The Alternative Fuel Credit Is Gone — What Fleets Can Still Claim

Quick Answer

The section 6426 alternative fuel credit and alternative fuel mixture credit — the $.50 per gallon-equivalent incentives for propane, CNG, LNG, and similar fuels — expired for sales, uses, or removals after December 31, 2024, and no successor credit exists for alternative fuel sellers or users. What remains available is different and smaller: the nontaxable-use refund of section 4041 excise tax actually paid on alternative fuel put to a nontaxable use, claimed on Form 8849 Schedule 1 at the rates printed on the form.

For propane autogas fleets, CNG station operators, and forklift fuel suppliers, the $.50 alternative fuel credit was a significant line item for years. The 2025 Form 4136 instructions close the book: "The section 6426/6427 credits/refunds for alternative fuel and alternative fuel mixture credit expired for sales, uses, or removals after 2024."

Unlike biodiesel, whose blender credit was replaced by a producer credit, the alternative fuel credit got no successor aimed at sellers or users. Here is the current landscape and what can still be claimed.

What expired

Two related incentives ended together for post-2024 periods: the alternative fuel credit (section 6426(d)) for selling or using alternative fuel in motor vehicles and motorboats, and the alternative fuel mixture credit (section 6426(e)) for blending alternative fuel into taxable fuel. The mixture credit’s cash-payment option under section 6427(e) had already expired back at the end of 2011 — in its final years the mixture credit could only offset Form 720 liability.

The covered fuels read like the fleet-conversion catalog: liquefied petroleum gas (propane), "P Series" fuels, compressed natural gas, liquefied natural gas, Fischer-Tropsch coal liquids, and liquid fuel from biomass. Liquefied hydrogen had exited even earlier — its credit ended after 2022.

No successor for sellers and users

The section 45Z Clean Fuel Production Credit that replaced the biodiesel regime helps only registered PRODUCERS of qualifying transportation fuel. A propane marketer, a fleet running autogas trucks, or a warehouse fueling CNG forklifts has no path into 45Z for buying or dispensing fuel — the alternative fuel credit simply ended.

Pre-2025 claim periods can still be pursued within the limitation periods, on the old paperwork (the January 2023 Schedule 3 revision), and subject to the old ordering rule: alternative fuel credits had to be taken first against Form 720 alternative-fuel liability, with Form 720-X repair before any Schedule 3 refund.

History lesson worth keeping: this credit expired at the end of 2021, was retroactively reinstated for 2022 with a special one-time claim window, then expired again for good after 2024. Always check current-year status before building fuel economics around a federal credit.

What remains: the nontaxable-use refund

Still alive — and often confused with the dead credit — is the nontaxable-use refund. When alternative fuel was actually TAXED under section 4041 and then used in a nontaxable way (off-highway business use, farming, export, school buses, and the rest of the type-of-use table), the tax paid is refundable on Form 8849 Schedule 1, line 6, at the rates printed on the schedule — for example $.183 per gasoline gallon equivalent for LPG-class fuels and $.243 per diesel gallon equivalent for LNG-class fuels.

This is a refund of tax paid, not an incentive payment — a fleet that owed no fuel tax gets nothing back. But for taxed propane burned in forklifts or other off-highway equipment, the claim is real money and fully current law.

Mind the units: GGE and DGE

Alternative fuel claims are measured in gallon equivalents, and the conversions are printed in the IRS instructions: CNG converts at 121 cubic feet per gasoline gallon equivalent; LPG at 5.75 pounds or 1.353 gallons per GGE; LNG at 6.06 pounds or 1.71 gallons per diesel gallon equivalent. The IRS’s own worked example: 10,000 gallons of LPG ÷ 1.353 = 7,391 GGE. Getting the units wrong is the classic error on these claims — LPG and CNG speak gasoline-equivalent, LNG speaks diesel-equivalent.

Frequently asked questions

Is the propane autogas credit still available?⌄
No. The $.50 per gallon-equivalent alternative fuel credit expired for sales and uses after December 31, 2024, and Congress created no replacement for fuel sellers or fleets. Only the nontaxable-use refund of tax actually paid remains available for propane.
Can my forklift fleet still claim anything on propane?⌄
Possibly — but under a different rule. If your propane was taxed under section 4041 and used off-highway in business equipment, that tax is refundable as a nontaxable-use claim on Form 8849 Schedule 1 at the rate printed on the form. If the fuel was sold to you untaxed, there is nothing to refund.
What is the difference between the alternative fuel credit and the mixture credit?⌄
The alternative fuel credit (section 6426(d)) rewarded selling or using alternative fuel as vehicle fuel; the alternative fuel mixture credit (section 6426(e)) rewarded blending alternative fuel into taxable fuel, and since 2012 could only offset Form 720 liability rather than pay cash. Both expired for post-2024 periods.
Can I still file for 2024 and earlier quarters?⌄
Within the normal limitation periods, yes — using the January 2023 Schedule 3 revision with the older Form 8849, and respecting the ordering rule that credits go first against Form 720 alternative-fuel liability. Post-2024 fuel supports no claim.
Does the 45Z credit cover CNG or propane businesses?⌄
Only if you are the registered PRODUCER of a qualifying clean transportation fuel — 45Z is an income tax credit for producers registered on Form 637 before production, claimed on Form 7218. Dispensing, reselling, or consuming alternative fuel earns nothing under 45Z.

Related guides

More in Fuel Tax Credits & Form 8849

Official sources

Tax rules, rates and deadlines change — verify current requirements against the IRS sources above before acting. This guide is general information, not tax or legal advice.

Taxed fuel used off-highway?

The nontaxable-use refund is still current law. TaxFilingCenter e-files Form 8849 Schedule 1 claims — including alternative fuel lines — with electronic IRS acknowledgment.

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