Proposal would cut diesel taxes and support new U.S. refineries

The proposal would repeal specified federal excise taxes on diesel fuel. The repeal covers the diesel fuel taxes identified in sections 4041 and 4081 of the tax code. The repeal would apply to diesel fuel sold, used, removed, or entered after enactment.

The Treasury Secretary would transfer money from the general fund to two trust funds. The money would go to the Highway Trust Fund and the Leaking Underground Storage Tank Trust Fund. Each transfer would equal the reduction in amounts otherwise credited to that fund because of the diesel tax repeal. The text does not set a transfer schedule.

The proposal would provide tax credits for qualifying refinery construction and fuel production. The construction credit would cover qualifying property at a U.S. refinery designed to process crude oil or other listed fuels. The production credit would cover fuel from a qualifying new refinery. The construction credit would equal 35 percent of eligible investment in property completed by the taxpayer and used at the refinery. A facility could not receive this credit if another credit under the same tax-code subpart is allowed for it. The production credit would be 5 cents per gallon for gasoline or diesel made at the refinery and sold to an unrelated buyer. Construction must begin after enactment and before January 1, 2032, and the refinery must be in service before January 1, 2037. The production credit covers fuel made within 10 years after the refinery is placed in service. The credits apply to property placed in service, or amounts paid or incurred, after enactment.

The proposal would remove specified limits on a special tax allowance for property used in new refinery construction. It covers property integral to constructing a refinery that meets the bill's definition, without applying that definition's construction-date limit. The provision removes the listed 2029 cutoff and other specified limits for this property. It would apply to property whose construction begins after enactment.