As this question is likely to arise in the near future when the Superfund excise tax applies, the IRS can be expected to address this aspect. accounting firms, For The Basics of Californias Outside Salesperson Exemption. services, Comprehensive Environmental Response Compensation, and Liability Act of 1980 (CERCLA). For instance, necessary data elements may not be available to properly identify the taxable chemicals and components. Alternatively, a taxpayer may base the rate for taxable substances on 10% of the value of the import.20. Draft the To Each Their Own: Agency Must Consider Experience of Each Partner in CMS Updates List of Telehealth Services for CY 2023, What You Need to Know About the New Tariffs on Imports from Russia. 20I.R.C. Effective July 1, the Infrastructure Investment and Jobs Act (IIJA) reinstated the excise taxes imposed on certain chemicals and imported chemical substances under IRC Sections 4661 through 4672 (Superfund excise taxes). 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. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. 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. Providence | 15I.R.C. 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. L. 117-58. Do Issuers Fail To File Form Ds Because They Fear Trolls? . A substance may be removed from the list of taxable substances if the Secretary determines that taxable chemicals constitute 20 percent or less of the weight and 20 percent or less of the value of the materials used to produce the substance (determined on the basis of the predominant method of production). 2022 Superfund excise taxes. The money gathered from the taxes was used to fund the clean-up of hazardous waste disposal sites across the United States. Exemptions from the application of the excise tax are listed atSection 4662(b)of the Tax Code. 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. The Superfund chemical excise taxes are reported on Form 6627, Environmental Taxes, which is attached to Form 720, Quarterly Federal Excise Tax Return. Austin | Heard on: Revenue from a new excise tax on chemicals like Benzene and Mercury would go . 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. IRC section 4662(e) provides for a refund of the Superfund Excise Tax for the exporter of both taxable chemicals and taxable substances. It has been almost 30 years since the Superfund excise tax was in effect. 4662(e). Prior to their expiration in 1995, the Superfund excise taxes were used to fund theHazardous Substance Superfund, established by theComprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). (added June 24, 2022), Q5. Form 6627 must be led alongside Form 720 on a quarterly basis. 4661 imposes tax on the sale or use by the manufacturer, producer, or importer of 42 listed chemicals. 3684 (Aug. 2, 2021). Houston | Section 4671 imposes tax on the sales or use of imported "taxable substances" made from those taxable chemicals. L. 99-499, approved Oct. 17, 1986. No. Since the Superfund excise tax expired almost three decades ago, the industrial chemical communitys familiarity with their application is attenuated at best. Cherry Bekaert LLP is a licensed CPA firm that provides attest services, and Cherry Bekaert Advisory LLC and its subsidiary entities provide tax and advisory services. Words With Friends, Part 1: Insurance Requirements and Contracts, Legislator Proposes To Expand CFL To Encompass "Commercial CERCLA PFAS Scope May Broaden To Many More PFAS, AI Avatar App is the Latest Target of BIPA Class Action Litigation. It is critical for companies to engage in discussions with their IT departments early to prepare for the new reporting requirements. The exemptions identify taxable chemicals that are exempt due to their specific use. How do I calculate the section 4661 tax? The legislation would impose an excise tax of fractions of a penny on crude oil and oil products, and between six cents and $14.30 on chemical feedstocks, while it would tax corporate income over $4.7 million at less than 1%. Reinstatement of Superfund excise taxes. management, Document . Charlotte | 10I.R.C. Deposit payments with the Electronic Federal Tax Payment System (EFTPS). 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 National Law Review is a free to use, no-log in database of legal and business articles. While the majority of the 42 listed chemicals are taxable by the manufacturer or importer upon the first sale or use, butane and methane only become taxable upon the first use other than as a fuel.23 This creates a potential liability for downstream product sales such that the first company that uses the methane or butane in a manner other than as a fuel will have to report and remit the Superfund Excise Tax. Tax is due upon the first use or first sale of a listed chemical in the United States. 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. This current iteration is set to expire on December 31, 2031. Los Angeles | technology solutions for global tax compliance and decision 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. Do not delete! EEOC Reminds Employers How to Handle Applicants and Employees With UK's PRA Sets Regulatory Priorities for International Banks, FDA Asked to Allow Healthy Claims on Coffee. Matt Levin Jul 2, 2021. (added June 24, 2022), Q4. Biobased chemicals and biofuels have taken root thanks to both popular appeal and political support. Recent FTC Enforcement Action Merits Cyber Insurance Coverage Review, Two Ways to Redefine & Achieve CRM Success. View Full Firm Disclosure. 3. Companies must report the reinstated Superfund excise taxes onForm 6627, Environmental Taxes, attached toForm 720, Quarterly Federal Excise Tax Return. Accordingly, the procedural rules in26 C.F.R. 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. (added June 24, 2022), Q8. How are substances added to or removed from the list of taxable substances? After more than 25 years, two excise taxes on chemicals and imported hazardous substances were reinstated in the Infrastructure Investment and Jobs Act (Pub. Exceptional organizations are led by a purpose. 18I.R.S. 23I.R.C. 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). Specifically, taxable substances include the 50 substances on the initial list of taxable substances in Section 4672(a)(3) and 101 taxable substances added by the IRS in December 2021, throughIRS Notice 2021-66. Arizona Gets to Keep Its State-Operated Workplace Safety and Health Manufacturers Legal Considerations for Staffing Reductions, PCAOB Enforcement Activity Up Sharply in 2022. Raleigh | (added June 24, 2022), Q13. DTTL and each of its member firms are legally separate and independent entities. What is the purpose of the Superfund Chemical Excise Taxes? However, since the IRS ruled that these substances met the definition of taxable substance, these new substances were also subject to the tax if imported by taxpayers, thereby effectively increasing the list of taxable substances of IRC section 4672. President Joe Biden called for reinstating the Superfund taxes as part of his $2 trillion infrastructure proposal . 6Id. It is not clear that that the IRS can offer any more relief to taxpayers than has already been given in Notice 2022-15. Key considerations for dealings with the reinstated Superfund Tax include: For producers, importers, exporters, and customers of businesses making and distributing identified chemicals and substances, action is needed quickly. See section 4671(b)(3). The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. Additionally, the Infrastructure Investment and Jobs Act ("IIJA") double the tax rate on chemicals or . In response to pointed public comment, on April 15, 2022, the IRS released an advance version ofNotice 2022-15, providing relief for thethirdandfourth calendar quarters of 2022, and the first calendar quarter of2023, regarding the failure to deposit penalties imposed bySection 6656of the Tax Code, as those penalties relate to the Superfund excise taxes. Service. Chemicals. 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. Taxpayers may petition the IRS to determine whether a substance falls within the taxable substances list. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor. 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. Richmond | Explore all The IRS is working on calculating tax rates for taxable substances and will release the tax rates as they become available. They're expected to generate $14.4 billion of revenue in total, or about $1.2 billion annually, the report said. | Agreed Terms of Use 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. The rates will be included in the instructions to Form 6627, Environmental Taxes, and under Recent Developments for Form 6627, Environmental Taxes. 4672(a)(2)(B)(1995). Some deposit amount is still required by July 29 to satisfy the relief provisions set out in Notice 2022-15. Superfund tax on chemicals. The taxes, which should go in effect on 1 July 2022, are estimated to raise approximately $14.45bn over a 10-year period The Reinstated Superfund Excise Taxes. 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. 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. 429 (2021)), effective July 1, 2022, with modifications to the applicable rates of tax and other provisions related to those taxes. Thomson Reuters/Tax & Accounting. Deloittte Tax 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. Deloitte Tax Your comprehensive guide to the Act's many changes to the Internal Revenue Code, and their implications for businesses and individuals. See Notice 2021-66, 2021-52 I.R.B. 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. Fast forward to today. 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. Activity letter G is reinstated for persons making inventory exchanges of taxable chemicals under section 4662(c)(2), or persons selling or buying intermediate . (a) General rule There is hereby imposed a tax on any taxable chemical sold by the manufacturer, producer, or importer thereof. A Superfund excise tax on chemicals has been signed into law and went into effect on July 1, 2022. 117-58 (2021). Please see www.deloitte.com/about to learn more about our global network of member firms. How do I calculate the section 4671 tax? The excise taxes are effective July 1, 2022. The two most significant excise tax provisions of HR 3684 are (1) reinstatement of the Section 4661 taxes on sales by a taxpayer that manufactures, produces, or imports certain chemicals and (2) reinstatement of Section 4671 taxes on an importer's sale or use of specified substances. . 3S. 4672(b)(1). 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. Helping businesses navigate financial due diligence engagements and domestic and cross-border transactions. South Florida | Tax Partner The taxes are set to be reinstated beginning on July 1, 2022. management, More for accounting What do companies need to do in order to prepare for these taxes? Hydrocarbon streams containing mixtures of organic taxable chemicals. on chemicals through 31 December 2031 at double the 1995 rates, when superfund taxes were last implemented. This box/component contains JavaScript that is needed on this page. The New York City Council Sets its Sights on Non-Profit Housing DOJ Announces New Voluntary Self-Disclosure Policy for U.S. Attorney Supreme Court: Salary, Not Daily Pay, Required for FLSA Overtime Time Is Money: A Quick Wage-Hour Tip on the Tip Credit, EDPB issues its Opinion on the EU-U.S. Data Privacy Framework, Hunton Andrews Kurths Privacy and Cybersecurity. What is a taxable chemical? This Week in 340B: February 21 27, 2023. chrigong@deloitte.com. Yes. Taxpayers should be proactive and carefully analyze and consider the potential tax liabilities, tax reporting requirements, and systems impacts as a result. 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). On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. Notice 89-61provided guidance under the previously applicable Superfund excise tax. Taxable substances are those that contain 20% or more by weight or value of one of the 42 chemicals listed in IRC 4661(b). First Offshore Wind Energy Lease Sales in the Gulf of Mexico, Telephone and Texting Compliance News: Litigation Update February 2023. Consider the action items above, particularly the last one, making sure the information systems are in place to capture the data needed to comply with this tax. The notice also addresses registration requirements to exempt certain sales and uses of taxable chemicals from tax. The applicable tax for a hazardous substance depends on its chemical composition. L. 96- 510, 42 U.S.C. 4672(a)(2)(B)(2021). Among the many provisions in that legislation . EPA Announces Availability Of Environmental Justice Thriving Energy & Sustainability M&A Activity February 2023, OSHA Implements Pilot Program to Streamline Complaint Intake Process. (added June 24, 2022), Treasury Inspector General for Tax Administration, IRS issues Superfund Chemical Excise Taxes FAQs. A4. The Carter administration established the Superfund in 1980 to offset the high price tags associated with remediating uncontrolled or abandoned hazardous waste sites. 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. The excise tax collection expired in 1995 but resumed on July 1, 2022. (added June 24, 2022), Q3. 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. A substance may be removed from the list of taxable substances if the Secretary determines that taxable chemicals constitute 20 percent or less of the weight and 20 percent or less of the value of the materials used to produce the substance . Additionally, Form 6627, Environmental Taxes, was previously used to report the Superfund Excise Taxes when the taxes were last in effect, and this form will be used again to report the taxes owed. The Superfund Amendments and Reauthorization Act of 1986 was enacted as Pub. 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). 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. Analyzing Superfund Excise Tax calculations and reporting requirements based on a companys unique business scenario. 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 inaugural reporting for companies required to report Superfund excise taxes is on their third-quarter 2022 Form 720, due to be submitted byOctober 21, 2022. brands, Social Many in the industrial chemical community are unfamiliar with the Superfund excise tax legacy, and the IRS is seemingly unprepared for the learning curve challenge the reactivation of the tax has created. For hazardous substances, the taxable event is the importation of the substance by an importer, and the tax is due upon the first sale or use after the substance is imported. Sitemap See also section 4661(b) for the tax rate for taxable chemicals. The Superfund excise taxes are set to expire at the end of 2031. Is the rate different for taxable substances? accounting, Firm & workflow Nothing in the statute or in Notice 2021-66, for example, references manufactured items in the context of taxable substances. 4671. Section 80201 of the IIJA reinstates the Superfund excise tax on certain chemical substances under Sections4661and4671of the Internal Revenue Code (Tax Code), effectiveJuly 1, 2022. Companies with a large volume of transactions should consider automating their tax calculation and reporting processes to increase efficiency and accuracy. For taxable substances, the importer of the taxable substance is responsible for reporting and paying the section 4671 tax to the IRS. The Superfund chemical excise taxes previously expired on December 31, 1995. Who is responsible for reporting and paying Superfund chemical excise taxes? See questions 4-5 for more information on taxable substances and questions 7-9 for more information on calculating the tax imposed by section 4671 (section 4671 tax). When people refer to Superfund taxes, they're generally referring to excise taxes that are imposed on taxable chemicals listed under section 4661 and then taxable substances that are. Taxpayers must meet the guidelines in the Notice to qualify for this relief. 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 tax expired under its terms in the mid-1990s but has now been reinstated. 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). See Section 4671(b)(2). The taxes had previously expired on Dec. 31, 1995, but were reinstated as part of the infrastructure legislation signed by President Biden in November 2021. . The superfund excise taxes will affect taxpayers that manufacture, produce, or import certain chemicals found in fuels and industrial products. Many entities are struggling with its application. L. No. 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). Accordingly, a manufacturer, producer, or importer of a taxable chemical is subject to the section 4661 tax on the sale or use of the taxable chemical on or after July 1, 2022. The statute provides an initial list of 50 taxable substances and instructs the IRS to add any substance in which taxable chemicals constitute more than 20% of the weight or value. Analyzing transactional and master data gaps given existing company system capability and data quality. Labor Board Flip-Flops Again on Severance FRB Governor Bowman Speaks on Bank Regulation and Supervision. In Notice 2021-66 (released December 14, 2021), the IRS provided guidance on Superfund excise taxes, which are reinstated as of July 1, 2022, under the Infrastructure Investment and Jobs Act (IIJA) (see Tax Alert 2021-2059).. Notice 2021-66 does the following: Updates the list of taxable substances under IRC Section 4672(a), which had 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. White House Reviewing Proposed Regulations on Reinstated Superfund You Dont Need a Machine to Predict What the FTC Might Do About Is It Compensable? 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. 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. 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. Expanded Employee Retention Credit (ERC) & how our professionals can assist you. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. *Note: Self-assessing based on 10% of appraisal value will almost always yield a higher tax rate than either of the other methods. Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. 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), News Releases for Frequently Asked Questions, Recent Developments for Form 6627, Environmental Taxes, Treasury Inspector General for Tax Administration, synthetic linear fatty alcohol ethoxylates, IRS issues Superfund chemical excise tax rates. Is there a way to check the status of an application for Activity Letter G registration? Attorney Advertising Notice: Prior results do not guarantee a similar outcome. 13I.R.C. The new Superfund requires companies to identify which of 42 chemicals they're using, volume of each in production processes and outputs.