IRS News Release  
January 01, 1994

IRS District Directors Have Been Advised Not to
Assert the Penalty Under Section 6714

WASHINGTON - IRS District Directors have been advised not to assert the penalty under section 6714 of the Internal Revenue Code in cases where, due to extreme and unexpected weather conditions, dyed diesel fuel is mixed with undyed kerosene or similar products after removal from the terminal, and the resulting fuel is sold or used for heating purposes during the current heating season. The penalty will be asserted, however, against any person using such mixtures for a taxable use.

In general, diesel fuel may be removed tax free from a terminal only if it is dyed to a concentration specified in the regulations under section 4082 of the Internal Revenue Code. Section 6714 of the Internal Revenue Code imposes a penalty for willfully altering the composition or strength of any dyeing done pursuant to those regulations.

During cold weather, it is necessary to add fuels, including kerosene or similar products, to improve the viscosity of diesel fuel sold or used for heating purposes. To the extent those products are not dyed, their addition may dilute the strength of the dye below the minimum level required by the regulations. The IRS recognizes that extreme and unexpected weather conditions may necessitate the addition of such undyed products to dyed diesel fuel after the fuel has been removed from the terminal.

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