Off-Highway Fuel Use Credits: Qualifying a Vehicle Without a Chassis

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Some nonchassis vehicles may qualify for off-highway fuel credits if they meet specific IRS criteria. We review the requirements and key legal cases.

6 minute read

July 24, 2025

Leanne Sobel

Partner-in-Charge, Energy Compliance Services - Motor Fuels and Excise Tax

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In this post, we build on the discussion from our third blog in this series about how a vehicle qualifies as a specifically designed mobile machinery for nontransportation functions when its chassis meets specific criteria. Here, we explore how a vehicle can still qualify for off-highway fuel credits even if it doesn’t have a chassis based on the following two specific criteria set by the Internal Review Service (IRS):

The vehicle is specifically designed for off-highway transportation.
The vehicle’s special design substantially limits or impairs its ability to transport a particular load, such as mining, construction, etc., on public highways.

Under 26 USC 7701(a)(48)(A), a vehicle is specifically designed for off-highway transportation based solely on its physical characteristics. The specific design prong doesn’t equate to exclusive off-highway use. We further examine ways heavy trucks may be used on highway and off highway as described in real legal cases.

Case 1: Worldwide Equipment, Inc. v. USA, No. 08-5950 (6th Cir. 2010): Specific Design Test

The court ruled on the standard for the specific design test. The issue was whether a truck was designed for the primary function of transporting loads other than over a public highway. Primary function does not mean that highway use cannot be more than incidental. In this case, the heavy-duty truck (RD888SX Coal Hauler) was designed to transport coal from a mine site to a coal tipple or temporary storage. The government argued most mine sites were not large enough to justify an on-site tipple, suggesting the truck must have been designed to travel on public highways and failed the special design test. The court disagreed.

The petitioner stated that the “RD888SX Coal Hauler was a custom designed and configured truck built for a special purpose. It was wider, taller, longer, […]heavier, slower and significantly more expensive to purchase and operate than general-purpose, heavy-duty dump trucks manufactured by Mack and several other manufacturers which were intended for highway use. It was built for the primary purpose of off-highway use.” The petitioner did not have to prove the vehicle did not use highway roads. The court found that the coal haulers were “designed for a vocation as an off-highway coal hauling vehicle, and the very design features which suit it for that vocation substantially impair the ability of the truck to operate on public highways.”

According to Internal Revenue Code (IRC 26) USC 7701(a)(48)(B), various factors may be taken into account to determine substantial impairment. These factors include the size of the vehicle, whether the vehicle is subject to the licensing, safety and other requirements for a highway vehicle and the vehicle’s ability to transport a load at a sustained speed of at least 25 miles per hour may be taken into account to determine substantial impairment. The case decision illustrates how dump trucks, which are used both on and off highways, often fail the substantial impairment test because they aren’t specifically designed to limit highway use.

Case 2: Lucine Williams v. Commissioner, TC Memo 1997-540: Substantially Impaired Test

In this case, the court decided that a dump truck hauling materials to various projects sites is considered a highway vehicle and is not entitled to a fuel tax credit for the diesel fuel purchased to fuel it. The dump truck owner kept the truck at a yard and used it to haul materials like dirt and asphalt to construction sites. Despite the owner having a special license from the State of California restricting use of the truck to within a 50-mile radius of the point of operations, the court determined the taxpayer failed to prove the truck was not a highway vehicle since it was driven on highways from the storage yard to the different pickup sites.

A Real-World Example

IRC Section 48.6421-4 provides an example of how the off-highway credit applies based on the use of the vehicles. Consider M Corporation, a logging company, that uses 12,000 gallons of fuel in a registered highway vehicle operating on public highways and on the company’s private roads. The company also uses 6,000 gallons for nonhighway vehicles like tractors and bulldozers and 2,000 gallons in heavy trucks not required to be registered for highway use since they operated entirely on the company’s property. M Corporation could claim credit for fuel used by the nonhighway vehicles and the unregistered highway vehicles. However, the company could not claim credit for the fuel used in the registered highway vehicle even though a portion of it was used on M Corporation’s own property.

This example underscores how the specific design and substantial impairment tests work in practice and how businesses can claim credits for vehicles that meet these criteria.

Key Takeaways

Although these cases concern the retail excise tax on certain vehicles, regulation Section 48.4061(a)-1 confirms the definition of highway vehicle has the same meaning under the retail excise tax as it does in fuel tax. While having a chassis is often a key factor, it’s not the only consideration. Vehicles designed for off-highway functions, even without a traditional chassis, may qualify for credits if their design limits their ability to operate on public roads.

At Weaver, we’re here to help ensure that your vehicles meet these criteria before you file for a refund. Contact us today.

Authored by Kelly Grace and Leanne Sobel

Off-Highway Fuel Credits and Refunds Series

Our upcoming series explores off-highway fuel credits and refunds, covering key topics like navigating IRS rules, how different states handle these credits and tips for substantiating off-road claims. Whether you’re aiming to maximize tax benefits or ensure compliance with regulations, this series will provide the guidance you need.

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