NE Wisconsin News

Representative Mike Gallagher has spearheaded a bipartisan initiative involving Wisconsin's congressional delegation, urging Congress to address an anomaly in the tax code that is impacting the state's fuel supply. This call for action supports the passage of legislation (H.R. 3524) aimed at rectifying the issue. 

According to a press release from Gallagher's office, members of the Wisconsin delegation highlighted their concerns in a letter: "In the fall of 2022, non-contract dyed diesel sales were halted at the Green Bay regional terminal for several weeks because supply was not available without trucking in the fuel. To meet its contractual obligations, one supplier was forced to pay hundreds of thousands of dollars in fuel excise taxes that it did owe but should not have incurred. Additionally, as the winter months approach, barge shipments become impossible to complete due to ice cover on Lake Michigan, making a fix to this unintended tax issue even more important. Passing H.R. 3524 or S. 1692 is a commonsense and bipartisan fix that would provide needed relief to a notable supply constraint for off-road diesel users in Wisconsin."

The press release further explains that the problem stems from the closure of the Milwaukee-Green Bay segment of the West Shore pipeline in 2016. This closure forced diesel fuel suppliers to transport fuel to Northeast Wisconsin via truck, leading to taxation on typically tax-exempt fuel due to unforeseen logistical needs. A tax waiver previously granted by the IRS ended last year, resulting in significant financial burdens and increased costs for farmers, construction workers, and foresters who rely on dyed diesel fuel.

According to the delegation's letter, under normal circumstances, Tax Code allows for a refund for the first tax payment when a second tax payment occurs during diesel fuel transportation. However, dyed diesel, which is used in off-road industries and agriculture, is exempt from fuel excise taxes. The issue arises because the dye that distinguishes it from on-road diesel is added only after leaving the final terminal. When transported by truck, there's no opportunity for a refund as there's no subsequent tax when dyed fuel reaches its final destination.