United States Tax Court 160 T.C. No. 11 GROWMARK, INC. & SUBSIDIARIES, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ————— Docket No. 23797-14. Filed May 16, 2023. ————— P, a fuel blender, is allowed tax credits under I.R.C. § 6426(b) and (c) for fuel mixtures it blended. P claimed the tax credits in determining its excise tax liability and paid its excise tax liability as reduced by those credits (actual excise tax expense). As a fuel blender, P may reduce its taxable income from fuel mixture sales by subtracting its cost of goods sold (COGS), including certain federal excise taxes. As part of its COGS, P originally claimed its actual excise tax expense. P asserts in its Petition that it should have claimed its gross excise tax liability, unreduced by the tax credits it received, as part of its COGS. R asserts that for purposes of calculating its COGS, P correctly included its actual excise tax expense. Held: P may claim as part of its COGS only that excise tax which it actually incurred or paid. Thus, the amount of fuel excise tax includible in P’s COGS is reduced by the amount of the tax credits P claimed and received under I.R.C. § 6426(b) and (c). Held, further, legislative history confirms P must use its actual excise tax expense, rather than gross excise tax liability, for purposes of calculating its COGS. ————— Served 05/16/23 2 George William Benson, Andrew R. Roberson, and Thomas Kevin Spencer, for petitioner. Justin D. Scheid, Rogelio A. Villageliu, Tess deLiefde, and James M. Cascino, for respondent. PARIS, Judge: This case is before the Court to decide petitioner’s affirmative allegation. All issues in the notice of deficiency were decided in Growmark, Inc. & Subs. v. Commissioner, T.C. Memo. 2019-161. In a timely notice of deficiency, respondent determined deficiencies with respect to issues other than petitioner’s COGS calculation in petitioner’s 2009 and 2010 federal income tax of $461,696 and $2,958,319, respectively. 1 Petitioner—in addition to challenging respondent’s adjustments in the notice of deficiency—alleged in its Petition that it may reduce its reported taxable income for 2009 and 2010 by $6,938,292 and $7,329,491, respectively, on the basis that it incorrectly calculated its COGS for each of those years by using its actual (net) excise tax expense instead of its gross excise tax liability. Thus, the only issue to be decided in this Opinion is whether a taxpayer that claims a credit against fuel excise tax under section 6426(b) or (c) may also claim as part of its COGS its gross excise tax liability, unreduced by the amount of the credit it received. We conclude that a taxpayer may not. Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (Code), in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. FINDINGS OF FACT …
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