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. Sec. Assisting with filing the federal excise tax returns and semi-monthly deposit reporting. L. 99-499, 42 U.S.C. 1Investment and Jobs Act, Pub. When the IIJA reinstated these two taxes, it doubled the previous rates. The excise tax was applied to a list of 42 chemicals used predominantly in the oil, gas, and chemical industries. The Superfund tax is assessed on the manufacturer or importer of these chemicals. Importers See Section 4671(b)(2). DTTL and each of its member firms are legally separate and independent entities. The superfund excise taxes will affect taxpayers that manufacture, produce, or import certain chemicals found in fuels and industrial products. management, Document 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. 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. Form 6627, Environmental Taxes, previously used to report the Superfund Tax, will likely be used again to report the tax owed. management, More for accounting Boston | It is critical to Update company information systems to collect the transaction and master data needed to comply with the Superfund Tax. | Careers Who is responsible for reporting and paying Superfund chemical excise taxes? (added June 24, 2022), Q4. A6. 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. In addition, exporters of chemicals and substances which were subject to the Superfund Tax can request a refund of the tax previously paid. The Superfund excise taxes are part of Subtitle D, Chapter 38 of the Tax Code. 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. View Full Firm Disclosure. 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. 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. Certain non-fuel and agricultural uses of some of these chemicals were exempted from the excise tax. All organic chemicals are derived from petrochemical feedstocks. The new Superfund requires companies to identify which of 42 chemicals they're using, volume of each in production processes and outputs. 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). The IRS is expected to issue guidance prior to theJuly 1, 2022, effective date of the Superfund excise taxes. The excise taxes are effective July 1, 2022. 15I.R.C. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. A13. Taxable substances are those substances listed in either section 4672(a)(3) of the Code or Notice 2021-66. 117-58 (2021). (added June 24, 2022), Q7. Superfund Chemical Excise Taxes are reported on Form 6627 (Environmental Taxes), which attaches to Form 720 (Quarterly Federal Excise Tax Return). A8. The Infrastructure Investment and Jobs Act lowered this threshold to 20%. 429, Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), How Modern Manufacturing Plants Can Protect Against Ransomware, Cyberattacks, FTC Will Host May 23, 2023, Workshop on Recyclable Claims and the Green Guides. The Superfund Tax rate for chemicals range from $048 per ton for nitric acid to $9.74 per ton for Benzene. In our experience, it generally takes at least three months to fully implement and test a new business process and system implementation. The IIJA reinstates the two taxes with several modifications. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Background Fast forward to today. of products and services. 52.4661-1 4662-4, 48 Fed. : Advanced Marketing Compels Trial on Arbitration in a TCPA Health Plans Gag Clause Attestations Due December 31, 2023. For example, methane or butane used as a fuel, or nitric acid, sulfuric acid, ammonia, or methane used in production of fertilizer are exempt. The Revenue Reconciliation Act of 1990 further extended the Superfund Excise Taxes through December 31, 1995, after which point the Superfund Excise Taxes expired. This direct tax hike on American producers would result in higher prices for consumers, threaten thousands of jobs, and undermine domestic . See how we connect, collaborate, and drive impact across various locations. 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 exemptions identify taxable chemicals that are exempt due to their specific use. 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. media, Press accounting firms, For The Carter administration established the Superfund in 1980 to offset the high price tags associated with remediating uncontrolled or abandoned hazardous waste sites. The IRS has release additional information on the Superfund Excise Taxes on Chemicals. Notice 2021-66 does not specify the tax rate for each taxable substance. 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. 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. The Infrastructure Investment and Jobs Act signed into law November 15, 2021, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. 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. Deloitte Tax Congress directed the Department of Treasury to publish an additional list of the taxable substances by January 1, 2022. 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. Helping businesses navigate financial due diligence engagements and domestic and cross-border transactions. shipping, and returns, Cookie In these cases, the other person would be liable for paying the excise tax, not the initial importer. Biobased chemicals and biofuels have taken root thanks to both popular appeal and political support. 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. They're expected to generate $14.4 billion of revenue in total, or about $1.2 billion annually, the report said. 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. 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. 11Infrastructure Investment and Jobs Act, Pub. The Superfund excise taxes are set to expire at the end of 2031. See also section 4661(b) for the tax rate for taxable chemicals. 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. DeloitteTax Yes. The initial list of 50 taxable substances is found in IRC 4672(a)(3). Abusive Arbitrage Devices Its Time to Get Reacquainted (Episode 2 B&C Biobased and Sustainable Chemicals Practice Group Bergeson & Campbell, P.C. Section 80201(c)(1) of the IIJA modified the method for determining whether a substance is a taxable substance by lowering the required percentage of taxable chemicals used to produce the substance from 50 percent to 20 percent of the weight (or the value) of the materials used to produce such substance. 10I.R.C. The Superfund Excise Tax becomes effective on July 1, 2022. The JCT estimated that the proposal would increase revenues by approximately $38.4 billion over a 10-year period. IT and tax departments in particular will need to collect transactional data all along the supply chain, as well any applicable master data. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. 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. policy, Privacy Chemicals. 4662(b)(1). 2022 Superfund excise taxes. There are 42 chemicals listed in section 4661(b). 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 Superfund Tax is effective as of July 1, 2022 and will remain in effect until the end of 2031. The rationale for the fee collection point was so that the fee would be equally distributed among all hazardous waste generators and suppliers.6. brands, Corporate income Form 6627 must be filed alongside Form 720 on a quarterly basis. Are semimonthly deposits required? Accordingly, the procedural rules in26 C.F.R. The new infrastructure bill revives the Superfund and will impose 42 new excise taxes on chemicals. 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. For example, if load of scrap metal contains 50% nickel (taxed at $8.90 per ton) and 20% chromite (taxed at $3.04 per ton), the tax rate would be calculated as: ($8.90 x .50 = $4.45) + ($3.04 x .20 = .61) = $5.06 per ton. A4. | Privacy Policy 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). 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. The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. 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. To accomplish this, the current system capability should be assessed. Companies are likely to be caught off guard by this reinstated tax. [email protected], Stephane Lunan This current iteration is set to expire on December 31, 2031. Companies with a large volume of transactions should consider automating their tax calculation and reporting processes to increase efficiency and accuracy. 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. 9601-9675 (2021). Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Please see www.deloitte.com/about to learn more about our global network of member firms. The Superfund Amendments and Reauthorization Act of 1986 was enacted as Pub. Now, according to Section 4661, the tax rate for chemicals ranges from $0.44 to $9.74 per ton, depending on how the chemical is being sold, used, or stored. 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. 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. The unique considerations of butane and methane require taxpayers further down the supply chain to be aware of the procedural issues affecting chemicals. Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. 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. . A12. 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