Directive expands tax-exempt diesel access

GRAND ISLAND, Neb. — President Donald Trump issued an executive order Oct. 5 that eases limits on the use of tax-exempt diesel fuel, and Indiana and Illinois governors made similar moves.

The federal directive exempts the 24.4-cents-per-gallon federal excise tax imposed for on-road use of red-dyed diesel fuel for the remainder of the year and encourages states to also suspend their diesel taxes.

Red-dye diesel is exempt from federal excise taxes because it is intended for farm equipment and other off-road uses.

The order instructs Treasury Secretary Scott Bessent to “defer certain diesel fuel tax payment obligations and to provide penalty relief to the extent permitted by law.”

It does not waive the federal taxes on diesel fuel, because only Congress can eliminate a tax, but does expand the use of tax-exempt red-dye diesel.

The U.S. national average diesel price topped $6 per gallon in September for the first time ever, triggered by fuel supply disruptions by conflicts in Iran and Ukraine.

Americans are spending about $700 million more per day on gas and diesel than they did a year ago, according to Bob McNally, Rapidan Energy president.

“Illinois Soybean Growers is grateful for this temporary action during a tough time in the farm economy,” said Bryan Severs, Potomac, ISG chairman.

“With this announcement, I can now put dyed fuel in my semis during harvest, providing some much-needed relief as fuel and other input costs remain extremely high. We look forward to receiving additional guidance on this issue.”

Indiana Exemption

Effective Oct. 6, Gov. Mike Braun suspended the special fuel use restrictions for dyed diesel through Nov. 4 to allow farmers to use the fuel for any farm-related activities.

He also renewed the statewide energy emergency and extended his suspension of the state’s gasoline use tax and gasoline excise tax through Nov. 4.

Bought in bulk, diesel fuel with a red-dye addition can cost between 60 and 70 cents less per gallon than clear diesel fuel sold at a station.

Braun first suspended the gasoline use tax in April and expanded the relief in May to include the gasoline excise tax.

Braun’s directive permits farmers and timber harvesters to use off-road fuel for “any farm-related activities” for the next 30 days, at which time he will review the order for possible renewal.

The exemption includes semi-trucks hauling crops and pickup trucks that might have dual uses.

The Indiana Soybean Alliance’s Membership and Policy Committee and the Indiana Corn Growers Association in a release expressed appreciation of Gov. Braun’s efforts to ease costs during this harvest season.

Yet, concerns remain as harvest in Indiana will likely last beyond Nov. 4.

“I appreciate Gov. Braun’s efforts to ease the burden of high diesel prices,” said M&P Chair David Hardin, Avon.

“We welcome the relief during a time when we are already experiencing high input costs. However, we need certainty through the entire harvest season and guidance on transitioning back to regular diesel when the exemption concludes.”

Some farmers are concerned about what might happen if residual red dye is found in the tanks of grain trucks after the Nov. 4 exemption ends.

“This is good news, and it is timely news as many of us are in the middle of harvest right now,” said ICGA President Alan Dunn, Michigantown.

“Harvest and the fall tillage season will last through most of November, so I hope that an extension for this relief will be considered. I’m also hoping for some clarification from the state on what to do if red dye residue is found in our tanks after this temporary waiver is lifted.”

Courtney Kingery, ISA and ICGA CEO, added that this is a recognition of agriculture’s value to the state’s economy.

“The value of the corn and soybeans grown in Indiana is about $13 billion annually. This crop is produced by the 20,000 corn and soybean farmers across the state, and 95% of those farms are family owned,” she said.

“This announcement came at a great time to give a little relief to Hoosier farmers as they move their grain from the fields to market. There has been an increase of more than $2 per gallon in diesel fuel costs since this spring.

“While the 64-cent-per-gallon savings from on-road diesel may not completely make up for the $2-per-gallon increase, it will help. Farmers could see up to $2,000 in savings per family farm during this exemption.”

Illinois Exemption

Gov. JB Pritzker issued a state disaster proclamation and executive order Oct. 6 to provide relief on diesel fuel costs for the agriculture industry during fall harvest.

The executive order directs the Illinois Department of Revenue and the Illinois State Police to allow on-road use of red-dyed diesel typically used for agricultural purposes.

The executive order also directs state agencies to consider additional protections for farmers and gives the state greater flexibility to respond to continued disruptions in fuel markets and the agricultural economy.

Pritzker’s disaster proclamation declares all 102 Illinois counties disaster areas for 30 days and activates emergency authorities under the Illinois Emergency Management Agency Act, allowing the state to deploy additional resources and respond to the diesel fuel crisis.

The accompanying executive order directs state agencies to take immediate steps to reduce pressure on farmers during harvest season, including:

• Providing temporary relief for agriculture use of dyed diesel on Illinois roadways — IDOR and ISP have been directed not to impose state penalties when dyed diesel fuel from bulk storage is sold or used on highways and state roads for farming and agricultural purposes through Dec. 31. IDOR will issue guidance outlining qualifying uses and documentation requirements.

• Preparing for continued pressure beyond fall harvest — Illinois Department of Transportation is directed to consider extending the Illinois Harvest Permit program into the winter, spring, or summer of 2027 if diesel shortages and elevated costs persist. The program allows farmers to haul up to 10% more weight on specific routes without getting fined, helping agricultural producers transport goods more efficiently.

• Mobilizing state government — The disaster proclamation directs state agencies, including IDOR, ISP and IDOT, to evaluate and implement additional measures to address diesel shortages and elevated costs and activates the governor’s authority to coordinate state personnel and resources as necessary.

Mark Bunselmeyer, Maroa, Illinois Corn Growers Association president, noted Illinois corn farmers are grateful for the executive orders by President Trump and Gov. Pritzker to address high diesel costs during harvest.

“There are a lot of details that need to be worked out to implement this policy in Illinois regarding taxes and enforcement, and we urge the relevant agencies to provide guidance as quickly as possible,” Bunselmeyer said.

“On a federal level, President Trump has recognized the high cost of diesel fuel and razor-thin margins for farmers this fall. The attention to the needs of American farmers is appreciated.

“Many questions remain for federal implementation, as well. While the answers to both state and federal implementation questions are worked out, Illinois farmers should continue using taxed, on-road diesel in registered highway vehicle to avoid potential penalties that remain unknown.”

Among the questions that remain for the implementation of the use of dyed diesel fuel in on-road vehicles:

• The Illinois Department of Revenue must issue guidance regarding qualifying uses and documentation requirements for farmers.

• Residual dye may remain in tanks on Jan. 1, when enforcement begins anew; what happens then?

• The U.S. Department of Treasury must determine if his authority extends to diesel fuel tax payment obligations.

• The U.S. Internal Revenue Service must issue guidance on how it will implement the tax relief on diesel fuel.

Industry Concerns

Energy Marketers of America warns gas stations to “proceed with caution.”

“Whether relief is available, whom it covers and on what conditions depend on Treasury determinations and guidance not yet issued. Deferral is not forgiveness. Moreover, the order does not resolve EPA or state restrictions on the dyed variety of diesel fuel,” the EMA said.

The Society of Independent Gasoline Marketers of America and the National Association of Truck Stop Owners stated in a note to membership that “the White House appears to be trying to encourage the supply chain to move toward selling dyed fuel in non-traditional ways.”

“We do not expect most reputable diesel retailers and fuel marketers to do this,” SIGMA and NATSO said.

“First, the tax is still owed, so there’s limited upside. The logistical challenges outweigh any visible upside — residual dye lingers in tanks and fuel systems. The liability and customer risk outweigh any temporary, uncertain benefit.”