Nebraska farmers have received some temporary fuel-tax relief during the 2026 harvest season. On Sept. 24, Gov. Jim Pillen issued Executive Order 26-21, providing relief for certain agricultural transportation activities in Nebraska. The program runs for 90 days, through Dec. 23.
On Oct. 5, President Donald Trump issued a federal executive order addressing diesel fuel taxes and penalties associated with dyed diesel used on highways. The federal action covers the period from Oct. 5 through Dec. 31, 2026.
While this provides an opportunity for farmers to reduce some costs during harvest, it is important to understand that the Nebraska and federal programs are separate. The federal order also requires additional guidance from the U.S. Treasury Department and the IRS. Producers should understand what the relief covers, what it does not cover, and what records they need to maintain.
Nebraska Fuel-Tax Refund
Nebraska’s relief applies to qualifying transportation of Nebraska-sourced commercial agricultural products on Nebraska highways and public roads. This may include grain, livestock and other qualifying agricultural products transported from the field to storage, a market or a stockpile.
For non-IFTA (International Fuel Tax Agreement) taxpayers, the Nebraska refund is claimed on Form 84AG, Nebraska Ag Use Motor Fuels Tax Refund Claim. Producers claiming relief under Executive Order 26-21 should write “EO 26-21” at the top of the form.
Beginning Oct. 1, Nebraska also imposed a 0.25-cent-per-gallon tax on dyed diesel. That tax may be refunded when the fuel is used for qualifying agricultural transportation under the executive order.
Producers should keep fuel receipts and records showing the gallons purchased, tax paid, vehicle used, miles traveled and agricultural products transported. Good records will help support a refund claim if questions arise later.
New Federal Red-Dyed Diesel Relief
The Oct. 5 federal executive order provides for temporary relief involving federal diesel fuel taxes and penalties associated with dyed diesel used on highways. However, there is an important distinction farmers need to understand: The federal fuel tax is being deferred, not forgiven.
Deferring a tax means delaying the tax obligation; it does not mean the tax has been permanently eliminated. Producers should not assume that federal diesel taxes covered by the order will never have to be paid.
The order also directs the IRS to provide penalty relief for qualifying dyed diesel sold for use or used on highways during the specified period. This penalty relief is separate from the deferral of the federal fuel tax.
Before this federal announcement, Nebraska’s executive order did not remove the federal restrictions on dyed diesel. The federal action is a significant development, but it is temporary and does not permanently change the federal dyed-fuel rules.
Treasury and the IRS still need to explain how the federal provisions will be administered, including how the tax deferral will work. Producers should watch for additional guidance rather than assume that all details have been settled.
What About Form 4136?
Farmers generally use Form 4136 to claim a federal fuel-tax credit for qualifying off-highway use, such as diesel used in tractors and other farm equipment. The federal diesel tax rate is 24.4 cents per gallon.
Diesel used in a semi to haul grain on public roads generally does not qualify for the normal farming fuel-tax credit. Producers should also be careful not to claim the same federal tax benefit twice on the same gallons of fuel.
The Oct. 5 federal order provides for temporary relief through a different mechanism. Producers should watch for Treasury and IRS guidance explaining how the deferral and penalty relief will be handled. Until those details are clear, keep records of fuel purchases and usage and do not assume the normal Form 4136 rules have changed.
How Long Does Red Dye Stay in a Semi?
There is no set number of days or miles after which dyed diesel is guaranteed to be undetectable. Fuel can be inspected and sampled, so producers should not rely on time, dilution or a certain number of miles to determine whether a vehicle meets fuel-tax requirements.
This is especially important as the temporary relief approaches its expiration date. A semi that uses dyed fuel during the relief period may still have that fuel in its tank after the period ends. Producers should not assume that the expiration of the relief period and the disappearance of dyed fuel will occur at the same time.
A Caution About Dyed Diesel
Even with the temporary relief, producers should think carefully before switching highway-licensed vehicles to dyed diesel simply to save money during harvest.
For those who have the option, continuing to use clear diesel in highway-licensed vehicles and claiming the applicable Nebraska refund may be a more straightforward long-term approach. This can help avoid uncertainty about the treatment of dyed fuel after the temporary relief expires.
The immediate savings may be attractive, but producers also need to consider the potential compliance issues that could follow. The federal tax deferral is not tax forgiveness, and the temporary penalty relief should not be treated as a permanent change in the rules.
Producers Crossing State Lines
Producers who haul grain, livestock or other agricultural products across state lines should be particularly cautious.
Nebraska’s Executive Order 26-21 applies to qualifying activities in Nebraska. Although the federal action is intended to apply nationwide, it does not automatically provide the same relief from every state's fuel-tax requirements.
If your trucks routinely cross state lines, using clear diesel in highway-licensed vehicles may be the safer approach unless you have confirmed the requirements that apply in each state where you operate.
Keep Good Bulk-Tank Records
Good recordkeeping is important, especially when a farm bulk tank supplies both tractors and highway vehicles.
A simple fuel withdrawal log should identify the date, vehicle or equipment, gallons withdrawn, fuel type and purpose of use. Keep receipts showing gallons purchased and tax paid, along with documentation supporting any Nebraska agricultural transportation refund.
Separating farm equipment use from highway vehicle use will make it easier to support your tax treatment and respond to questions if your records are reviewed.
What Should Producers Do?
- Keep fuel receipts showing gallons purchased and tax paid.
- Track bulk-tank withdrawals by vehicle or equipment.
- Separate farm equipment use from highway vehicle use in your records.
- Document qualifying agricultural transportation for Nebraska EO 26-21 refund claims.
- Use Form 84AG for qualifying Nebraska refunds and write “EO 26-21” at the top.
- Keep Nebraska refund claims separate from federal tax matters.
- Watch for additional Treasury and IRS guidance on the federal order.
- Be particularly cautious when hauling across state lines.
- Consider continuing to use clear diesel in highway-licensed vehicles when practical.
The Bottom Line
The Nebraska and federal actions provide temporary opportunities for farmers to manage fuel costs during harvest. However, producers need to understand that the programs are separate and that the federal tax treatment is not the same as a permanent tax exemption.
Federal diesel fuel taxes are being deferred, not forgiven. The temporary penalty relief for qualifying dyed diesel use is a separate provision, and neither should be viewed as a permanent change to federal fuel-tax rules.
For Nebraska farmers, the best approach is to understand which relief applies to your operation, maintain good records and watch for additional guidance. Before changing fuel practices, consider both the immediate savings and the compliance requirements that may apply after the temporary relief expires.
