Section 6. AVIATION-GRADE

KEROSENE

(a) In general —(1) Section 4 of Notice 2005–4 provides guidance on the taxation of aviation-grade kerosene under the Act. Under sections 4(d) and 4(e), a position holder is not liable for tax if, among other conditions, it obtains a certificate from the

use as a fuel, or (2) is used as a fuel by the taxpayer producing the mixture.

(b) Explanation of terms —(1) The diesel fuel in a biodiesel mixture may be either dyed or undyed. However, taxpayers are reminded of the penalty in § 6715 for the willful alteration of the strength or composition of any dye in dyed fuel. Also see § 48.6715–1 of the Manufacturers and Retailers Excise Tax Regulations.

(2) A biodiesel mixture generally is used as a fuel when it is consumed to produce energy. Thus, for example, a biodiesel mixture that is consumed in a furnace to produce heat is used as a fuel. However, the destruction of a biodiesel mixture in a fire or other casualty loss is not treated as use as a fuel.

(3) A biodiesel mixture is a mixture of biodiesel and diesel fuel containing at least 0.1 percent (by volume) of diesel fuel. Thus, for example, a mixture of 999 gallons of biodiesel and 1 gallon of diesel fuel is a biodiesel mixture.

(4) Kerosene in a mixture of biodiesel and diesel fuel is not included in the volume for purposes of determining whether the biodiesel mixture satisfies the volume requirements set forth in paragraph (b)(3) of this section. Further, the gallons of kerosene in the mixture of biodiesel and diesel fuel are not included in the gallons of biodiesel for which a credit or payment is allowed.

(c) Effective date —(1) In general . Paragraphs (b)(1), (2), and (4) of this section are applicable January 1, 2005, the effective date of Notice 2005–4. Paragraph (b)(3) of this section applies with respect to mixtures produced after August 29, 2005 and, except as provided in paragraph (c)(2) of this section, is not taken into account in determining the tax treatment of any mixture produced on or before that date.

(2) Reliance permitted in certain cases . A taxpayer may rely on paragraph (b)(3) of this section to claim a biodiesel mixture credit for a mixture produced on or before August 29, 2005 if the taxpayer has not taken any action inconsistent with the claim requirements under this notice such as providing a Certificate for Biodiesel or a Statement of Biodiesel Reseller with respect to the biodiesel in the mixture.