Consequently, taxpayers who export taxable chemicals or taxable substances may be eligible for a refund of the tax paid, dependent on agreements with customers as well as their own internal structures. Cherry Bekaert: Tax, Audit and Advisory Services, Superfund Excise Taxes on Chemicals and Substances: How to Prepare, Maximize the Supply Chain Revolution Panel Discussion, 2023 Legislative Landscape: Expanding Opportunities for Manufacturers, The U.S. and Global Economic Manufacturing Outlook for 2023, Private Equity Industry Report: 2022 Trends and 2023 Outlook, Cybersecurity Maturity Model Certification, Business Intelligence and Data Analytics Services, Digital Strategy & Transformation Services, Government Contractor Consulting Services, SBA 8(a) Business Development Program Consulting Services, Information Technology Audit & Consulting, Cybersecurity Maturity Model Certification (CMMC), Outsourced Sales Tax Compliance and Managed Services, IRS issues Superfund Chemical Excise Tax Rates, IRS issues Superfund Chemical Excise Taxes FAQs, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. Therefore, a chemical substance could qualify as a taxable substance if taxable chemicals listed in IRC section 4662 constitute more than 20 percent of the weight (or more than 20 percent of the value) of the materials used to produce such substance.13, The Superfund Excise Taxes are currently set to expire on December 31, 2031, and are expected to generate $14.4 billion of revenue (or approximately $1.2 billion annually).14, IRC section 4661(b) lists 42 chemicals, identified in Exhibit A. The excise tax was applied to a list of 42 chemicals used predominantly in the oil, gas, and chemical industries. A substance is listed as a taxable substance if it is listed under section 4672(a)(3), or if the Secretary of the Treasury or her delegate (Secretary) has added it to the list of taxable substances pursuant to section 4672(a)(2) or (4). The original excise tax expired on December 31, 1995. In our experience, it generally takes at least three months to fully implement and test a new business process and system implementation. Assisting with development and implementation of technology solutions to enable identification of taxable chemicals and substances, as well as exemptions. 12I.R.S. US Executive Branch Update February 28, 2023. The specified. 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). First Offshore Wind Energy Lease Sales in the Gulf of Mexico, Telephone and Texting Compliance News: Litigation Update February 2023. Part of the Tax News & Views podcast series. Thomson Reuters/Tax & Accounting. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Desperate Times, Desperate Measuring Cups FTC Brings Enforcement Trending in Telehealth: February 20 26, 2023, IRS Sets Deadline For Using 401(K) Plan Forfeitures, How Generative AI Generates Legal Issues in the Games Industry, DOJ Announces New Nationwide Voluntary Self-Disclosure Policy. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. It is important for companies to engage in early conversations with procurement, contracting, IT, and other internal departments to identify and assess their exposure and potential gaps in data gathering. How do I calculate the section 4661 tax? The following is an FAQ to help companies get up to speed on what the Superfund Chemical Excise Taxes will require of them. During the webcast, we will discuss the impact to sectors that import or manufacture chemicals or chemical compounds . Some highlights on the petroleum products tax are as follows: Imposition of the Tax The Infrastructure Investment and Jobs Act, signed at the end of 2021, reinstates the Superfund chemical excise taxes under Sections 4661 and 4671 of the Internal Revenue Code. Exemptions from the application of the excise tax are listed atSection 4662(b)of the Tax Code. The consumer and political goals of reducing Americas dependence on foreign oil, enhancing national security, and greening the economy converge in biobased chemicals and advanced biofuels, the promising technology of producing commercial chemicals and fuels from renewable resources. The first return, for the calendar quarter ending on September 30, 2022, is due by October 31, 2022. The Leaking Underground Storage Tank (LUST) Fund adds an additional $0.001/gal federal fee. The term "ton" is. For exporters, IRC 4662(e) provides for a refund of the Superfund Tax for both taxable chemicals and taxable substances that are exported. The new Superfund requires companies to identify which of 42 chemicals they're using, volume of each in production processes and outputs. See section 4671(b)(1). The applicable tax for a hazardous substance depends on its chemical composition. Assisting with filing refund claims and reporting requirements around exemption certificates. On November 15, 2021, President Biden signed into law theInfrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. How are the Superfund chemical excise taxes reported? Proposed Nursing Home Disclosure Requirements Target Private Equity Regulation in the Post-FTX Environment: SECs Proposed Enhanced Can a Child Decide Whom They Want to Live With in Michigan? These taxes have not been in effect since 1995, so companies that havent had to deal with them for the past 27 years are now scrambling to understand the complexities and requirements of this new iteration of the law. Instead, Section 4671(b) provides that the amount of tax imposed with respect to any taxable substance is equal to the amount of tax that would have been imposed by Section 4661 on the taxable chemicals used as materials in the manufacture of the taxable substance, if such taxable chemicals had been sold in the United States for use in the manufacture or production of the taxable substance. 4672(a)(2)(B)(1995). How do you calculate the Superfund Excise Tax? The Final CCPA Regulations: What You Need To Know, Are College Athletes Students or Employees? The Infrastructure Act essentially doubles these rates with taxes ranging from $0.44 per ton to $9.74 per ton. discount pricing. Does the Supreme Court have the stomach to tackle the super fun SECs Pay vs. These taxes have not been in effect since 1995, so companies that havent had to deal with them for the past 27 years are now scrambling to understand the complexities and requirements of this new iteration of the law. The term " Superfund " refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. The Infrastructure Bill lowered this threshold to 20%. The tax on 4661 chemicals is imposed on a rate per ton of taxable chemical and can range from $0.44 to $9.74 per ton. Under what circumstances is registration required? The tax may be passed along to customers. industry questions. The excise taxes are effective July 1, 2022. 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. What is the purpose of the Superfund Chemical Excise Taxes? It is not clear that that the IRS can offer any more relief to taxpayers than has already been given in Notice 2022-15. 13I.R.C. financial reporting, Global trade & Augusta | Reporting . This could create a potential liability for downstream users such that the rst company that uses the methane or butane in a manner other than as a fuel will have to report and remit the Superfund Tax. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. 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. (added June 24, 2022), Q7. IRC section 4672 additionally directed importers and exporters to request a determination from the IRS as to whether a specific unlisted chemical substance should be included in the list of taxable substances. Companies with large volumes of transactions should consider automating their tax calculation and reporting processes. Reinstatement of Superfund excise taxes. Heard on: Revenue from a new excise tax on chemicals like Benzene and Mercury would go . media, Press The Superfund chemical taxes will be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes. The Infrastructure Bill lowers the thresholdfor a chemical substance to meet the definition of taxable substance, thus more imports may be subject to this tax. Find the tax rates for 121 taxable substances. L. 99-499, 42 U.S.C. Even companies that have been on the market for decades may not have many employees who were around when the previous excise tax applied. ADVANCED! Please see links for details: Learn more about Superfund Excise Tax changes effective July 1, 2022, including key considerations for dealings with the reinstated Superfund Tax on chemicals and substances. Richmond | 23I.R.C. Accordingly, the chemicals are taxed upon the first sale or use after import or manufacture in the United States, and the importer or manufacturer is liable for the excise tax, which it may pass along to its customers.22. The IIJA reinstates the two taxes with several modifications. Taxable substances are defined inSection 4672as any substance that, at the time of sale or use by the importer, is listed as a taxable substance. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. tax, Accounting & Tax Senior Manager Nota Bene Episode 160: European Update: Oliver Heinisch and Scott Federal Communications Commission to Consider Rules and Proposals to Whats the Standard? Superfund Chemical Excise Taxes are reported on Form 6627 (Environmental Taxes), which attaches to Form 720 (Quarterly Federal Excise Tax Return). Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The Infrastructure Bill reinstated the Superfund Excise Taxes on chemicals and taxable substances, effective July 1, 2022.11 In addition to the reinstatement of the taxes, the Infrastructure Bill doubled the prior rate of tax on the 42 listed chemicals. The taxes apply only to imported chemicals or substances, not those for export. Assisting with risk analyses and internal processes (design or documentation). 11001 (2021). 2Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), Pub. Superfund Chemical Excise Taxes are reported on Form 6627 (Environmental Taxes), which attaches to Form 720 (Quarterly Federal Excise Tax Return). Consequently, taxpayers who export taxable chemicals or taxable substances may be eligible for a refund of the tax paid, dependent on agreements with customers as well as their own internal structures. Its also important to understand the tax calculation and reporting requirements and to align with other business functions to implement a process to meet data, process, and system requirements. Form 6627 must be led alongside Form 720 on a quarterly basis. As part of the Infrastructure Investment and Jobs Act signed into law November 15, 2021, the Superfund Excise Taxes go into effect July 1, 2022. The IRS is expected to issue guidance prior to theJuly 1, 2022, effective date of the Superfund excise taxes. governments, Explore our IRS issues Superfund chemical excise tax rates IR-2022-132, June 24, 2022 WASHINGTON The Internal Revenue Service announced today that it has prescribed tax rates for 121 taxable substances that are subject to the Superfund chemical excise tax imposed by section 4671 (a) of the Internal Revenue Code (Code). The $1.2 trillion infrastructure bill making its way through the Senate contains a $14.55 billion tax hike on American chemical and mineral producers. Audit & Get the insight and tools you need to fully understand and comply with changes resulting from this major tax reform. Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. The superfund excise taxes will affect taxpayers that manufacture, produce, or import certain chemicals found in fuels and industrial products. 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). For example, butane and methane are exempt if they are being used as fuel, but NOT if they are being used for some other purpose. Calculate the rate based on the percentage amount of each listed chemical included in the substance. Taxpayers may petition the IRS to determine whether a substance falls within the taxable substances list. 117-58 (2021). What is a taxable chemical? Cherry Bekaert LLP and Cherry Bekaert Advisory LLC practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Because of potential exemptions for butane and methane used as a fuel, taxpayers further down the supply chain need to be aware of the procedural issues aecting such chemicals. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor. The 2022 law revived a tax that previously expired in 1995, the Hazardous Substance Superfund tax rate. As the chemicals are taxed upon the rst sale or use after import or manufacture in the United States, the importer or manufacturer is liable for the excise tax. Treas. What are the Superfund chemical excise taxes? Chemical tax to clean up toxic sites gets new life as part of infrastructure deal. Will the U.S. Supreme Court Make Marijuana Legal? Tax Senior Manager (added June 24, 2022), Q9. 4672(a)(2)(B)(2021). Section 4662(c)(2) provides an additional exemption from tax liability where a company imports a taxable chemical and exchanges that chemical as part of an inventory exchange with another person. Hydrocarbon streams containing mixtures of organic taxable chemicals. See also section 4661(b) for the tax rate for taxable chemicals. More information on the procedures for petitioning the Secretary to add or remove substances from the list of taxable substances will be released in advance of July 1, 2022. 4662(e). environment open to Thomson Reuters customers only. Are semimonthly deposits required? The chemicals Superfund tax was initially enacted in 1980 as a response to high-profile environmental disasters relating to hazardous waste. First, a substance can be added to the list of taxable substances by the Secretary, in consultation with the Administrator of the Environmental Protection Agency and the Commissioner of U.S. Customs and Border Protection, if the Secretary determines that taxable chemicals constitute more than 20 percent of the weight (or more than 20 percent of the value) of the materials used to produce the substance (determined on the basis of the predominant method of production). A taxable substance is defined as a substance that contains 20% or more by weight or value of any one of the chemicals listed in Section 4661 (down from 50% in the previous iteration of the law). (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. FAQs Due to the complicated nature of the Superfund Excise Tax and the granularity of the tax rate structure, gaps in existing systems and processes may exist. Sitemap 52.4661-1 4662-4, 48 Fed. Substances. 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. Manufacturers, producers, or importers that sell or use any of these chemicals must pay a tax of $0.22 to $4.87 per ton, depending on the chemical. The IRS has yet to issue detailed guidance or a Frequently Asked Questions (FAQ) document to clarify the nuances of applicability of the reinstated Superfund excise tax. Companies with a large volume of transactions should consider automating their tax calculation and reporting processes to increase efficiency and accuracy. sarsmith@deloitte.com, Frank Falvo July 1, 2022. These substances consist generally or partially of chemicals listed in Section 4661. Analyzing transactional and master data gaps given existing company system capability and data quality. This Superfund Tax is assessed only on importers of taxable substances and is due upon the first sale or the first use after import into the United States. Cherry Bekaert Advisory LLC and its subsidiary entities are not licensed CPA firms. A7. The information here is by no means comprehensive, but it does provide a basic understanding of the law and its implications for affected companies. The term substance, therefore, excluded fabricated products that are molded, formed, woven, or otherwise finished into end-use products. Challenges to the No Surprises Act Continue: The Latest includes a Navigating Permissive State Laws in Light of the Federal Information FDA Publishes List of 2023 Priority Guidance Topics. accounting, Firm & workflow No. 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. See how we connect, collaborate, and drive impact across various locations. Along with the quarterly reporting requirements, taxpayers with a quarterly liability greater than $2,500 will be required to make semi-monthly tax deposits of the Superfund Excise Taxes. Is there a way to check the status of an application for Activity Letter G registration? Superfund Chemical Excise Taxes Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. Since the Superfund excise tax expired almost three decades ago, the industrial chemical communitys familiarity with their application is attenuated at best. They were reinstated by section 80201(c)(3) of the Infrastructure Investment and Jobs Act (Public Law 117-58, 135 Stat. of products and services. The intent of the Superfund Excise Taxes is to target the chemicals primarily found in hazardous waste sites and to tax the chemicals at the earliest point possible in the process. IT'S HAPPENING! Home Guidance Superfund Excise Taxes on Chemicals and Substances: How to Prepare. A3. *Note: Self-assessing based on 10% of appraisal value will almost always yield a higher tax rate than either of the other methods. Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. This memorandum explains why. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. Taxpayers with a quarterly liability greater than $2,500 will be required to make semi-monthly tax deposits of the tax. Due to the complicated nature of the tax assessments, and the detailed information required, gaps in existing systems and processes may exist. Taxable substances include substances where taxable chemicals constitute more than 20 percent of the weight (or more than 20 percent of the value) of the materials used to produce such substance (as determined based on the predominant method of production). 1043, provides transitional relief for the third and fourth calendar quarters of 2022, and the first calendar quarter of 2023, regarding the failure to deposit penalties imposed by section 6656 for failures to deposit Superfund chemical excise taxes through March 31, 2023. 1Investment and Jobs Act, Pub. The relevance of this guidance to the new tax is unclear. Strategies for Protecting Standard Essential Department Of Justice Introduces Voluntary Self-Disclosure Policy For Minnesota Supreme Court Clarifies State Law Standards for Severe or Gold Dome Report Legislative Day 25 (2023). The Superfund Tax rate for chemicals range from $048 per ton for nitric acid to $9.74 per ton for Benzene. The Superfund Chemical Excise Tax was created in 1980 through the Comprehensive Environment Response, Compensation, and Liability Act. No. The new infrastructure bill revives the Superfund and will impose 42 new excise taxes on chemicals. Confidentiality and Non-Disparagement Agreements with Non-Supervisory USCIS Confirms It Will Accept Employment-Based I-485 Applications New Jersey Enacts Bill of Rights for Temporary Workers, DOJ Implements Nationwide Voluntary Self-Disclosure Program. 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. How do I calculate the section 4671 tax? On Aug. 16, 2022, the Inflation Reduction Act (IRA) reinstated a third excise tax, the Hazardous Substance Superfund Financing Tax Rate on Crude Oil and Petroleum Products. Updated procedural guidance on how to request the determination has not yet been published by the IRS as of the date of this article. On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. On Dec. 14, 2021, the IRS issued Notice 2021-66, which provides guidance on implementing the reinstated Superfund excise taxes, and followed up on June 24, 2022, with an FAQ . L. 96- 510, 42 U.S.C. Many entities are struggling with its application. 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. 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. Contact an attorney or other suitable professional advisor on September 30, 2022 ), Q7 even companies have. Be led alongside form 720 on a quarterly basis make semi-monthly tax of. 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