated with Europe in October to release 100 million barrels of refined diesel from European strategic reserves over the next four months. The Treasury Department said on X on Oct. 9 that, at Trump's direction, the Office of Foreign Assets Control (OFAC) would immediately issue a temporary general license allowing Russian-origin diesel to be supplied to global markets. A general license does not lift sanctions themselves; it temporarily allows specified transactions.
https://x.com/USTreasury/status/2108630834169385310
The IRS set an earlier start date than the executive order. In news release IR-2026-122, the IRS said the relief "is retroactive to Oct. 1, 2026, and remains in effect until Dec. 31." The executive order's period begins Oct. 5; the IRS chose Oct. 1, four days earlier. Neither document explains why the start dates differ. Anyone who sells dyed diesel or uses it for highway use is eligible, the IRS said.
During the relief period, ordinary collection and enforcement procedures are suspended, the IRS said. All IRS fuel compliance officers will be reassigned to other duties and no federal inspections of on-highway dyed fuel use will be conducted. Taxpayers need not keep records proving eligibility, and sellers and distributors have no duty to investigate or record the fuel's end use. Penalties for failing to make semi-monthly tax deposits or to keep proper records are also waived.
The relief covers federal taxes only and does not affect state fuel taxes or state penalties, the IRS said. "Many states, but not all states," have provided similar relief, it said, advising taxpayers to check their state agency's guidance. The IRS said it will issue additional guidance on the section 7508A payment postponement and on processing the quarterly excise tax return, Form 720.
The IRS posted the same relief on its official X account on Oct. 16.
https://x.com/IRSnews/status/2111125407328076096
Agriculture Secretary Brooke Rollins relayed the Treasury Department's explanation on X on Oct. 15, saying "there is no federal tax on dyed diesel used on the highway during the relief period."
https://x.com/SecRollins/status/2110732718606618902
Trump addressed the federal diesel tax itself on Oct. 15. Asked about suspending it, he said it was "something I may support." "Iran will be defeated very quickly, and when that happens oil and diesel prices will drop like a rock," he said, adding, "I may do it anyway." The White House rapid-response account @RapidResponse47 posted the remarks with video. Suspending the tax on ordinary highway diesel is not part of the executive order, and the White House has issued no document on it.