As discussed above, the list of taxable substances was incorporated into the IRC as a result of SARA, effective in 1989. Some companies did not yet exist when the previous excise tax applied and have no experience with the old tax and thus no internal processes for determining their liability for the Superfund excise tax. Charlotte | 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. Deloitte Tax 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. 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. Yes. 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. First Offshore Wind Energy Lease Sales in the Gulf of Mexico, Telephone and Texting Compliance News: Litigation Update February 2023. The Superfund Chemicals tax previously expired in 1995. Performance Rule Requires Disclosure of Relationship Tech Takeaways: SCOTUS Weighs in on Pivotal Tech Cases. on a wide range of chemicals and substances. NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. FAQs Chemical tax to clean up toxic sites gets new life as part of infrastructure deal. 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). The excise tax was applied to a list of 42 chemicals used predominantly in the oil, gas, and chemical industries. The tax would apply after December 31, 2021, until January 1, 2032. To obtain certainty prior to IRS issuing guidance on this matter, companies that import taxable substances as part of articles can seek clarification from the IRS. 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 . Notice 2022-15 provides temporary relief from the failure-to-deposit tax penalty. Exporters 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. Background They were reinstated by section 80201(c)(3) of the Infrastructure Investment and Jobs Act (Public Law 117-58, 135 Stat. 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. 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. Second, an importer or exporter of a substance (or other interested person) can petition the Secretary to add the substance to or remove the substance from the list of taxable substances. 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). Labor Board Flip-Flops Again on Severance FRB Governor Bowman Speaks on Bank Regulation and Supervision. Fullwidth SCC. 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. 4672(b)(1). Tax Senior Manager 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. Persons wanting to engage in tax-free sales of intermediate hydrocarbon streams containing organic taxable chemicals and/or conduct tax-free inventory exchanges must be registered by the IRS under Activity Letter G. Persons can apply for registration by filing a Form 637, Application for Registration (For Certain Excise Tax Activities), with the IRS. Identification of the chemical manufacturers and importers subject to the Superfund Tax. The rate of excise tax per ton is based on the amount of each chemical included in the substance. Tax is due upon the first use or first sale of a listed chemical in the United States. Strictly Confidential? 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. The Act also doubles the tax rate on chemicals or chemical products and expands the reach of the tax. 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. The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. 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. Companies must report the reinstated Superfund excise taxes onForm 6627, Environmental Taxes, attached toForm 720, Quarterly Federal Excise Tax Return. A Review of the Developing Legal Landscape Surrounding the "Student-Athlete" Debate. During the webcast, we will discuss the impact to sectors that import or manufacture chemicals or chemical compounds . See also section 4661(b) for the tax rate for taxable chemicals. Semi-monthly payments should be made by the 15 th and 30 th of each month, but the IRS is providing relief from penalties for non-payment up through the first quarter of 2023. When the IIJA reinstated these two taxes, it doubled the previous rates. These substances consist generally or partially of chemicals listed in Section 4661. This message will not be visible when page is activated. 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. 3. Greenville | The Superfund chemical excise taxes previously expired on December 31, 1995. 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? This box/component contains JavaScript that is needed on this page. 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. Boston | 5Id. ADVANCED! 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. Tampa | Taxpayers must make semimonthly deposits of the Superfund chemical excise taxes. sarsmith@deloitte.com, Frank Falvo 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. | Agreed Terms of Use A2. 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. 13I.R.C. 15I.R.C. Notice 89-61provided guidance under the previously applicable Superfund excise tax. accounting firms, For 901, for the initial list of substances that the Secretary has added to the list of taxable substances. IT'S HAPPENING! 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. 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. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. A12. L. 99-499, approved Oct. 17, 1986. Taxable substances are those substances listed in either section 4672(a)(3) of the Code or Notice 2021-66. Criminal Referrals and OSHA Violations, Part III: Industry Standards Oregon House Revenue Committee Set to Hear More About Pro-Taxpayer Buying or Selling a Small Business Government Contractor? The excise tax collection expired in 1995 but resumed on July 1, 2022. 2Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), Pub. The Final CCPA Regulations: What You Need To Know, Are College Athletes Students or Employees? The Basics of Californias Outside Salesperson Exemption. (added June 24, 2022), Q13. A14. Reg. The term " Superfund " refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. The content and links on www.NatLawReview.comare intended for general information purposes only. _____________________________________________________________________________________________. governments, Explore our Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. Section 4671(a) imposes an excise tax on the sale or use of a taxable substance by the importer of the taxable substance. 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 . (added June 24, 2022), Q11. Superfund tax on chemicals. 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. policy, Privacy The Reinstated Superfund Excise Taxes. Since the Superfund excise tax expired almost three decades ago, the industrial chemical communitys familiarity with their application is attenuated at best. This tax provided a federal fund to remediate toxic spill sites when a responsible party could not be identified. View Full Firm Disclosure. L. 96- 510, 42 U.S.C. accounting, Firm & workflow 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. 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. Tax Partner 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 first quarterly Superfund Tax reporting on Form 720 is due October 31, 2022. 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. 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. Will Changes to the Option To Tax Regime Impact UK Insolvency Sales? 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. ONESOURCE Determination gives companies the ability to quickly comply with Superfund Excise and Hazardous Substance taxes by automatically and accurately calculating the amount of excise tax owed. This assessment should include a review of the transaction life cycle, master data setup, cost computation and recognition, and general entry posting. (added June 24, 2022), Q4. There are 42 chemicals listed in section 4661(b). The Treasury Department and the IRS reportedly intend to update Notice 89-61 to reflect the changes made to Section 4672(a)(2) by the IIJA and to make other changes that may be necessary. In November 2021, President Biden signed the Infrastructure Investment and Jobs Act. IT and tax departments in particular will need to collect transactional data all along the supply chain, as well any applicable master data. The rates are listed in IRS release IR-2022-133 (June 24, 2022). (added June 24, 2022), Q12. Analyzing and assisting in documenting available exemptions (e.g., certain taxable chemicals used in the production of fuel). A1. Products & Companies with a large volume of transactions should consider automating their tax calculation and reporting processes to increase efficiency and accuracy. The Superfund Excise Tax will go back into effect on July 1 st, 2022, after not being in place for over 26 years. firms, CS Professional 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. How do I calculate the section 4671 tax? 4671. Form 6627 must be led alongside Form 720 on a quarterly basis. In addition, exporters of chemicals and substances which were subject to the Superfund Tax can request a refund of the tax previously paid. 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. Reg. While the majority of the listed chemicals are taxable by the manufacturer or importer upon the rst sale or use, butane and methane only become taxable upon the rst use other than as a fuel. During 1979 Senate discussions, it was estimated that expenditures for hazardous waste disposal sites related to chemicals would be $200 million (versus $40 million for sites related to crude oil).3 During this congressional hearing, it was determined that the proposed system of fees would cover: (1) crude oil; (2) petrochemical feedstocks; and (3) certain highly toxic and/or high-volume inorganic materials including heavy metals, halogens, acids, bases, and ammonia.4. 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). 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). | Careers Companies that import taxable chemicals or taxable substances will be liable for the excise tax. Form 6627 must be filed alongside Form 720 on a quarterly basis. They're expected to generate $14.4 billion of revenue in total, or about $1.2 billion annually, the report said. 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 Superfund Excise Tax is not permanent and . 4662(e). Deposit payments with the Electronic Federal Tax Payment System (EFTPS). To accomplish this, the current system capability should be assessed. Under what circumstances is registration required? What are the Superfund chemical excise taxes? All Rights Reserved. 2022 Superfund excise taxes. Temporary relief from the penalty for failure to deposit Superfund chemical taxes for 2022 (third and fourth calendar quarters) and the first calendar quarter of 2023 is inNotice 2022-15. The rationale for the fee collection point was so that the fee would be equally distributed among all hazardous waste generators and suppliers.6. See Notice 2021-66, 2021-52 I.R.B. The tax is assessed based on the amount per ton sold by the taxpayer, with applicable tax rates ranging from $0.44 per ton to $9.74 per ton. Does the Supreme Court have the stomach to tackle the super fun SECs Pay vs. DOL Provides Snapshot of ERISA Enforcement Statistics for Fiscal Year 2022, TPA Escapes Liability for Sending COBRA Notice to Employees Former Address, but Claims Proceed Against Employer, For Form 6627, Environmental Taxes, previously used to report the Superfund Tax, will likely be used again to report the tax owed. It states that it was Congress intent that taxable substances only include chemicals that are intended for further chemical conversion. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. The Superfund excise taxes are set to expire at the end of 2031. Prior to 1996, the rates of tax on those chemicals ranged from $0.22 per ton to $4.87 per ton. Among the many provisions in that legislation . There are three ways to arrive at a tax determination for the Superfund Tax: 2. Los Angeles | 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. 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. 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. Raleigh | 21See I.R.C. The information here is by no means comprehensive, but it does provide a basic understanding of the law and its implications for affected companies. 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. The Superfund chemical excise taxes are reported on Form 6627, Environmental Taxes, which is attached to Form 720, Quarterly Federal Excise Tax Return. (added June 24, 2022), Q2. The Superfund excise taxes include two separate but interrelated excise taxes applicable to crude oil and petroleum products, chemicals, and hazardous substances, which fund the Hazardous Substance Superfund for the cleanup of hazardous waste sites and expired more than 25 years ago. How are the Superfund chemical excise taxes reported? 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. The current list is published in IRC section 4672(a)(3) and attached as Exhibit B. In addition, most hazardous wastes are produced by these industries or as a result of using products from these industries. Please see www.deloitte.com/about to learn more about our global network of member firms. Deloittte Tax In order to pay for the provisions in The Infrastructure Investment and Jobs Act (also referred to as the Bipartisan Infrastructure Bill), Superfund was reinstated with double the tax . At what point in a transaction do the new taxes kick in? Deloitte Tax 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. Heavy metals, halogens, acids, and bases are significant raw materials for many toxic inorganics.) Yes. How does a company report the Superfund Chemical Excise 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. Read our analysis and reports on the landmark Supreme Court sales tax case, and learn how it impacts your clients and/or business. 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. 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. A7. In our experience, it generally takes at least three months to fully implement and test a new business process and system implementation. 14Joint Committee on Taxation, Estimated Revenue Effects of the Provisions in Division H of an Amendment in the Nature of a Substitute to H.R. The return of the Superfund excise tax on chemicals affects taxpayers that manufacture, produce, or import certain chemicals, as it imposes an excise tax on the sale of 42 specific chemicals listed in Section 4661 of the tax code, including ammonia, butane, benzene, mercury, and other common products. 4671(b). Houston | 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. The Superfund Amendments and Reauthorization Act of 1986 was enacted as Pub. Integrated software However, the IRS released a number of IRS Notices between 1990 and 1995 concerning taxpayer requests for a determination as to whether a listed chemical substance met the definition of taxable substance. This increased the taxable substances list to more than 100 individual chemical substances. The Superfund excise taxes are set to expire at the end of 2031. As explained in today's IRS release: How are substances added to or removed from the list of taxable substances? of products and services. 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. Licenses for Exports to Are You Ready for the UPC? 7Superfund Amendments and Reauthorization Act of 1986, Pub. What is a taxable substance? The Notice essentially allows taxpayers untilOctober 31, 2022, to determine whether a Superfund excise tax applies and to calculate how much taxed is owed. 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). A taxable substance is one that is . The IIJA also reinstated the Superfund excise tax on the import for sale or use of any taxable substance underSection 4671of the Tax Code. 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. A13. 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. 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. 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 . Excise taxes are reported on a quarterly basis on IRS Form 720, Quarterly Federal Excise Tax. 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. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. Comprehensive 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. Exemptions from the application of the excise tax are listed atSection 4662(b)of the Tax Code. msulayman@deloitte.com, Stephane Lunan slunan@deloitte.com, Christina Gong For taxable substances, the importer of the taxable substance is responsible for reporting and paying the section 4671 tax to the IRS. Technology/systems impacts 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 Prior to the expiration of the Superfund Excise Taxes, a chemical substance that was composed of at least 50% of chemicals listed in IRC section 4662 could be found to be a taxable substance. Semi-monthly payments should be made by the 15th and 30th of each month, but the IRS is providing relief from penalties for non-payment up through the first quarter of 2023. and services for tax and accounting professionals. Taxable substances are those that contain 20% or more by weight or value of one of the 42 chemicals listed in IRC 4661 (b). The excise tax applies to companies that manufacture, produce, or import any of the 42 specific chemicals listed in Section 4661 of the Tax Code, most of them common in consumer products,. Corporate healthcare, More for The excise taxes are effective July 1, 2022. 4671(b)(2). This current iteration is set to expire on December 31, 2031. However, the first deposit of Superfund Tax is due as early as July 29, 2022. Systems and processes will also need to be established in order to properly calculate and remit taxes that are due, as well as apply for refunds or exemptions. 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. . Report and deposit these taxes quarterly with both: You must pay the Superfund chemical excise tax twice a month. When are the new Superfund Chemical Excise taxes due? collaboration. 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Surrounding the `` Student-Athlete '' Debate Mexico, Telephone and Texting Compliance News: Litigation Update February 2023 tax. Code or notice 2021-66 Reauthorization Act of 1980 ( CERCLA ), Q12 tax:.... Experience, it generally takes at least three months to fully implement and test a business. Be visible when page is activated up toxic sites gets new life as part of infrastructure deal: 2 calculation... Exports to are You Ready for the excise tax, attached toForm superfund excise taxes on chemicals, quarterly Federal excise on. Telephone and Texting Compliance News: Litigation Update February 2023 these industries chemical compounds first sale of lawyer.