To help foster the production of gasoline, an income tax credit for alcohol and alcohol blended rules applies to fuel sales and uses. There is basically a 60 cent per gallon credit for alcohol of at least 190 proof and 40 cent per gallon credit for alcohol of at least 150 but less than 190 proof for persons producing alcohol rules or using them in a trade or business.
Alcohol Fuel Credit Reduction
The amount of the allowable tax credit must be reduced to the extent that the alcohol is used in gasoline and other alcohol fuels for which there is an excise tax exemption for fuel taxes. This means that the credit generally pertains to mostly pure alcohol fuels and therefore a taxpayer would need to be using them in order to generate the largest credit possible.
General Business Credit
The alcohol fuels credit is claimed as one of the components of the general business credit. Thus, it is subject to maximum tax liability rules and the carryback and carryforward rules. This means that a taxpayer will be subject to limitations that could eliminate the whole credit depending on the other credits they have taken.
Taking & Revoking Credit
Taxpayers may elect to have the alcohol fuels credit not apply for any tax year. The election may be made or revoked at any time before the three year period beginning on the last date for filing a return for such tax year, without regard to extensions.