Ill. Admin. Code tit. 86 § 130.333

Current through Register Vol. 48, No. 45, November 8, 2024

Section 130.333 - Sustainable Aviation Fuel Purchase Credit

a) Earning Sustainable Aviation Fuel Purchase Credit

1)From July 1, 2023 through December 31, 2032, sustainable aviation fuel ("SAF") sold to or used by an air common carrier, certified by the carrier to be used in Illinois, earns a credit in the amount of $1.50 per gallon of SAF purchased. The credit earned shall be referred to as the Sustainable Aviation Fuel Purchase Credit or SAFPC. Only that portion of each gallon of aviation fuel that consists of SAF, as defined in this Section, is eligible to earn the credit.

2)The credit is earned at the time SAF is purchased for use in Illinois. The amount of credit that is earned is based on the number of whole gallons of SAF purchased for use in Illinois. Partial gallons will not earn a credit. Credits may be used at the same time as they are earned. [35 ILCS 105/3-87; 35 ILCS 110/3-72] A qualifying purchase is considered to take place as of the date of invoice of the SAF. The credit is considered to be earned on SAF that is purchased under an installment contract or progress payment contract at the time that each installment or progress payment is invoiced and based on the number of whole gallons purchased by the installment or progress payment.

3)For a sale or use of aviation fuel to qualify to earn SAFPC, taxpayers must retain in their books and records a certification from the producer of the aviation fuel that the aviation fuel sold or used and for which SAFPC was earned meets the definition of SAF under this Section. The documentation must include detail sufficient for the Department to determine the number of gallons of SAF sold or used. [35 ILCS 105/3-87; 35 ILCS 110/3-72; 35 ILCS 115/9; 35 ILCS 120/3]

4) SAFPC earned by an air common carrier expires on December 31, 2032. SAFPC is non-transferable and non-refundable. Taxpayers shall account for the earning and usage of SAFPC on each monthly return filed with the Department, as deemed necessary by the Department. In addition, to monitor the number of gallons of soybean oil feedstock included in the SAF purchased and to monitor the earning and usage of SAFPC, air common carriers must periodically report this information in the form and manner required by the Department.

5)Until January 1, 2033, on an annual basis, running from January through December each year, no credit may be earned by an air common carrier for soybean oil-derived SAF once air common carriers in this State have collectively purchased SAF containing 10,000,000 gallons of soybean oil feedstock. [35 ILCS 105/3-87; 35 ILCS 110/3-72] If the amount of credit earned during any calendar year reported to the Department by air common carriers includes credit earned on soybean oil-derived SAF that exceeds 10,000,000 gallons of soybean oil feedstock, then the credit earned on soybean oil-derived SAF shall be reduced proportionately to meet this cap.

6) SAF is "used in Illinois" and therefore eligible to earn the credit if it is subject to tax under the Use Tax Act or the Service Use Tax Act, including uses subject to Use Tax or Service Use Tax but for which an exemption is allowed under the Act. SAF that is not subject to Use Tax or Service Use Tax in Illinois is not "used in Illinois" for purposes of the credit. No credit is earned for a purchase of SAF that is purchased for resale. See Section 130.210(a) and 86 Ill. Adm. Code 150.301.

EXAMPLE: Purchase 1: air common carrier purchases 10,000 gallons of aviation fuel it certifies is for use in Illinois. Producer provides purchaser-air common carrier with a certification that 5,000 gallons of the fuel is SAF. Purchaser-air common carrier earns $7,500 in SAFPC (5,000 * $1.50 = $7,500) on the purchase. The fuel will be loaded into the fuel supply tanks of aircraft at O'Hare Airport, and is therefore subject to Illinois Use Tax. All of the fuel, however, will be used in flights that are engaged in foreign trade and eligible for the exemption under Section 3-5(12) of the Use Tax Act [35 ILCS 105/3-5(12)] and Section 2-5(22) of the Retailers' Occupation Tax Act [35 ILCS 120/2-5(22)] . Therefore, the transaction is exempt from retailers' occupation and use tax.

Purchase 2: air common carrier purchases 20,000 gallons of non-SAF aviation fuel for use in Illinois at a price of $4 per gallon. No exemption applies to the purchase. The tax rate is 8.5 %. The taxable selling price is $80,000. Total tax owed is $6,800 ($80,000 * 8.5% = $6,800). Purchaser-air common carrier may use $5,000 ($80,000 * 6.25 % = $5,000) of SAFPC earned in Purchase 1 to satisfy the 6.25% portion of the tax. Purchaser-air common carrier must pay supplier the remaining $1,800 in tax (local portion), for which SAFPC may not be used. Purchaser-air common carrier will have $2,500 SAFPC remaining for use in future purchases.

b) "Sustainable aviation fuel" means liquid fuel, the portion of which is not kerosene, which either:

1)meets the criteria set forth in subsections (d) and (e) of Section 40B of the federal Internal Revenue Code of 1986, including the following:

A) meets the requirements of:

i) American Society for Testing and Materials International Standard D7566, or

ii) the Fischer-Tropsch provisions of American Society for Testing and Materials International Standard D1655, Annex A1;

B) is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass;

C) is not derived from palm fatty acid distillates or petroleum; and

D) has been certified in accordance with subsection (e) of Section 40B of the federal Internal Revenue Code of 1986 as having a lifecycle greenhouse gas emissions reduction percentage of at least 50%; or

2) meets the following criteria:

A)consists of synthesized hydrocarbons and meets the requirements of:

i)the American Society for Testing and Materials International Standard D7566; or

ii)the Fischer-Tropsch provisions of American Society for Testing and Materials International Standard D1655, Annex A1;

B)prior to June 1, 2028, is derived from biomass resources, waste streams, renewable energy sources, or gaseous carbon oxides, and beginning on June 1, 2028, is derived from domestic biomass resources;

C)is not derived from any palm derivatives; and

D)the fuel production pathway for the SAF achieves at least a 50% lifecycle greenhouse gas emissions reduction in comparison with petroleum-based jet fuel, as determined by a test that shows:

i)that the fuel production pathway achieves at least a 50% reduction of the aggregate attributional core lifecycle emissions and the positive induced land use change values under the lifecycle methodology for SAFs adopted by the International Civil Aviation Organization with the agreement of the United States; or

ii)that the fuel production pathway achieves at least a 50% reduction of the aggregate attributional core lifecycle greenhouse gas emissions values utilizing the most recent version of Argonne National Laboratory's GREET model, inclusive of agricultural practices and carbon capture and sequestration.

c) Using Sustainable Aviation Fuel Purchase Credit

1)The purchaser of SAF shall certify to the seller of the aviation fuel that the purchaser is satisfying all or part of its liability for the 6.25% tax under the Use Tax Act or the Service Use Tax Act that is due on the purchase of aviation fuel by use of SAFPC. The credit may be applied only to the 6.25% State rate of tax incurred on aviation fuel. The credit may be accumulated or may be used the same day that it is earned, but must be followed by proper documentation and reporting of the credit as set out in this Section.

2)The SAFPC certification must be dated and shall include the name and address of the purchaser, the purchaser's Account ID, if registered, the credit being applied, and a statement that the State Use Tax or Service Use Tax liability is being satisfied with the air common carrier's SAFPC.

3) The credit is non-transferable and may not be used to satisfy the tax liability of any taxpayer other than the air common carrier that earned the credit. A credit reported under a particular Account ID may not be transferred to a related but separately registered division or company.

4)An air common carrier-purchaser of aviation fuel may utilize SAFPC in satisfaction of the 6.25% tax arising from the purchase of aviation fuel, but not in satisfaction of penalty or interest. [35 ILCS 105/3-87; 35 ILCS 110/3-72] Accumulated credit may be used to satisfy the State portion (6.25%) of a Use Tax or Service Use Tax liability arising under audit where the liability established is the result of the air common carrier failing to self-assess and remit Use Tax or Service Use Tax on the purchase of aviation fuel. The credit may only be used to satisfy the State portion (6.25%) of a Use Tax or Service Use Tax liability incurred on the purchase of aviation fuel. Under no circumstances may the credit be used to satisfy penalty and interest, or other tax liability incurred by the air common carrier.

5) Credit may be used to satisfy the State portion (6.25%) of a qualifying Use Tax or Service Use Tax liability incurred by an air common carrier on a purchase of aviation fuel when payment of tax must be made directly to the Department.

6) The credit expires on December 31, 2032. See Section 3-87 of the Use Tax Act and Section 3-72 of the Service Use Tax Act.

7) An air common carrier may use credit to satisfy Service Use Tax liability only when purchasing aviation fuel transferred incident to a sale of service.

d) Documentation of Sustainable Aviation Fuel Purchase Credit Earned and Used

1) Earning SAFPC. An air common carrier earning SAFPC must retain in its books and records, produce upon request of the Department, submit periodically as required by the Department, and produce upon audit by the Department, as to each purchase of SAF on which the air common carrier earned SAFPC, the following documentation:

A) the vendor or supplier (including, if applicable, either the vendor's or supplier's Illinois Account ID or Federal Employer Identification Number);

B) a copy of the certification from the producer of the aviation fuel that the aviation fuel meets the definition of SAF under this Section;

C) the date of purchase and number of whole gallons of SAF purchased;

D) the number of whole gallons of soybean oil feedstock, if any, included in the gallons listed in subsection (d)(1)(C); and

E) any other information required by the Department to track the earning of SAFPC.

2) Using SAFPC. An air common carrier using SAFPC must retain in its books and records, produce upon request of the Department, submit periodically as required by the Department, and produce upon audit by the Department, as to each purchase of aviation fuel on which the air common carrier used SAFPC to satisfy the purchaser's Use Tax or Service Use Tax liability, the following documentation:

A) the vendor or supplier (including, if applicable, either the vendor's or supplier's Illinois Account ID or Federal Employer Identification Number);

B) the date of purchase and purchase price of the aviation fuel;

C) the amount of SAFPC used to satisfy the purchaser's 6.25% Use Tax or Service Use Tax liability on that purchase;

D) the amount of SAFPC, if any, included in the amount listed in subsection (d)(2)(C) that was derived from soybean oil feedstock; and

E) any other information required by the Department to track the usage of SAFPC.

3) Reporting. Air common carriers are required to complete and retain in their books and records a form provided by the Department to record the information required in subsections (d)(1) and (d)(2) for each purchase of aviation fuel on which they earn or use SAFPC. Air common carriers shall submit copies of the completed form to the Department periodically as required by the Department so that the Department can meet the statutory requirement to track the number of gallons of soybean oil feedstock included in purchases of SAF to be used in Illinois and track the earning and usage of SAFPC.

4) Disallowed and unused SAFPC. An air common carrier who used SAFPC to satisfy the air common carrier's Use Tax or Service Use Tax liability incurred on a purchase that is later determined not to qualify for usage of the credit may be liable for tax, penalty, and interest on that purchase as of the date of the purchase. However, the air common carrier is entitled to use the disallowed SAFPC, so long as it has not expired, on qualifying purchases of aviation fuel for which credit was not previously used. Similarly, an air common carrier who used SAFPC to satisfy the air common carrier's Use Tax or Service Use Tax liability incurred on a purchase that is later determined not to be subject to tax (e.g., exempt sale) is entitled to use the resulting unused SAFPC, so long as it has not expired, on qualifying purchases of aviation fuel for which credit was not previously used.

e) Retailers or Servicemen Accepting Sustainable Aviation Fuel Purchase Credit

1)Beginning on July 1, 2023 and through December 31, 2032, a retailer may accept an SAFPC certification from an air common carrier-purchaser in satisfaction of Use Tax on aviation fuel as provided in Section 3-87 of the Use Tax Act if the purchaser provides the appropriate documentation as required by Section 3-87 of the Use Tax Act. An SAFPC certification accepted by a retailer in accordance with this paragraph may be used by that retailer to satisfy Retailers' Occupation Tax liability (but not in satisfaction of penalty or interest) in the amount claimed in the certification, not to exceed 6.25% of the receipts subject to tax from a sale of aviation fuel. [35 ILCS 120/3] For a transfer of aviation fuel incident to a sale of service, see corresponding language at 35 ILCS 110/3-72 and 35 ILCS 115/9. In order to accept SAFPC from an air common carrier, the retailer or serviceman must obtain an SAFPC certificate from the air common carrier. The air common carrier must provide the certification on a form provided by the Department. The certificate must be kept in the retailer's or serviceman's books and records, but need not be submitted to the Department with the retailer's or serviceman's return. An SAFPC certificate must contain the following information:

A) a signed statement that the air common carrier is using SAFPC to satisfy all or part of the 6.25% portion of Use Tax or Service Use Tax liability incurred on the purchase of aviation fuel;

B) the air common carrier's name and address;

C) the air common carrier's Illinois Account ID, if registered;

D) the date of purchase and total selling price of the aviation fuel;

E) the amount of credit being used (see Section 3-87 of the Use Tax Act and Section 3-72 of the Service Use Tax Act); and

F) the amount of credit, if any, included in the amount listed in subsection (e)(1)(E) that was derived from soybean oil feedstock.

2) SAFPC accepted by the retailer or serviceman may be used by the retailer or serviceman to pay its liability incurred under the Retailers' Occupation Tax Act or Service Occupation Tax Act, so long as the retailer or serviceman complies with the following:

A) The retailer or serviceman may not accept credit in excess of 6.25% of the purchase price of the aviation fuel.

B) The retailer or serviceman must properly report the credit on the return to the Department in order to use the credit to pay Retailers' Occupation Tax or Service Occupation Tax liability. The SAFPC does not create an exemption or an authorized deduction. The SAFPC is a means for the retailer or serviceman to pay Retailers' Occupation Tax or Service Occupation Tax, as the case may be. Therefore, the receipts from transactions in which customers have provided SAFPC cannot be deducted from the gross receipts reported on the Aviation Fuel Sales and Use Tax Return (Form ST-70). Receipts from transactions in which customers have provided SAFPC must be included in gross receipts subject to tax reported on line 1 and line 3 of the return. The resulting tax on those gross receipts can then be paid by using the credit on line 17 of the return.

f) Retailers or Servicemen Accepting Sustainable Aviation Fuel Purchase Credit After Qualifying Purchases

1) An air common carrier that does not provide the certification as provided in subsection (e) to a retailer or serviceman at the time of purchase of aviation fuel must pay the appropriate amount of Use Tax or Service Use Tax at that time to the retailer or serviceman. However, retailers and servicemen are not prohibited from accepting SAFPC certifications after sales of aviation fuel have taken place. Retailers and servicemen are not required to accept the certifications and are not required to refund the amount of Use Tax or Service Use Tax that was properly paid by the air common carriers in exchange for the certificates after the sales have taken place.

2) Retailers and servicemen that choose to accept SAFPC certifications from air common carriers after sales of aviation fuel have taken place and refund the amount of Use Tax or Service Use Tax that was properly paid by those air common carriers must file amended returns or claims for credit or refund as provided in Section 130.1501. However, to avoid the potential of retailers and servicemen filing multiple amended returns and claims for credit or refund, retailers and servicemen may elect to report the acceptance of that SAFPC on line 17 of the retailers' and servicemen's Aviation Fuel Sales and Use Tax Returns (Form ST-70) for the period in which those refunds occurred. The retailer's or serviceman's election to report the acceptance of the credit on their current return, in lieu of filing an amended return and claim for credit or refund, does not supersede the applicability of the statute of limitations described in Section 130.1501(a)(4) to the claiming of that credit by the retailer or serviceman. Retailers and servicemen may only refund the 6.25% of State Use Tax or Service Use Tax paid by the air common carriers. See subsection (c).

3) Air common carriers who provide SAFPC certifications to retailers or servicemen after sales of aviation fuel have taken place as provided in this subsection (f) must maintain records documenting both the original purchase of the aviation fuel and documenting the use of the credit in the month in which the certification was provided to the retailer or serviceman.

4) Example: An air common carrier purchased aviation fuel from a retailer in June 2024. The air common carrier paid Use Tax to the retailer at the time of purchase. In January 2025, the air common carrier asks the retailer to accept an SAFPC certification for the June 2024 purchase and refund the Use Tax (6.25%) paid previously by the air common carrier. The retailer chooses to accept the certification and refunds the amount of the Use Tax (6.25%) to the air common carrier. The retailer makes the election to report the acceptance of the credit on line 17 of the retailer's January 2025 Aviation Fuel Sales and Use Tax Return (rather than filing an amended return or claim for credit or refund). The air common carrier must retain records documenting the purchase of the aviation fuel in June 2024 and the use of the credit in the month of January 2025.

Ill. Admin. Code tit. 86, § 130.333

Added at 47 Ill. Reg. 19135, effective 12/6/2023