U.S. Venture, Inc. v. United States, No. 20-1861 (7th Cir. 2021)
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Gasoline is subject to an excise tax. The combined fuel excise taxes account for more than 80% of the annual revenue collected for the Highway Trust Fund. The 2005 Safe, Accountable, Flexible, Efficient Transportation Equity Act. introduced new credits that fuel producers could use to offset their fuel excise taxes, including one for using “alternative fuels” to create “alternative fuel mixtures” (AFM credit), 26 U.S.C. 6426(e).
U.S. Venture buys fuel from various suppliers and combines it with different additives before selling the finished product to retailers. Since 2012 U.S. Venture has commonly added butane to the gasoline it produces and sells. Butane is a type of gas, made from both natural gas and petroleum. It has long been considered a fuel additive, with suppliers adding it to gasoline since at least the 1960s.
In 2017. U.S. Venture first sought an AFM tax credit for producing and selling fuel that contained a mixture of gasoline and butane. The IRS rejected its position. The district court and Seventh Circuit affirmed. There is nothing alternative about gasoline containing a butane additive, as indicated by a combination of statutory provisions defining the scope of the alternative fuel mixture tax credit.
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