IRS Revises Form 720 and Instructions for Quarterly Excise Tax Returns

The IRS has issued an updated Form 720, Quarterly Excise Tax Return which is used by blenders to pay the federal excise tax on the volume of renewable diesel blended into diesel fuels derived from crude oil. The changes to Form 720 are due to changes inflation adjusted excise tax rates for non-petroleum products such as arrow shafts and transportation by air. Nevertheless, the updated Form 720 must be used by all taxpayers with excise tax liability including biodiesel blenders with an IRS 637 M registration. The updated Form 720 and Instructions are identified with the revision date (Rev. March 2024) in the upper left-hand corner of both documents. Do not use the previous Form 720 and Instructions with the revision date (Rev. April 2016) for blends created on or after January 1, 2024.

Important! The revised Form 720 is also updated to include the inflation adjusted rate for the petroleum Superfund tax. However, below the rack blenders should disregard the Superfund tax rate. The Superfund tax is paid by refiners based on the volume of fuel in a blend derived from crude. The Superfund tax does not apply to the volume of renewable diesel added to crude based diesel fuel. Blenders are not required to pay the Superfund tax.

Reminder! The Inflation Reduction Act of 2022 made the following changes to the definition of renewable diesel and the treatment of kerosene, effective for fuel sold or used after 2022.

  • Renewable diesel no longer includes fuel derived from biomass that meets the requirements of a Department of Defense specification for military jet fuel or an American Society of Testing Materials (ASTM) specification for aviation turbine fuel.
  • Kerosene is no longer treated as diesel fuel for purposes of the renewable diesel mixture credit.
  • Butane mixture doesn’t qualify for a credit. A mixture of butane (or other gasoline blendstock) and gasoline is a mixture of two taxable fuels. Therefore, it isn’t an alternative fuel mixture and doesn’t qualify for the section 6426 alternative fuel mixture credit.