8896 Low Sulfur Diesel Fuel Production Credit

8896

Low Sulfur Diesel Fuel Production Credit

Form
(Rev. December 2006)

©

OMB No. 1545-1914

Attach to your tax return.

Attachment
Sequence No.

Department of the Treasury
Internal Revenue Service

Name(s) shown on return

1
2
3
4
5
6
7

Low sulfur diesel fuel produced (in gallons)
Multiply line 1 by $.05
Qualified capital costs limitation (see instructions)
Total low sulfur diesel fuel production credits allowed for all prior tax years
Subtract line 4 from line 3
Enter the smaller of line 5 or line 2
Low sulfur diesel fuel production credit from partnerships, S corporations, and cooperatives

1
2
3
4
5
6
7

8

Add lines 6 and 7. Cooperatives go to line 9; partnerships and S corporations, report this amount
on Schedule K; all others, report this amount on the applicable line of Form 3800 (e.g., line 1q
of the 2006 Form 3800)
Amount allocated to the patrons of the cooperative
Subtract line 9 from line 8. Report this amount on the applicable line of Form 3800 (e.g., line 1q
of the 2006 Form 3800)

8
9

9
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General Instructions
Section references are to the Internal
Revenue Code.

What’s New
● The tax liability limit is no longer
figured on this form; instead, it must be
figured on Form 3800, General Business
Credit.
● Taxpayers that are not partnerships,
S corporations, or cooperatives, and
whose only source of this credit is from
those pass-through entities, are not
required to complete or file this form.
Instead, they can report this credit
directly on line 1q of Form 3800.
● The IRS will revise this December
2006 version of the form only when
necessary. Continue to use this version
for tax years beginning after 2005 until a
new revision is issued.

Purpose of Form
Use Form 8896 to claim the low sulfur
diesel fuel production credit.
The credit generally is 5 cents for
every gallon of low sulfur diesel fuel
produced by a qualified small business
refiner during the tax year. However, the
total credits allowed for all tax years
cannot be more than the refiner’s
qualified capital costs limitation on line
3. This credit is part of the general
business credit.

Definitions
Low Sulfur Diesel Fuel
This is diesel fuel with a sulfur content of
15 parts per million or less.

Small Business Refiner
A small business refiner generally is a
refiner of crude oil with an average daily
domestic refinery run or average
retained production for all facilities that

142

Identifying number

did not exceed 205,000 barrels for the
1-year period ending on December 31,
2002. To figure the average daily
domestic refinery run or retained
production, only include refineries that
were refineries of the refiner or a related
person (within the meaning of section
613A(d)(3)) on April 1, 2003. However, a
refiner is not a small business refiner for
a tax year if more than 1,500 individuals
are engaged in the refinery operations of
the business on any day during the tax
year.

Qualified Capital Costs
For each facility, qualified capital costs
are costs paid or incurred to comply
with the highway diesel fuel sulfur
control requirements of the
Environmental Protection Agency (EPA)
during the period beginning January 1,
2003, and ending on the earlier of:
● The date 1 year after the date on
which the refiner must comply with
these EPA requirements with respect to
such facility or
● December 31, 2009.
Qualified capital costs include costs for
the construction of new process operation
units or the dismantling and reconstruction
of existing process units to be used in the
production of low sulfur diesel fuel,
associated adjacent or offsite equipment
(including tankage, catalyst, and power
supply), engineering, construction period
interest, and site work.
In addition, the small business refiner
must obtain certification from the IRS
(which will consult with the EPA) that the
taxpayer’s qualified capital costs will
result in compliance with the applicable
EPA regulations. This certification must
be obtained not later than the date that
is 30 months after the first day of the
first tax year in which the credit is
determined.

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 37704F

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Additional Information
For more details, including basis
reduction, see section 45H.

Specific Instructions
Use lines 1 through 6 to figure any low
sulfur diesel fuel production credit from
your own trade or business.

Cooperative Election To Allocate
Credit to Patrons
A cooperative described in section
1381(a) can elect to allocate any part of
the low sulfur diesel fuel production
credit among the patrons of the
cooperative. To make the election,
attach a statement to the effect that the
cooperative elects to allocate the credit
among the patrons eligible to share in
patronage dividends on the basis of the
quantity or value of business done with
or for the patrons for the tax year.
The election is not effective unless:
● Made on a timely filed return
(including extensions). However, if the
cooperative made an election on a tax
return for a tax year ending after
December 31, 2002, and filed before
June 15, 2006, but failed to attach the
required statement, the cooperative may
attach that statement to the first federal
income tax return it files after June 14,
2006.
● The cooperative designates the
apportionment in a written notice mailed
to its patrons during the payment period
described in section 1382(d).
If you timely file your return without
making an election, you can still make
the election by filing an amended return
with the statement within 6 months of
the due date of the return (excluding
Form

8896

(Rev. 12-2006)

Form 8896 (Rev. 12-2006)

extensions). Enter “Filed pursuant to
section 301.9100-2” on the amended
return.
Once made, the election cannot be
revoked.

Line 1
Enter the number of gallons of diesel
fuel produced with a sulfur content of 15
parts per million or less.

Page

excess over 155,000 barrels) by
50,000to get .2. Next subtract .2 from 1
to get .8. Then multiply 25% by .8 to get
20%. On line 3, enter 20% of the
qualified capital costs for the facility that
produced the fuel reported on line 1.

Line 4
Enter the total low sulfur diesel fuel
production credits allowed for all prior
tax years (as determined for line 6).

Line 3
On line 3, enter 25% of the qualified
capital costs (defined above) for the
facility that produced the fuel reported
on line 1 if your average daily domestic
refinery runs were not more than
155,000 barrels for the 1-year period
ending on December 31, 2002. If your
average daily domestic refinery runs
were more than 155,000 barrels, the
25% is reduced (but not below zero) by
multiplying it by 1 minus your excess
over 155,000 barrels divided by 50,000
barrels.
Example. Your average daily domestic
refinery runs were 165,000 barrels for
the 1-year period ending on December
31, 2002. First divide 10,000 (your

Paperwork Reduction Act Notice. We
ask for the information on this form to
carry out the Internal Revenue laws of
the United States. You are required to
give us the information. We need it to
ensure that you are complying with
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relating to a form or its instructions must
be retained as long as their contents

2

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by section 6103.
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burden for individual taxpayers filing this
form is approved under OMB control
number 1545-0074 and is included in
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