US President Donald Trump signed an executive order Monday that waives federal penalties for using tax-exempt red-dyed diesel on public roads through December 31 and moves to defer the federal diesel tax, with diesel above $6 a gallon in many regions.
The order directs the Treasury secretary to have the IRS announce no penalties for dyed diesel sold or used on highways from October 5 through December 31. Red diesel normally fuels only farm and construction equipment and generators. Trump said the order would “waive the off-road requirement” for anyone buying the fuel.
The tax deferral depends on Treasury, which has five days to decide whether 26 U.S.C. 7508A, a provision for postponing tax deadlines after federal disasters and similar events, authorizes relief. If it does, the secretary may defer the 24.4-cent-a-gallon federal diesel excise tax for fuel taxed from October 5 through year-end, without interest or penalties. The order also tells Treasury to explore wiping out the deferred bill, after consulting the Secretary of War.
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The White House estimates federal savings of roughly $60 for a trucker filling a 250-gallon tank, and more than $100 if states act too. The order directs the Transportation Department to coordinate with states, industry and labor groups, tells the Agriculture Department to protect red diesel supplies for farmers in high-demand areas, and asks the White House to push states to follow. At least 10 governors had already waived state red-diesel restrictions, according to press reports.
The administration blames limited global diesel supply, thin refining capacity and refinery closures in Democrat-led states for high prices. The order follows a deal with Europe to draw 100 million barrels of diesel from emergency stocks.
GasBuddy’s Patrick De Haan said the order’s benefits would be “limited and uneven at the pump”. Most states have their own dyed-diesel laws a federal order cannot override, many charge sales tax on the fuel instead of fuel tax, and major truck stops rarely sell it, he said.
Andy Lipow of Lipow Oil Associates said the order saves consumers money in the short term but “doesn’t solve the underlying issue” of supply.
