White House Website Link

Signed October 5, 2026. Directs the U.S. Treasury to defer certain federal diesel excise taxes (26 U.S.C. 4041) incurred October 5 through December 31, 2026, without penalties or interest, and directs the IRS to waive penalties for selling or using dyed diesel on the highway during that period. Treasury is also directed to explore ways, including legislation, to forgive the deferred tax. Note: the order defers the tax; it does not eliminate it. Federal motor carrier safety enforcement continues, and the order does not change state fuel taxes or penalties.

IRS Website Link

Issued October 14, 2026. Implements the President’s order: the IRS will not impose penalties when dyed diesel is sold for use or used on highways nationwide from October 1 through December 31, 2026 (retroactive). Relief applies to anyone who sells or uses dyed diesel for highway use, including penalties for missed semimonthly deposits and inadequate records. IRS fuel compliance inspections are suspended, and sellers and distributors are under no obligation to investigate or document the end use of dyed fuel sold during the relief period. This is federal relief only and does not affect state fuel taxes or penalties. Further IRS guidance is expected on the deferred tax and Form 720 reporting.

IRS Website Link

Issued October 21, 2026. The IRS will not challenge failures to file returns, report, or keep records solely related to federal excise tax liability from taxable uses of dyed diesel between October 1 and December 31, 2026, and will not assert civil penalties for those failures. This includes filing Form 720 solely to report that liability, even if the filing deadline falls after December 31, and no records need to be reconstructed later. Anyone who files Form 720 for other taxes must continue to file and report those liabilities. The IRS is considering a grace period or other measures for residual red dye in fuel tanks after the relief period ends, with further guidance to follow.

IRS Webpage Link

Updated October 23, 2026. Answers common questions about the federal relief in IR-2026-122 and IR-2026-125. Key points: no federal records or Form 720 reporting are required for dyed diesel sold or used during the relief period (including the fourth-quarter Form 720 due January 31), and no new obligations are created for distributors, retailers, or end-users. Sellers are presumed not to know dyed fuel is used on-road, so they will not become liable for the tax. Federal “nontaxable use only” notices may be removed during the relief period but must be restored when it ends. Relief covers dyed biodiesel mixtures but not clear diesel or dyed kerosene. The IRS is still considering a grace period for residual dye in tanks. Federal relief does not change state requirements; Illinois still requires the dyed diesel notice on invoices and shipping papers (see IDOR Bulletin FY 2027-09).

Illinois Website Link

Issued October 6, 2026, by Governor JB Pritzker under the Illinois Emergency Management Agency Act. Declares all Illinois counties a disaster area due to the diesel fuel crisis, citing record-high diesel prices, global supply disruptions, low distillate fuel inventories, and rising costs to transport agricultural goods. Directs state agencies, including IDOR, the Illinois State Police, and IDOT, to implement executive orders issued under the proclamation and to evaluate measures to address the shortage and high cost of diesel during harvest season. The proclamation provides the emergency authority for Executive Order 2026-08 and is in effect for 30 days from issuance.

Illinois News Release and Executive Order Link

Issued October 6, 2026, alongside a disaster proclamation declaring every Illinois county a disaster area due to the diesel fuel crisis. Directs IDOR and the Illinois State Police not to impose penalties when dyed diesel is sold or used from bulk storage for use on highways and state roads for farming and agricultural purposes through December 31, 2026. Illinois relief is narrower than the federal relief: it covers agricultural use only. The order also directs IDOR to issue implementing guidance and request federal penalty relief, and directs IDOT to consider extending the Illinois Harvest Permit program into 2027 if the shortage continues.

IDOR Website Link

IDOR’s guidance implementing Executive Order 2026-08 for end-users. From October 6 through December 31, 2026, IDOR and the Illinois State Police will not impose penalties for the sale, purchase, possession, or use of dyed diesel in on-road vehicles used for farming and agricultural purposes related to transporting agricultural goods. IDOR will not pursue administrative or criminal penalties against licensed distributors selling to eligible end-users. End-users must keep records for four years: license plate, gallons, fill-up dates, the date dyed diesel was last added, and proof of agricultural use (such as bills of lading, trip sheets, or grain tickets). Because residual dye can remain after the relief period, end-users must also keep the vehicle’s odometer reading on December 31 and receipts for all fuel purchased afterward. Normal enforcement resumes January 1, 2027.

IDOR Website Link

For IFTA licensees operating qualified motor vehicles on Illinois roads for farming and agricultural purposes. Explains how to report dyed diesel use from October 6 through December 31, 2026, on Form MFUT-15, IFTA Quarterly Return: include all gallons (clear and dyed) when calculating fleet MPG, subtract qualifying dyed diesel miles in Illinois from Illinois taxable miles, and report only clear diesel as tax-paid gallons. Qualifying travel includes the empty return trip. Fuel receipts must show the purchase date, seller name and address, vehicle license plate, and gallons, along with proof of agricultural use; records must be kept for four years. Carriers crossing state lines are responsible for each jurisdiction’s dyed fuel laws and may face penalties in any jurisdiction that does not allow dyed diesel for their operations.

IDOR Website Link

For licensed motor fuel distributors. Only Illinois licensed motor fuel distributors may make tax-free sales of dyed diesel, and dyed diesel may be sold for on-road use in Illinois only for farming and agricultural purposes from October 6 through December 31, 2026. Each invoice must show the nature of the exemption, invoice number and date, carrier and bill of lading number, purchaser name and address, Illinois origin and destination, gallons, and UST tax and Environmental Impact Fee. The notice “Dyed Diesel Fuel, Non-taxable Use Only, Penalty For Taxable Use” must still appear on all shipping papers, bills of lading, and invoices. Cash sales require the same documentation. Report these sales on Form RMFT-5, Schedule DD-1, with the purchaser’s name and address, fuel use code “A” (Agriculture), and gallons sold.

IDOR Website Link

IDOR’s standing rules for dyed diesel under Illinois law. Since 2000, Illinois has required red dye in special fuel used for non-taxable, non-highway purposes, and the fuel must be dyed before removal at the terminal rack. Storage tanks, containers, and facilities must display the notice “Dyed Diesel Fuel, Non-Taxable Use Only,” and bills of lading and invoices must display “Dyed Diesel Fuel, Non-Taxable Use Only, Penalty For Taxable Use.” Dyed diesel transactions must be reported separately from other special fuel transactions, and UST and EIF reporting applies. The page also lists penalties for violations, ranging from fines to misdemeanor and felony charges.

Motor Fuel Tax questions (motor fuel distributors): rev.mf@illinois.gov | 217-782-2291

Motor Fuel Use Tax questions (IFTA): rev.ifta@illinois.gov | 217-785-1397