Boston | 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. 4671. The excise tax applies to companies that manufacture, produce, or import any of the 42 specific chemicals listed inSection 4661of the Tax Code, most of them common in consumer products, including ammonia, butane, benzene, and mercury. This Week in 340B: February 21 27, 2023. How Modern Manufacturing Plants Can Protect Against Ransomware, FTC Will Host May 23, 2023, Workshop on Recyclable Claims and the Appellate Court Affirmed An Order Denying A Beneficiarys Request For An Overview of Why Class Action Privacy Lawsuits May Have Just Gotten Gold Dome Report Legislative Day 26 (2023). industry questions. The relevance of this guidance to the new tax is unclear. A14. The Reinstated Superfund Excise Tax for Chemicals and Imported Substances As of July 1, 2022, The Infrastructure Investment and Jobs Act (IIJA) has reinstated excise taxes imposed on certain chemicals and imported chemical substances. Strictly Confidential? Yes. 901, for the initial list of substances that the Secretary has added to the list of taxable substances. If the importer does not calculate the section 4671 tax for a taxable substance and the IRS has not prescribed a tax rate for the taxable substance, then the amount of tax is 10 percent of the appraised value of the taxable substance as of the time the taxable substance was entered into the United States for consumption, use, or warehousing. customs, Benefits & As part of the recently unveiled infrastructure deal, the Biden administration announced plans to reinstate the Superfund taxes on chemical manufacturers in the United States. discount pricing. The amount of the section 4671 tax with respect to any taxable substance is generally the amount of section 4661 tax that would have been imposed on the taxable chemicals used in the manufacture or production of the taxable substance if the taxable chemicals had been sold in the United States for use in the manufacture or production of the taxable substance. Integrated software Unlike the static list of 42 taxable chemicals, the taxable substance list is subject to change. Under the new law, the excise tax applies to the use, sale, or import of 42 taxable chemicals and 151 hazardous substances. The IRS has issued lists for both the chemicals and substances included (under Section 4661 and 4671 of the Internal Revenue Code, respectively), but has cautioned importers that items on the list could change as chemicals or substances are either added or removed from the list over time. The taxes apply only to imported chemicals or substances, not those for export. Tax Partner 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). 11Infrastructure Investment and Jobs Act, Pub. 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. Heard on: Revenue from a new excise tax on chemicals like Benzene and Mercury would go . Part of the Tax News & Views podcast series. Certain non-fuel and agricultural uses of some of these chemicals were exempted from the excise tax. automatically and accurately calculating the amount of excise tax owed. L. 99-499, approved Oct. 17, 1986. Complete Analysis of the Tax Cuts and Jobs Act, The future of Indirect Tax (IDT): How to take charge of change, How to overcome the most common challenges of tax engine implementation, The Tax Technology Transformation: Getting Started. A Review of the Developing Legal Landscape Surrounding the "Student-Athlete" Debate. accounting firms, For Tax Principal Companies with a large volume of transactions should consider automating their tax calculation and reporting processes to increase efficiency and accuracy. The Final CCPA Regulations: What You Need To Know, Are College Athletes Students or Employees? Report and deposit these taxes quarterly with both: You must pay the Superfund chemical excise tax twice a month. Various exemptions exist for taxable chemicals, including: Additionally, the export of taxable chemicals is eligible for a refund of any tax paid on the chemical.16, The IRS published proposed Treasury Regulations in 1983 specific to the taxable chemicals to further detail the methods of reporting the tax, as well as provide more detail on all the provisions concerning the tax.17. This current iteration is set to expire on December 31, 2031. Breaking the Link New Developments on U.S. DeloitteTax The IIJA also reinstated the Superfund excise tax on the import for sale or use of any taxable substance underSection 4671of the Tax Code. The Basics of Californias Outside Salesperson Exemption. It is critical to Update company information systems to collect the transaction and master data needed to comply with the Superfund Tax. 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. The IRS is expected to issue guidance prior to theJuly 1, 2022, effective date of the Superfund excise taxes. In Notice 2021-66 the IRS published a list of 100 additional substances subject to the Superfund Tax. In November 2021, President Biden signed the Infrastructure Investment and Jobs Act. governments, Explore our EC Appeals European General Court Decision Annulling the Harmonized Weekly Bankruptcy Alert February 28, 2023. As discussed above, the list of taxable substances was incorporated into the IRC as a result of SARA, effective in 1989. IRC section 4662 directs the IRS to release guidance as to the appropriate manner of reporting exempt sales or claiming refunds. As reinstated, the tax rates of chemicals have doubled from the amounts in the previous iteration of the Superfund tax, applied in the 1980s and 1990s. 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). The 2022 law revived a tax that previously expired in 1995, the Hazardous Substance Superfund tax rate. Will the U.S. Supreme Court Make Marijuana Legal? 12I.R.S. 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. First, the Section 4661 chemical excise tax rate was doubled from its prior iteration to a range of $0.44 per ton up to $9.74, depending on how a chemical (from a list of 42) is sold or used. 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. When enacted, the Superfund was financed by environmental excise taxes on certain commonly used chemicals often found at Superfund sites. See Notice 2021-66, 2021-52 I.R.B. L. 117-58. As soon as possible, companies that import any of the taxable chemicals or substances on the IRSs list need to conduct a thorough assessment of their manufacturing processes to find out when, where, and how the Superfund Chemical Excise Tax might apply. A cloud-based tax 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. (All oil and almost all hazardous substances are products of the oil industry, chemical and allied industries, and heavy metals industries. These taxes were in place until 1995 to fund the Federal Hazardous Substance Superfund, but expired in 1995. Superfund Chemical Excise Taxes are reported on Form 6627 (Environmental Taxes), which attaches to Form 720 (Quarterly Federal Excise Tax Return). FAQs Waters of the United States and Winston Churchill. . 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. Raleigh | 19I.R.C. In fact, companies that export products comprised of taxable chemicals or substances are entitled to a refund if they paid prior to manufacturing. (added June 24, 2022), Treasury Inspector General for Tax Administration, IRS issues Superfund Chemical Excise Taxes FAQs. The Leaking Underground Storage Tank (LUST) Fund adds an additional $0.001/gal federal fee. When the Superfund tax was last applied back in 1995, a taxable substance was required to have 50% of a chemical. 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. services, Comprehensive Environmental Response Compensation, and Liability Act of 1980 (CERCLA). 20I.R.C. A semimonthly period is the first fifteen (15) days of a calendar month or the portion of a calendar month following the 15th day of the month. corporations. management, Document A taxable substance is any substance that, at the time of sale or use by the importer of the substance, is listed as a taxable substance. For instance, necessary data elements may not be available to properly identify the taxable chemicals and components. Even companies that have been on the market for decades may not have many employees who were around when the previous excise tax applied. When do the Superfund chemical excise taxes go into effect? The Revenue Reconciliation Act of 1990 further extended the Superfund Excise Taxes through December 31, 1995, after which point the Superfund Excise Taxes expired. See question 3 for more information on taxable chemicals and question 6 for more information on calculating the tax imposed by section 4661 (section 4661 tax). 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. South Florida | A13. Orlando | Connect with other professionals in a trusted, secure, A12. 4672(b)(1). 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. 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. 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. How do I calculate the section 4671 tax? 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. Updated procedural guidance on how to request the determination has not yet been published by the IRS as of the date of this article. The applicable tax for a hazardous substance depends on its chemical composition. The specified. Assisting with filing the federal excise tax returns and semi-monthly deposit reporting. (added June 24, 2022), Q14. Semi-monthly deposits are required, however. The tax law is included in the Infrastructure Investment and Jobs Act that was signed into law on November 15, 2021. The taxes are set to be reinstated beginning on July 1, 2022. 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. . Deloitte Tax Exemptions are available for some exported taxable chemicals and substances, as well as for chemicals/substances used in certain kinds of fertilizer, animal feed, and fuel. The Infrastructure Bill lowered this threshold to 20%. Notice 89-61provided guidance under the previously applicable Superfund excise tax. 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. 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. 18I.R.S. Heavy metals, halogens, acids, and bases are significant raw materials for many toxic inorganics.) All organic chemicals are derived from petrochemical feedstocks. For exporters, IRC 4662(e) provides for a refund of the Superfund Tax for both taxable chemicals and taxable substances that are exported. Yes. This assessment should include a review of the transaction life cycle, master data setup, cost computation and recognition, and general entry posting. 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. Frequently Asked Questions: Superfund Chemical Excise Taxes. 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. A10. At what point in a transaction do the new taxes kick in? 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. Additionally, the Infrastructure Investment and Jobs Act ("IIJA") double the tax rate on chemicals or . 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. 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. research, news, insight, productivity tools, and more. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Try our solution finder tool for a tailored set 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. How are the Superfund chemical excise taxes reported? Do Issuers Fail To File Form Ds Because They Fear Trolls? 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