On October 5, 2026, President Trump signed an Executive Order titled "Emergency Tax Relief on Diesel Fuel," which temporarily permits the use of off-road, red-dyed diesel fuel in on-highway vehicles nationwide. This emergency measure is designed to combat surging fuel prices—which hit historic highs near $6.32 a gallon due to supply constraints linked to the war with Iran—by effectively bypassing the federal excise tax.
Key Provisions Include:
- The Waiver Period: The federal tax and penalty relief is retroactive to October 1, 2026, and remains in effect through December 31, 2026.
- IRS Enforcement Relief: The IRS announced it will not impose standard civil penalties for selling or using dyed diesel on public highways during this window.
- Relaxed Recordkeeping: To encourage compliance and assure retailers, the IRS waived strict reporting, return-filing, and recordkeeping requirements tied to these taxable transactions until January 1, 2027.
The federal order does not automatically override state laws. While states like Ohio and West Virginia have passed matching emergency orders to permit red diesel on their roads, other states have maintained their state diesel taxes.