Michigan biodiesel deal pleads guilty to filing false tax returns

In Michigan, a Bloomfield, Michigan, biodiesel fuel dealer pleaded guilty to filing a false income tax return, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Matthew Schneider of the Eastern District of Michigan.

According to plea documents, Chandra Yarlagadda, 54, owned and operated Alpha Bioenergy LLC (Alpha), formerly known as Naturol Bioenergy LLC, which purchased and sold biodiesel fuel. Pursuant to the Clean Air Act and related federal regulations, companies that purchase and sell biodiesel fuel are required to purchase Renewable Identification Numbers (RINs) for any volume of renewable fuel bought or sold. RINs are credits that obligated parties under the Clean Air Act, such as Alpha, to demonstrate compliance with annual standards set forth by the Environmental Protection Agency.

Yarlagadda reported income and expenses associated with Alpha on Schedules C attached to his personal income tax returns. Yarlagadda admitted as part of his plea that on the Schedules C attached to his 2009, 2010, and 2011 tax returns, he substantially overstated expenses associated with the purchase of RINs. For these three years, Yarlagadda falsely reported RIN expenses totaling more than $14.2 million, when, in fact, he was only entitled to claim approximately $80,000 in RIN expenses for those years. By claiming these inflated deductions, Yarlagadda avoided paying an additional $2.3 million in federal income taxes that was due.