Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Superfund Chemical Excise Taxes Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. 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. US Executive Branch Update February 28, 2023. 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. In fact, companies that export products comprised of taxable chemicals or substances are entitled to a refund if they paid prior to manufacturing. making. Yes. 52.4661-1 4662-4, 48 Fed. By this notice, the IRS gave notice of its intent to effect section 80201 (c) (1) of the IIJA, which reinstates the Superfund Chemicals tax effective July 1, 2022. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) established the Hazardous Substance Response Trust Fund (the Superfund), which was to be administered by the Environmental Protection Agency (EPA).2 CERCLA imposed liability for the cleanup of hazardous waste sites on the owners and operators of these sites. (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. Yes. 2023. 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. 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. chrigong@deloitte.com. 13I.R.C. Pending further guidance, the previously published tax rates, adjusted for the IIJA increases, and the examples outlined in Notice 89-61 could be helpful in calculating the tax on taxable substances and the potential tax exposure if a substance is subsequently added to the list. 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. 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 . This current iteration is set to expire on December 31, 2031. 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. media, Press If you would ike to contact us via email please click here. 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. 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. . US Executive Branch Update February 27, 2023. 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). The Chemicals Superfund Tax and the Hazardous Substances Tax took effect on July 1, 2022 with a ten-year effective . L. 99-499, approved Oct. 17, 1986. A13. 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. Exceptional organizations are led by a purpose. 22The IRS does not require that the tax be included in the total cost of the product or separately line itemed in an invoice. Abusive Arbitrage Devices Its Time to Get Reacquainted (Episode 2 B&C Biobased and Sustainable Chemicals Practice Group Bergeson & Campbell, P.C. 5Id. corporations, For 901, for the initial list of substances that the Secretary has added to the list of taxable substances. 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. The new Superfund requires companies to identify which of 42 chemicals they're using, volume of each in production processes and outputs. For taxable substances, the importer of the taxable substance is responsible for reporting and paying the section 4671 tax to the IRS. The Superfund tax on chemicals is also a tax on the import of taxable substances. 48839 (Oct. 21, 1983). This button displays the currently selected search type. The first return, for the. Fast forward to today. This memorandum explains why. The relevance of this guidance to the new tax is unclear. Nashville | 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. 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. Due to the complicated nature of the tax assessments, and the detailed information required, gaps in existing systems and processes may exist. 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. 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 excise tax collection expired in 1995 but resumed on July 1, 2022. The rates are listed in IRS release IR-2022-133 (June 24, 2022). Accordingly, the procedural rules in26 C.F.R. 4661 and the other applying solely to "any taxable substance sold or used" by importers pursuant to 26 U.S.C. 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. Importers Social login not available on Microsoft Edge browser at this time. When the IIJA reinstated these two taxes, it doubled the previous rates. To accomplish this, the current system capability should be assessed. 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. tax, Accounting & 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. As defined, the taxable substances appear to stop short of what would be defined as an article according to40 C.F.R. Biobased chemicals and biofuels have taken root thanks to both popular appeal and political support. There are other exemptions as welle.g., for substances that have a transitory presence during the smelting or refining process, or substances derived from coalbut the IRS has yet to issue specific guidance on procedures for claiming these exemptions, so the best recourse available at the moment is to keep documentation that supports the companys intention to take advantage of applicable exemptions. Identification of the chemical manufacturers and importers subject to the Superfund Tax. There are two ways a substance can be added to or removed from the list of taxable substances pursuant to section 4672(a)(2) and (4). 2022 Superfund excise taxes. This law levies taxes on the manufacture, production, or importation of 42 specific chemicals and another 121 chemical substances. Assisting with filing the federal excise tax returns and semi-monthly deposit reporting. See section 4671(b)(1). Raleigh | When the Superfund tax was last applied back in 1995, a taxable substance was required to have 50% of a chemical. Waters of the United States and Winston Churchill. ADVANCED! The term " Superfund " refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. The Superfund tax rate will now be adjusted annually to . There are two separate Superfund chemical excise taxes: a tax imposed on the sale or use by the manufacturer or importer of "taxable chemicals" listed in section 4661, and a tax on the sale or use by the importer of "taxable substances" listed in section 4672 and IRS Notice 2021-66. 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. When is the first return due? The Superfund Excise Tax is not permanent and . Licenses for Exports to Are You Ready for the UPC? 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 Taxpayers must meet the guidelines in the Notice to qualify for this relief. The Superfund is a federal excise tax on various hazardous chemicals. (added June 24, 2022), Q14. The applicable tax for a hazardous substance depends on its chemical composition. 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. 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. 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. Yes. Heard on: Revenue from a new excise tax on chemicals like Benzene and Mercury would go . 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? Atlanta | The information here is by no means comprehensive, but it does provide a basic understanding of the law and its implications for affected companies. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor. 429. The Basics of Californias Outside Salesperson Exemption. The chemicals Superfund tax was initially enacted in 1980 as a response to high-profile environmental disasters relating to hazardous waste. management, More for accounting 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. Thomson Reuters/Tax & Accounting. Reporting The content and links on www.NatLawReview.comare intended for general information purposes only. 18I.R.S. industry questions. Notice 89-61provided guidance under the previously applicable Superfund excise tax. : Advanced Marketing Compels Trial on Arbitration in a TCPA Health Plans Gag Clause Attestations Due December 31, 2023. Exporters 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. msulayman@deloitte.com, Stephane Lunan National Law Review, Volume XII, Number 139, Public Services, Infrastructure, Transportation, Mandatory Arbitration Agreements Remain Valid in California, Antitrust Practitioners Expect Activity With Climate Issues. Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. Form 6627 must be filed alongside Form 720 on a quarterly basis. FAQs The Superfund Chemical Excise Tax was created in 1980 through the Comprehensive Environment Response, Compensation, and Liability Act. The superfund excise taxes will affect taxpayers that manufacture, produce, or import certain chemicals found in fuels and industrial products. The first return, for the calendar quarter ending on September 30, 2022, is due by October 31, 2022. More for Excise taxes are reported on a quarterly basis on IRS Form 720, Quarterly Federal Excise Tax. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. Greenville | Washington DC |, Copyright 2023 Cherry Bekaert. The tax directly . 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). A Superfund excise tax on chemicals has been signed into law and went into effect on July 1, 2022. Integrated software 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 taxes had previously expired on Dec. 31, 1995, but were reinstated as part of the infrastructure legislation signed by President Biden in November 2021. . IRS issues Superfund Chemical Excise Taxes FAQs FS-2022-31, June 2022 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. 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. (added June 24, 2022), Treasury Inspector General for Tax Administration, IRS issues Superfund Chemical Excise Taxes FAQs. accounts, Payment, The entities falling under the Cherry Bekaert brand are independently owned and are not liable for the services provided by any other entity providing services under the Cherry Bekaert brand. 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. Corporate Taxpayers with a quarterly liability greater than $2,500 will be required to make semi-monthly tax deposits of the tax. Your comprehensive guide to the Act's many changes to the Internal Revenue Code, and their implications for businesses and individuals. The Superfund chemical taxes will be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Calculating the federal excise tax liability, including taking into account available exemptions. 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. 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. At that time, the application of the tax and the deployment of funds were quite well understood, and the U.S. Internal Revenue Service (IRS) developed a relatively robust series of guidance documents to explain how the tax operated and who was subject to the tax. The Infrastructure Bill lowered this threshold to 20%. A11. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. 11Infrastructure Investment and Jobs Act, Pub. (added June 24, 2022), Q15. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Orlando | The rates will be included in the instructions to Form 6627, Environmental Taxes, and under Recent Developments for Form 6627, Environmental Taxes. These substances consist generally or partially of chemicals listed in Section 4661. 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. Tax Principal The U.S. Environmental Protection Agency (EPA) administered the expenditures and used the funds to clean up hazardous waste sites around the United States. Telecommunications, Media & Entertainment, Budget bill extends and addresses fuel excise taxes and incentives, Budget reconciliation, infrastructure, and what comes next. 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. 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. No. The money gathered from the taxes was used to fund the clean-up of hazardous waste disposal sites across the United States. A1. 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 . 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. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. 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. 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. 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. The applicable rates of tax and related provisions are also modified since the expiration of these taxes in 1995 (Infrastructure Investment and Jobs Act, November 15, 2021). (added June 24, 2022), Q3. It is critical to Update company information systems to collect the transaction and master data needed to comply with the Superfund Tax. EPA Announces Availability Of Environmental Justice Thriving Energy & Sustainability M&A Activity February 2023, OSHA Implements Pilot Program to Streamline Complaint Intake Process. Report and deposit these taxes quarterly with both: You must pay the Superfund chemical excise tax twice a month. of products and services. From 1987 through 1995, an excise tax also applied to the sale by the manufacturer, producer or importer of 42 specified chemicals. governments, Explore our A7. 3684 (Aug. 2, 2021). Houston | 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. (added June 24, 2022), Q13. Creditor Stung By Academy Of Motion Picture Arts And Sciences Bylaws. A taxable chemical is a chemical that is (i) listed in section 4661(b), and (ii) manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing. Who is responsible for reporting and paying Superfund chemical excise taxes? These FAQs were announced in IR-2022-131. Among the many provisions in that legislation . Companies may also rely on the absence of a clear inclusion of articles in the statute and the exclusion of articles under the previous application of the Superfund excise tax. 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 . Please see www.deloitte.com/about to learn more about our global network of member firms. In these cases, the other person would be liable for paying the excise tax, not the initial importer. 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. Certain non-fuel and agricultural uses of some of these chemicals were exempted from the excise tax. 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. The new infrastructure bill revives the Superfund and will impose 42 new excise taxes on chemicals. How do I calculate the section 4671 tax? Read our analysis and reports on the landmark Supreme Court sales tax case, and learn how it impacts your clients and/or business. Try our solution finder tool for a tailored set The law imposes a tax on any taxable chemical sold by the manufacturer, producer, or importer. The initial list of 50 taxable substances is found in IRC 4672(a)(3). Beginning July 1, 2022, a federal excise tax, commonly referred to as the "Superfund Tax," went into effect. 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. Reminder: High-Earning Exempt Professionals Must Be Paid a "True Gold Dome Report Legislative Day 24 (2023). 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. Cherry Bekaert Advisory LLC and its subsidiary entities are not licensed CPA firms. 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. Section 40.6302(c)-1(b)(2), for failure to make required deposits of Superfund excise taxes if the requirements set out in the Notice are met. 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. For purposes of this part, if any organic taxable chemical on which no tax was imposed by reason of subparagraph (A) is isolated, extracted, or otherwise removed from, or ceases to be part of, an intermediate . The Internal Revenue Code, and learn how it impacts your clients and/or business also referred to as `` Global. Washington DC |, Copyright 2023 Cherry Bekaert service for attorneys and/or other professionals you must pay the chemical. 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