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Court rules in favor of US government in Exxon fuel tax-credit case

A U.S. district court judge in Dallas ruled in favor of the U.S. government, denying a request by Exxon Mobil Corp. for a $337 million refund related to fuel excise taxes.

From 2005 to 2011, Congress provided a tax incentive to gasoline producers, known as the "mixture credit," that allowed a credit against the fuel excise tax imposed on the sale or removal of gasoline for each gallon of alcohol blended into an alcohol-gasoline mixture.

Exxon filed a lawsuit in 2016 to recover about $1.3 billion for the improper calculation and collection of taxes from 2006 to 2009. This decision relates to a portion of the lawsuit regarding the application of the mixture credits.

According to the order dated Aug. 8, the refund for $337 million, which involves the effect of mixture credits for 2008 and 2009, was denied. During those two years, Exxon claimed over $960 million in mixture credits against the fuel excise tax it otherwise would have owed, the decision said.

"When a taxpayer pays excise taxes on goods it sells, it may include the excise tax payment as an expense in computing its cost of goods sold. On its original income tax returns for 2008 and 2009, Exxon thus reduced its fuel excise tax by the mixture credits it claimed. Its cost of goods sold, therefore, reflected only the excise tax it actually paid to the government," the decision said.

"We are reviewing the ruling and evaluating our next steps," Exxon spokesperson Scott Silvestri said Aug. 10.

The case is Exxon Mobil Corp v. U.S.A., 3:16-cv-02921, U.S. District Court, Northern District of Texas (Dallas).