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Power Take-Off (PTO) Tax Correction


Ready Mixed Concrete Industry Position: Power take-off (PTO) tax correction for concrete mixer trucks would help to stimulate growth in the ready mixed concrete industry, which has been hit hard by skyrocketing fuel prices and the worst downturn in the housing market since 1991.

How It Affects Our Industry: In 1951, Congress imposed an excise tax on diesel fuel used to propel highway vehicles. In 1953, the Internal Revenue Service (IRS) Excise Tax Ruling Branch issued a Private Letter Ruling (PLR) clarifying that the fuel used for PTO operations of concrete mixer trucks is eligible for an excise tax credit. The PLR confirmed Congress’ intent that non-propulsive fuel use, such as PTO fuel use, should be statutorily exempt as an “off-highway business use.” However, nine years later, in 1960, the IRS made the determination that allowing a tax credit for PTO operations was administratively burdensome.  

In 2005, Congress enacted the Safe, Accountable, Flexible, Efficient Transportation Equity Act – A Legacy for Users (SAFETEA-LU). Section 11144 of SAFETEA-LU directed the IRS to study and report on PTO fuel usage and to propose options for exempting such use from the highway fuel excise tax. The recently completed report determined that 30.2 % of fuel consumed by a concrete mixer truck is used to perform the PTO function of turning the mixer drum. The study also identified five options for allowing a PTO fuel excise tax credit for concrete mixer trucks, which would amount to approximately $279 per truck per year for a total annual industry credit of roughly $21,500,000.

*IRS PTO Report

Background: IRS regulations regarding federal fuel taxes, written almost 50 years ago, allow for a tax credit for fuel used by equipment powered by a separate engine. However, the regulations disallow the credit for engines that perform both a PTO function and also propel the truck on-road. In essence, owners of modern trucks have been penalized for advancing technology that ultimately saves fuel by having a single more efficient engine perform both functions. Indeed, by the mid-1960s using a second engine to perform concrete mixer operations was obsolete technology.  

Moreover, at least 29 states already offer some form of fuel tax relief for tax paid on PTO fuel!

The unwarranted and inequitable PTO tax burden on the ready mixed concrete industry must be rectified immediately. NRMCA is working on legislative language that will direct the IRS to initiate a rulemaking providing for a credit for the excise taxes paid on the PTO fuel use of concrete mixer trucks.