President Donald Trump signed an executive order Monday to waive federal penalties for using dyed diesel on highways through Dec. 31 and possibly defer the tax, pending Treasury action.
Under the executive order, the Treasury secretary has five days to direct the IRS to announce it will not penalize highway sales or use of dyed diesel from Oct. 5 through Dec. 31. The announcement must also address penalties for missed semimonthly tax deposits.
The tax deferral is not automatic. Within the same five days, Treasury must determine, in consultation with the secretary of war as appropriate, whether relief is legally authorized and which taxpayers qualify.
If Treasury makes those findings, covered tax payments owed by eligible taxpayers would be deferred without penalties or interest, to the extent legally authorized. The order also directs Treasury to explore ways, including legislation, to forgive the deferred amounts.
Speaking in Nebraska before the signing, Trump described the move in broader terms. He said the order would “officially waive the off-road requirement and allow anyone to purchase tax-free red dye diesel for any reason.”
According to the White House fact sheet, diesel is taxed according to its intended use. Highway diesel carries state and federal excise taxes, while fuel for farming, construction, heating and other off-road purposes does not. The untaxed fuel is dyed red so law enforcement can spot it on the road and collect penalties and back taxes.
The federal diesel tax is 24.4 cents per gallon, or about $60 on a 250-gallon fill, the White House said. It estimated savings of more than $100 per fill in states that take matching action. The order does not identify participating states or establish any state tax relief.
The fact sheet describes broader enforcement discretion than the order expressly directs. It says the administration and governors can use their discretion to halt inspections. The order directs Treasury to assess how the IRS should allocate resources to fuel tank inspections and sampling, and to announce its decision.
Other agencies have roles in carrying out the order. The Transportation Department, through the Federal Motor Carrier Safety Administration, is to work with states, industry leaders and labor organizations. It must also continue all compliance enforcement, including audits, inspections and monitoring.
The Agriculture Department is to work with co-ops, rural fuel distributors and farm groups to ensure dyed diesel reaches high-demand areas.
The White House tied the move to high diesel prices and tight global supply, which it blamed on the Russia-Ukraine war and a worldwide shortage of refining capacity. The fact sheet also faulted Democratic-led states that it said closed refineries in the name of “Green Energy” policies.
The White House also listed other steps it says will ease fuel costs. According to the fact sheet, the Transportation Department waived hours-of-service rules so drivers hauling gasoline and diesel could drive additional hours.
In October, according to the White House, Trump negotiated with Europe to release 100 million barrels of refined diesel from its strategic reserves over the next four months.
The administration also pointed to an August agreement with Venezuela that it said secures 65 billion barrels of oil. It said it has delivered more than $40 billion in direct aid to farmers since January 2025 and that truckers’ earnings have risen more than 7% since Trump returned to office. Those figures come from the White House and have not been independently verified.
The order directs the White House Office of Intergovernmental Affairs to encourage corresponding state policies. Treasury must issue guidance on eligibility, conditions and payment deadlines; the order does not itself forgive the deferred taxes.
