Trump Opens Dyed Diesel to Highway Use. What Does It Mean for Motorcoach Operators?

The administration is offering temporary relief from federal diesel taxes as fuel prices climb, but whether motorcoach operators can take advantage of it—and how—is still unclear.

Fuel prices have always been one of the variables motorcoach operators have the least control over. A charter can be quoted weeks or even months before it operates, but the price of diesel can change considerably between the day the contract is signed and the day the coach leaves the yard.

That makes the Trump administration's latest move on diesel worth watching closely.

On October 5, President Donald Trump signed an executive order aimed at providing temporary relief from elevated diesel costs. Among other provisions, the order temporarily removes certain federal penalties associated with using dyed diesel on public highways and directs the Treasury Department to determine what tax relief can be provided through December 31, 2026.

The administration has largely promoted the action as relief for America's truckers and farmers. Motorcoach operators, however, run another diesel-dependent commercial transportation business, and there is an obvious question that has received considerably less attention: Does this apply to motorcoaches?

At the moment, the answer isn't as simple as the headlines might suggest.

What the Order Actually Does

Dyed diesel, commonly called red diesel, is essentially diesel that has been dyed to identify fuel sold for uses that are generally exempt from federal highway fuel taxes. Under normal circumstances, putting that fuel into a taxable highway vehicle can result in significant penalties.

The federal excise tax on highway diesel is currently 24.4 cents per gallon. The October 5 executive order directs the IRS to temporarily suspend specified penalties associated with the highway sale and use of dyed diesel between October 5 and December 31.

There is an important distinction, however, between eliminating penalties and eliminating the tax itself.

The order gives the Treasury Department five days to determine whether it can defer applicable federal diesel excise-tax obligations during the relief period and directs Treasury to issue guidance identifying who qualifies, what conditions apply, which liabilities can be postponed and when those taxes would eventually become due. The administration has also directed Treasury to examine whether those deferred liabilities could ultimately be eliminated.

In other words, operators should not read the announcement as meaning that every gallon of diesel has suddenly become 24.4 cents cheaper.

Treasury and IRS guidance will determine how much of the announced relief actually reaches the operator.

For a Motorcoach Fleet, 24.4 Cents Adds Up

The amount involved isn't insignificant.

Consider a motorcoach traveling 70,000 miles per year and averaging approximately six miles per gallon. That coach would consume roughly 11,667 gallons annually. At 24.4 cents per gallon, the federal diesel excise tax represented by that fuel consumption is approximately $2,847 per coach.

Across a 20-coach fleet operating at similar utilization, that works out to roughly $56,900 annually.

Those aren't the savings an operator should expect from this executive order—the current relief period covers less than three months—but they illustrate why a few cents per gallon matter so much when multiplied across a high-mileage fleet.

Operators already understand this math. UMA, for example, promotes its AMBEST fuel program as potentially saving participating members an estimated 20 to 25 cents per gallon depending on wholesale prices, retail prices and region.

The industry wouldn't spend so much time negotiating fuel programs if pennies per gallon didn't matter.

Where Motorcoach Operators Need Answers

The biggest problem right now isn't understanding the potential savings. It's understanding the rules.

Motorcoach companies operate differently from many of the businesses highlighted in the administration's announcement. Coaches routinely cross state lines, purchase fuel in multiple jurisdictions and account for interstate fuel taxes through IFTA.

That creates several unresolved questions.

Can a charter or motorcoach operator purchase dyed diesel under the temporary federal policy? Will passenger carriers receive the same treatment as freight carriers? How should those purchases be documented for IFTA purposes? What happens when a coach purchases dyed diesel in one state and then operates through several others? Will individual states recognize the federal relief, or will operators remain responsible for state fuel taxes and dyed-fuel restrictions?

The executive order itself recognizes part of this problem. It directs federal officials to work with state governments and encourages states to adopt corresponding policies.

For interstate motorcoach operators, that state-by-state component could ultimately determine whether the relief is straightforward or administratively difficult to use.

This is also why operators should be cautious about changing their fueling practices immediately. The administration has announced the policy, but Treasury has not yet finished writing the operating instructions.

There is little benefit in saving money at the pump today if an operator creates a fuel-tax or compliance problem six months from now.

The Industry Hasn't Weighed In Yet

As of October 6, Motorcoach Insider has not located publicly posted guidance from either the American Bus Association or United Motorcoach Association specifically addressing the October 5 dyed-diesel order.

That may simply be a matter of timing. The executive order is only a day old, and Treasury itself has been given several days to determine how the tax provisions will be implemented.

Both associations have reason to pay attention.

ABA continues to advocate on federal economic issues affecting motorcoach operators, including the impact of Section 232 tariffs on imported motorcoaches. UMA likewise maintains government-affairs efforts on behalf of operators and already offers members access to fuel-purchasing programs intended to reduce diesel costs.

Once Treasury and the IRS provide implementation guidance, the industry should have a much clearer picture of whether this new relief is something motorcoach companies can actually use.

Why This Story Is Bigger Than Dyed Diesel

There is another reason this deserves attention from operators.

Fuel volatility exposes one of the fundamental problems with charter pricing. An operator may quote a trip today that doesn't operate for another three months. The customer expects the contracted price to remain the same, while fuel, insurance, parts and labor continue moving in the background.

When diesel rises substantially between the quote and the trip, the operator either absorbs the increase, relies on a contractual fuel surcharge, increases future pricing or attempts to renegotiate the work.

For a single trip, that may be manageable. Across dozens of coaches and thousands of trips, it becomes a margin issue.

That is why the administration's diesel action shouldn't be viewed by this industry merely as another political story out of Washington. Whether the policy ultimately helps operators significantly or only marginally will depend on the details, but federal diesel policy directly affects the economics of operating a motorcoach.

For now, Motorcoach Insider will be watching Treasury and IRS guidance, state responses and any guidance issued by ABA and UMA.

The announcement has been made. What operators need now are the details.

And until those details arrive, the question remains: Can motorcoach operators actually use this relief?

Resources

White House — Emergency Tax Relief on Diesel Fuel Executive Order

White House — Diesel Affordability Fact Sheet

Internal Revenue Service — Dyed Fuel Information

American Bus Association — News & Advocacy

United Motorcoach Association

UMA — Member Benefits and Fuel Program

Motorcoach Insider provides independent reporting and analysis of the business, operations and economics of the motorcoach industry. This article is for informational purposes and should not be considered tax or legal advice.