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Extends the federal excise tax exemption for alternative motorboat fuels to include certain vessels described in section 4042(c)(1) that are actually engaged in trade between U.S. Atlantic or Pacific ports (including U.S. territories). The change applies to fuel sold for use or used after December 31, 2025, so affected vessel operators and fuel sellers can claim the exemption for qualifying fuel delivered on or after that date.
Adds a new sentence to Section 4041(g) of the Internal Revenue Code of 1986 that extends the existing statutory language per subsection (a)(2).
The exemption under paragraph (1) of subsection (a)(2) shall also apply to fuel sold for use or used by a vessel that (A) is described in section 4042(c)(1), and (B) is actually engaged in trade between the Atlantic or Pacific ports of the United States (including any territory or possession of the United States).
The amendment applies to fuel sold for use or used after December 31, 2025.
Who is affected and how: Vessel owners and operators engaged in coastwise trade between Atlantic- or Pacific-facing U.S. ports (including U.S. territories) will be able to claim an existing excise tax exemption for qualifying alternative motorboat fuels used on those vessels for fuel transactions after December 31, 2025. Fuel suppliers and distributors selling qualifying alternative motorboat fuels to these vessels will also be affected because sales to eligible vessels may be exempt from the excise tax; they will need to adjust invoicing, reporting, and tax collection practices accordingly. The IRS and Treasury will need to interpret and administer the expanded exemption, including guidance for verifying vessel eligibility and the covered trade routes. The budgetary impact is likely modest—a reduction in excise tax receipts tied to the volume of qualifying fuel used by the covered vessels—but not a large-scale revenue effect. The change is administrative in nature and does not impose new unfunded mandates on state or local governments.
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Read twice and referred to the Committee on Finance.
Introduced February 12, 2025 by Lisa Murkowski · Last progress February 12, 2025
Read twice and referred to the Committee on Finance.
Introduced in Senate