Congress directed the Department of Treasury to publish an additional list of the taxable substances by January 1, 2022. In addition to the reinstatement of the federal superfund excise tax on chemicals and substances that went into effect on July 1, 2022, the Hazardous Substance Superfund excise tax went into effect on January 1, 2023 as part of the Inflation Reduction Act of 2022. Chemical tax to clean up toxic sites gets new life as part of infrastructure deal. Among the many provisions in that legislation . See Notice 2021-66, 2021-52 I.R.B. It is important for companies to be aware of the existence of this tax, and to evaluate the chemicals and substances they import, to establish whether they owe any excise taxes. The return of the chemical excise tax affects taxpayers that manufacture, produce, or import certain chemicals, as Superfund Chemical Taxes are imposed on the sale of 42 specific chemicals (Taxable Chemicals) listed in 4661 (Chemical Sales Excise Tax), including ammonia, butane, benzene, mercury, and other common chemicals. 4671. Taxpayers with a quarterly liability greater than $2,500 will be required to make semi-monthly tax deposits of the tax. During the first, second, and third calendar quarters of2023, the IRS will not withdraw a taxpayers right to use the deposit safe harbor rules of the Excise Tax Procedural Regulations at 26 C.F.R. policy, Privacy (added June 24, 2022), Q12. Service. Companies that import taxable chemicals or taxable substances will be liable for the excise tax. Applicants for registration may call 859-320-4091 and select menu option #1. These FAQs detail what the Superfund chemical excise tax is, how the tax is computed, and who may be liable for the tax. A cloud-based tax The return of the Superfund excise tax on chemicals affects taxpayers that manufacture, produce, or import certain chemicals, as it imposes an excise tax on the sale of 42 specific chemicals listed in Section 4661 of the tax code, including ammonia, butane, benzene, mercury, and other common products. Are there any available exemptions for the Superfund Chemical Excise Taxes? No. accounting firms, For Tax is due upon the first use or first sale of a listed chemical in the United States. Download pdf (1.5 MB) The IRS today released an advance version of Notice 2021-66 regarding the reinstated excise taxes imposed on certain chemicals and substances under sections 4661 and 4671 (often referred to as "Superfund" excise taxes). Will the U.S. Supreme Court Make Marijuana Legal? The Final CCPA Regulations: What You Need To Know, Are College Athletes Students or Employees? The Infrastructure Investment and Jobs Act signed into law November 15, 2021, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. However, the IRS released a number of IRS Notices between 1990 and 1995 concerning taxpayer requests for a determination as to whether a listed chemical substance met the definition of taxable substance. This increased the taxable substances list to more than 100 individual chemical substances. Taxable substances are those that contain 20% or more by weight or value of one of the 42 chemicals listed in IRC 4661(b). Austin | These taxes were in place until 1995 to fund the Federal Hazardous Substance Superfund, but expired in 1995. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials. SaraBeth Smith Strictly Confidential? (b) Amount of Tax The amount of tax imposed by subsection (a) shall be determined in accordance with the following table: (c) Termination No tax shall be imposed by this section after December 31, 2031. Hydrocarbon streams containing mixtures of organic taxable chemicals. *Note: Self-assessing based on 10% of appraisal value will almost always yield a higher tax rate than either of the other methods. The rates are listed in IRS release IR-2022-133 (June 24, 2022). Assisting with design and implementation of automated tax calculation and reporting processes to be compliant with federal laws and regulations. The rationale for the fee collection point was so that the fee would be equally distributed among all hazardous waste generators and suppliers.6. The Superfund Excise Tax is imposed on the manufacturer or importer of the listed chemicals, and the tax becomes due upon the first use or sale in the United States.15. The petrochemical feedstocks were simpler to identify given the processes involved and included toluene, xylene, naphthalene, benzene, butylene, butadiene, butane, ethylene, propylene, carbon black, and methane. Assisting with filing the federal excise tax returns and semi-monthly deposit reporting. To obtain certainty prior to IRS issuing guidance on this matter, companies that import taxable substances as part of articles can seek clarification from the IRS. _____________________________________________________________________________________________. At what point in a transaction do the new taxes kick in? 10I.R.C. What do companies need to do in order to prepare for these taxes? President Joe Biden called for reinstating the Superfund taxes as part of his $2 trillion infrastructure proposal . and services for tax and accounting professionals. This message will not be visible when page is activated. Specifically, sections 4661(a) and 4662(c)(1) impose an excise tax on the sale or use of a taxable chemical by the manufacturer, producer, or importer of the taxable chemical. If the importer does not calculate the section 4671 tax for a taxable substance and the IRS has prescribed a tax rate for the taxable substance, the tax is calculated using the rate prescribed by the IRS. Additionally, the Infrastructure Investment and Jobs Act ("IIJA") double the tax rate on chemicals or . It's codified in IRC Sections 4671 and 4672, both of which were added by the Superfund Amendments and Reauthorization Act of 1986. Litigation Setback for Employers Under Illinois Biometric Information Senate Committee Holds Hearing on Future of Low Carbon Transportation North Carolina Senate Passes Compassionate Care Act at Exactly 4:20 States and Feds Signal Big Changes to Telehealth Prescribing. The tax rate for taxable substances is dependent on the individual chemical composition of the substance.19 For example, if polypropylene is composed of 50% propylene (a listed taxable chemical), then the rate for polypropylene would be $9.74 x 50%, or $4.87. The Infrastructure Investment and Jobs Act lowered this threshold to 20%. The Superfund tax is assessed on the manufacturer or importer of these chemicals. Reminder: High-Earning Exempt Professionals Must Be Paid a "True Gold Dome Report Legislative Day 24 (2023). DTTL and each of its member firms are legally separate and independent entities. The Superfund chemical taxes will be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes. Ethylene and propylene may also be exempt, but only when used in the production of fuel (motor fuel, diesel fuel, aviation fuel, or jet fuel). As noted above, importers are not required to use the IRS-prescribed tax rates for the section 4671 tax and may calculate their own rates. Such exemptions include methane or butane used as a fuel, chemicals used in the production of fertilizer (including nitric acid, sulfuric acid, ammonia, or methane) and substances derived from coal. What are the Superfund chemical excise taxes? Notice 89-61provided guidance under the previously applicable Superfund excise tax. On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. Effective July 1, 2022, as required by the Infrastructure Investment and Jobs Act (IIJA)passed last November, the Internal Revenue Service (IRS) has reinstated the Superfund Chemical Excise Tax on a wide range of chemicals and substances. Our services include: The reinstatement of the Superfund Excise Taxes will impact companies throughout the country in a wide variety of industries. See how we connect, collaborate, and drive impact across various locations. It has been almost 30 years since the Superfund excise tax was in effect. The JCT estimated that the proposal would increase revenues by approximately $38.4 billion over a 10-year period. Earlier Superfund excise taxes were 9.7 cents per barrel of crude oil or refined oil products, and a variety of excise taxes, ranging from $0.22 to $4.87 per ton on some 42 chemicals and metal compounds. Chemicals. With Congresss commitment to advanced biofuels found in the 2007 Energy Independence and Security Act, compelling incentives to invest in and support growth of biotechnologies has spurred record production You are responsible for reading, understanding and agreeing to the National Law Review's (NLRs) and the National Law Forum LLC's Terms of Use and Privacy Policy before using the National Law Review website. Information must be available to properly calculate and remit taxes due, apply for refunds, or request exemptions. How are substances added to or removed from the list of taxable substances? How does a company report the Superfund Chemical Excise Tax? A5. The Infrastructure Investment and Jobs Act, which President Biden signed into law on November 15, 2021, reinstates Superfund excise taxes on the sale and import of certain chemicals as part of the law's revenue raising provisions. To stay logged in, change your functional cookie settings. 13I.R.C. (added June 24, 2022), Q6. Prior to the expiration of the Superfund Excise Taxes, a chemical substance that was composed of at least 50% of chemicals listed in IRC section 4662 could be found to be a taxable substance. We provide an overview of the origins of the Superfund Excise Tax and take a closer look at the revitalized tax (effective July 1, 2022), as included within the Infrastructure Investment and Jobs Act (the The Infrastructure Bill), signed into law on November 15, 2021.1 Through this lens, we highlight issues to consider in evaluating the Superfund tax on chemicals and chemical substances. Effectively tracking necessary data through the supply chain may be a challenge as well. See Section 4671(b)(2). The IRS has release additional information on the Superfund Excise Taxes on Chemicals. Good News for American Businesses: H1-B Denial Rates Plummet Under USCIS Extends Comment Period for Proposed Fee Increases, OFCCP Rescinds Trump-Era Religious Exemption Rule. More information about reliance is available. Customer Reviews: Five-Star Enforcement and the Expanding Regulations. (added June 24, 2022), Q10. Often collectively referred to as the superfund taxes, Congress imposed excise taxes on domestic crude oil, imported petroleum products and identified chemicals, as well as imported substances comprised of such chemicals. What is a taxable substance? Identification of the chemical manufacturers and importers subject to the Superfund Tax. Technology/systems impacts The content and links on www.NatLawReview.comare intended for general information purposes only. customs, Benefits & Section 4671(a) imposes an excise tax on the sale or use of a taxable substance by the importer of the taxable substance. Congress set up a trust fund, or "Superfund," to clean up and mitigate environmental damage using new taxes imposed on 42 taxable chemicals that Congress identified as having the potential to cause harm upon improper handling or disposal. The Superfund tax on chemicals is also a tax on the import of taxable substances. (added June 24, 2022), Q15. Various exemptions exist for taxable chemicals. For purposes of claiming refunds under section 4662(e) for section 4661 tax paid on chemicals used in the production of an exported substance, in the case of a petition of an importer or exporter (i) that is filed and accepted by the Secretary before January 1, 2023, (ii) that seeks to add the substance to the list of taxable substances, and (iii) based on which the Secretary adds the substance to the list of taxable substances, both the filing date of the petition and the date the substance is added to the list of taxable substances will be deemed to be July 1, 2022. There are two separate Superfund chemical excise taxes: a tax on the sale or use of "taxable chemicals" under section 4661 of the Internal Revenue Code and a tax on the sale or use of imported "taxable substances" under section 4671 (all section references are to the Internal Revenue Code unless otherwise stated). Form 6627 must be filed alongside Form 720 on a quarterly basis. L. 117-58), effective July 1, 2022. Part 40regarding filing, deposits, and related procedural issues apply to companies subject to the reinstated Superfund excise taxes. The excise tax was applied to a list of 42 chemicals used predominantly in the oil, gas, and chemical industries. Part of the Tax News & Views podcast series. An official website of the United States Government. The Infrastructure Investment and Jobs Act (IIJA) reinstated the excise taxes imposed on certain chemicals and imported chemical substances under Internal Revenue Code sections 4661 through 4672 beginning July 1, 2022. Hampton Roads | This Week in 340B: February 21 27, 2023. Substances. Companies responsible for collecting and remitting the excise tax will need to identify the source system to capture the transactional and master data for applicable transactions, and assess what data elements are captured and how to obtain necessary reports to support compliance filing. 2Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), Pub. This effectively doubled the tax rate of the imported taxable substances as well, and the Infrastructure Bill further increased the alternative method of calculation of the taxable substances to 10% the value of import. Companies opting for the latter run the risk, however, of incurring penalties, should the IRS adopt a different view. 12I.R.S. Additionally, similar to what happened between 1990 and 1995 when importers and exporters petitioned the IRS to determine whether various chemical substances would qualify as taxable substances, taxpayers may again request a written determination from the IRS as to whether a product they export or import qualifies as a taxable substance, if its chemical makeup includes at least 20% of a listed taxable chemical in IRC section 4661.21 However, IRS Notice 2021-66 suspended prior guidance (IRS Notice 89-61) as to how to request this determination, and taxpayers await additional guidance from the IRS as to the procedure to do so. The "Superfund Tax" is comprised of two separate taxesone covering the sale or use of taxable chemicals "by the manufacturer, producer, or importer thereof" pursuant to 26 U.S.C. Who is responsible for reporting and paying Superfund chemical excise taxes? Expanded Employee Retention Credit (ERC) & how our professionals can assist you. Page Last Reviewed or Updated: 24-Jun-2022, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation, Electronic Federal Tax Payment System (EFTPS), Fact Sheets for Frequently Asked Questions, Q1. 117-58 (2021). California Law May Limit Hospitals Ability to Adopt The Joint Ankura CTIX FLASH Update - February 28, 2023, Ankura Cyber Threat Investigations and Expert Services. The National Law Review is not a law firm nor is www.NatLawReview.com intended to be a referral service for attorneys and/or other professionals. Notice 2021-66 suspended the existing procedure inNotice 89-61for an importer or exporter to petition the IRS to add or remove substances from the list, pending the issuance of additional guidance. Tax Principal consulting, Infrastructure Investment and Jobs Act (IIJA), passed last November, the Internal Revenue Service (IRS) has reinstated the. Augusta | Tax Partner 18I.R.S. environment open to Thomson Reuters customers only. Heres how to analyze the implications and plan now for the revitalized Superfund Excise Tax. For chemicals, the taxable event is the sale or use by the manufacturer, producer, or importer of the chemical, and the tax is due in the U.S. upon the first use or sale. Yes. For taxable chemicals, the manufacturer, producer, or importer of the taxable chemical is responsible for reporting and paying the section 4661 tax to the IRS. These FAQs were announced in IR-2022-131. Are semimonthly deposits required? The Superfund was to be financed through environmental excise taxes, including: (1) excise tax imposed on domestic crude oil; (2) excise tax imposed on imported crude oil and petroleum products; and (3) domestically produced and imported petrochemicals and inorganic chemicals. Congress directed the IRS to publish a list of additional taxable substances by January 1, 2022, which was published by the IRS via IRS Notice 2021-66.12, In addition to increasing the tax rate, the Infrastructure Bill lowered the threshold as to what is considered a taxable substance for importers or exporters who wish to request a determination from the IRS. Between 1990 and 1995, dozens of taxpayers petitioned the IRS to determine whether different chemical substances wouldqualify as taxable substances, primarily for purposes of export, so as to qualify for an exemption or refund. L. 99-499, 42 U.S.C. 429.Section 80201 of the IIJA reinstates the Superfund excise tax on certain chemical substances under Sections 4661 and 4671 of the Internal Revenue Code (Tax Code), effective July 1, 2022.Section 80201(c)(1) of the IIJA modified the method for determining . Tampa | Section 704.3. Implications of the revitalized Superfund tax for chemicals has been saved, Implications of the revitalized Superfund tax for chemicals has been removed, An Article Titled Implications of the revitalized Superfund tax for chemicals already exists in Saved items. Yes. California Assembly Bill Pushes for Womens Designated Restrooms on Mississippi Legislature Takes Up Pass-Through Entity Election FTC Signals Increased Scrutiny of Technology Sector Through Understanding the Corporate Transparency Act and Ensuring Compliance. 4662(b)(1). Companies are likely to be caught off guard by this reinstated tax. Amendments. Multiple Concussions Result in Greater Cognitive Deficits, DOL Issues Internal Guidance on Telework Under the FLSA & FMLA, USPTO Launches Cancer Moonshot Expedited Examination Pilot Program. Exporters The original Hazardous Substance Superfund trust was established to pay for the hazardous-substance cleanup program created by the Comprehensive Environmental Response Compensation, and Liability Act of 1980 (CERCLA) The IIJA reinstates the cleanup program until 2031, and the taxes collected are expected to total more than $14 billion over the next ten years. More for 11001 (2021). 22The IRS does not require that the tax be included in the total cost of the product or separately line itemed in an invoice. 4671. Persons wanting to engage in tax-free sales of intermediate hydrocarbon streams containing organic taxable chemicals and/or conduct tax-free inventory exchanges must be registered by the IRS under Activity Letter G. Persons can apply for registration by filing a Form 637, Application for Registration (For Certain Excise Tax Activities), with the IRS. Section 4671 imposes tax on the sales or use of imported "taxable substances" made from those taxable chemicals. | Privacy Policy Get the insight and tools you need to fully understand and comply with changes resulting from this major tax reform. chrigong@deloitte.com. making. There are 42 chemicals listed in section 4661(b). Prior to 1996, the rates of tax on those chemicals ranged from $0.22 per ton to $4.87 per ton. The following is an FAQ to help companies get up to speed on what the Superfund Chemical Excise Taxes will require of them. The list of 42 chemicals and their respective excise tax rates is found in Internal Revenue Code (IRC) 4661(b). Butane and methane users BIPA ALERT: Illinois Supreme Court Opens the Door to Punitive, President Biden to Nominate Julie Su as New Secretary of Labor, The European Unitary Patent: Why Retailers Should Care, New York City Employers Prepare for AI Bias Law [VIDEO], Administration's WOTUS Rule Muddies Jurisdictional Waters. The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. L. No. The IRS published IRS Notice 2021-66 on December 13, 2021, which included the list of approximately 100 taxable substances previously considered by the IRS in the early 1990s via individual IRS Notices, which will now be subject to the Superfund Excise Taxes (see Exhibit C).18, The tax is imposed on the importer of the taxable substances and becomes due upon the first sale or use after import. The tax expired under its terms in the mid-1990s but has now been reinstated. Find the tax rates for 121 taxable substances. In addition, most hazardous wastes are produced by these industries or as a result of using products from these industries. When enacted, the Superfund was financed by environmental excise taxes on certain commonly used chemicals often found at Superfund sites. Excise Tax on Chemical Sales The Superfund excise tax on chemical sales is imposed on 42 listed taxable chemicals on a per-ton basis by taxpayers that manufacture or produce a listed chemical in the United States or import it for consumption, use, or warehousing in the United States. When expanded it provides a list of search options that will switch the search inputs to match the current selection. It is unclear whether and how the statute means to differentiate a substance from an article, and if so, whether the IRS would apply the definition of article under the Toxic Substances Control Act (TSCA). A1. This tax provided a federal fund to remediate toxic spill sites when a responsible party could not be identified. Under Section 4661, an excise tax is imposed on the sale by manufacturers, producers, and importers of 42 taxable chemicals (see table below for a list of those chemicals). 4661 imposes tax on the sale or use by the manufacturer, producer, or importer of 42 listed chemicals. The excise tax collection expired in 1995 but resumed on July 1, 2022. An exporter who did not pay the initial assessment of the Superfund Tax may still be entitled to the refund if certain condition are met. Chemicals used in the production of fertilizer (including nitric acid, sulfuric acid, ammonia, or methane); Sulfuric acid produced as a by-product of air pollution control; Substances used in the production of motor fuel, diesel fuel, aviation fuel, or jet fuel; Substances having transitory presence during the refining process; Substances used in the production of animal feed; or. Specifically, the statute provides that to qualify as a taxable substance, taxable chemicals listed in IRC section 4662 must constitute more than 50 percent of the weight (or more than 50 percent of the value) of the materials used to produce such substance (determined on the basis of the predominant method of production).10. However, importers with estimated tax totals of more than $2,500 per year are required to start making bi-weekly deposits to the Superfund Tax as early as July 29, 2022. In brief. The Superfund Tax is effective as of July 1, 2022 and will remain in effect until the end of 2031. Deloitte Tax The notice also addresses registration requirements to exempt certain sales and uses of taxable chemicals from tax. L. 117-58. Form 6627 must be led alongside Form 720 on a quarterly basis. The tax law is included in the Infrastructure Investment and Jobs Act that was signed into law on November 15, 2021.
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