Guidance from the IRS Regarding Dyed Diesel

Guidance from the IRS Regarding President Trump’s Executive Order on Dyed Diesel

On October 14, the IRS provided guidance regarding President Trump’s Executive Order on dyed diesel fuel. Members considering using dyed diesel in highway vehicles should review the IRS guidance, along with applicable Illinois requirements.

The guidance states that the IRS will not impose any penalties related to the excise tax for dyed diesel fuel sold for use or used in diesel-powered vehicles on highways nationwide during the relief period of Oct. 1, 2026 to Dec. 31, 2026. The guidance also states that taxpayers do not need to maintain records to substantiate eligibility for federal relief from penalties during this time. The IRS guidance also states that they anticipate issuing further guidance as to the postponement of payment of taxes imposed and will continue to explore ways to eliminate the obligation to pay any amounts deferred. IFB reminds members that this temporary relief does not permanently eliminate fuel tax obligations.

Illinois documentation requirements remain in effect. The federal recordkeeping relief does not change the requirements in the Illinois Department of Revenue (IDOR) guidance shared last Friday. Members seeking Illinois penalty relief must continue to maintain the required documentation for qualifying agricultural transportation during the state relief period of October 6 through December 31, 2026. IDOR requires these records to be retained for four years.

To assist with recordkeeping, a printable dyed diesel truck log is available to be provided to members upon request. Providing this form is not an Illinois Farm Bureau endorsement or recommendation to use dyed diesel in highway vehicles. It is simply an optional tool to help members document their fuel use and agricultural hauling. Members should continue to refer to current Illinois Department of Revenue guidance for required documentation. Completing the form alone does not guarantee compliance.

IFB’s recommendation continues to be: If you choose to use red dyed diesel in on-road trucks for farming and agricultural purposes, document everything and have a plan to transition back to clear diesel.