Fuel Company’s $6.7 Million Tax Credit Deals Lacked Substance

A fuel producer isn’t entitled to a $6.7 million refund in alternative fuel tax credits because the transactions it used to claim those credits lacked economic substance, a federal court held.

The US District Court for the Southern District of New York on Tuesday denied a challenge brought by Chemoil Corp.—a renewable fuels producer that’s subject to a fuel excise tax—because the fuel transactions the company entered into served no economic purpose under the economic substance doctrine.

The court examined Chemoil’s 2011 transactions with two energy trade companies under the doctrine, which allows courts to question the validity of ...