Oregon Sen. Jeff Merkley and four Senate Democrats on Thursday urged the Treasury Inspector General for Tax Administration to investigate whether the Internal Revenue Service improperly allowed liquefied natural gas exporters to claim federal tax credits for fuel used to propel LNG tankers, Merkley said in a Thursday statement.
Merkley, joined by Senate Democratic Leader Chuck Schumer of New York and Sens. Chris Van Hollen of Maryland, Edward Markey of Massachusetts and Sheldon Whitehouse of Rhode Island, asked Acting Inspector General Hill to examine whether the IRS determined that LNG tankers qualify for the Alternative Fuel Excise Tax credit and, if so, how that decision was made.
The senators also asked investigators to determine whether Treasury Secretary Scott Bessent was involved in the decision and whether he or his staff discussed the matter with the White House, including US President Donald Trump. They questioned whether the tax treatment was intended to benefit Trump campaign contributors.
The AFET credit provides 50 cents per gallon equivalent for certain nonliquid alternative fuels used in motorboats. The senators argue that LNG tankers, which can exceed 1,000 feet in length, do not fit the ordinary or regulatory definition of a motorboat.
They also said LNG tankers already receive separate tax treatment for alternative fuels when engaged in qualifying foreign trade, suggesting Congress did not intend for the vessels to receive the AFET credit.
The senators cited news reports and public financial filings indicating that the IRS has allowed companies to claim the credit for LNG tanker fuel without issuing updated public guidance.
Merkley previously led Senate Democrats in questioning an estimated $370 million tax benefit for Cheniere Energy, the largest US LNG exporter, tied to the use of LNG as an alternative fuel.
In their letter, the senators said extending the AFET credit to LNG tankers would waste taxpayer money and provide a subsidy for fuel the vessels may have used regardless, because LNG naturally produces boil-off gas that can be burned for propulsion.
The senators asked TIGTA to investigate the IRS decision-making process, guidance provided to taxpayers, and the involvement of Treasury and White House officials.