Issue

There is a potential credit for fuel (e.g. gasoline and/or diesel) used by your institution “exclusively for use by a nonprofit educational organization.”

Situation

Marathon Bible College (MBC) is a public charity and a school under I.R.C. sections 501(c)(3) and 170(b)(1)(A)(ii).  MBC has several vehicles that are only used on campus, for various school activities, and buses that transport students between venues.  They wonder if they might be able to get a credit back for any of the excise taxes paid on fuels used in these vehicles.  We tell them that this is a great question!

To qualify, an institution must be able to identify the type of use (hint: it is likely type 13), report gallons used (or equivalents), complete Form 4136, file a Form 990-T (with the credit claimed on Part IV, Line 45g), and maintain records that include the person who sold the fuel to you and the dates of the purchases.

According to IRS Publication 510, Fuel Taxes (Including Fuel Tax Credits and Refunds), the various uses that meet the “type of use” criteria include exclusive use by a nonprofit educational organization, use in a school bus, and off-highway business use.

Some institutions choose not to take advantage of these credits as the ultimate benefit may only be a few hundred dollars.  Also, some institutions would rather not file Form 990-T simply to “transmit” Form 4136.

Rules

From Form 4136, Credit for Federal Tax Paid on Fuels instructions:

How To Make a Claim

Complete all information requested for each claim you make.  You must enter the number (when requested) from the Type of Use Table, the number of gallons, or gasoline or diesel gallon equivalents (GGE or DGE)… and the amount of the credit.

Recordkeeping

You must keep records to support any credits claimed on the return for at least 3 years from the date the return is due or filed, whichever is later.

From IRS Publication 510:

Exclusive use by a nonprofit educational organization (No. 13). Exclusive use by a nonprofit educational organization means fuel used by an organization exempt from income tax under section 501(a) that meets both of the following requirements.

  • It has a regular faculty and curriculum.
  • It has a regularly enrolled body of students who attend the place where the instruction normally occurs.

A nonprofit educational organization also includes a school operated by a church or other organization described in section 501(c)(3) if the school meets the above requirements.

Bottom Line

  • Form 4136, Credit for Federal Tax Paid on Fuels instructions may offer an opportunity for your institution to get a credit for federal fuel taxes paid.
  • The various uses that meet the “type of use” criteria include exclusive use by a nonprofit educational organization, use in a school bus, and off-highway business use.
  • Form 4136 is “transmitted” by filing Form 990-T and claiming the credit on Part IV, Line 45g.
  • Meticulous recordkeeping is required – so plan and track accordingly.

Specific questions? Email Dave Moja.

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.