Superfund Chemical Excise Taxes Are Back
The recent reinstatement of Superfund chemical excise taxes on certain taxable chemicals and specified taxable substances takes effect July 1, 2022, and will be imposed through 2031. 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 taxes will affect companies that manufacture, produce or import listed taxable chemicals or import specified taxable substances, as well as, indirectly, customers of such companies.
The Details
The Superfund taxes are expected to generate approximately $14.5 billion over a 10-year period. The revenues are intended to help pay for the approximately $550 billion in new spending on infrastructure that is part of the 2021 Infrastructure Investment and Jobs Act.
The taxes apply to any “taxable chemical” under Internal Revenue Code (IRC) 4661 and any “taxable substance” under IRC 4671.
- There are 42 listed taxable chemicals under IRC 4661, which imposes excise tax on the sale or use by a manufacturer, producer or importer of such chemicals. As reinstated, the excise tax rates are doubled from pre-1996 levels and range from $0.44 cents per ton to $9.74 per ton.
- IRC 4671 imposes the excise tax on the sale or use by an importer of specified taxable substances (as initially identified in IRC 4672(a)(3) and IRS Notice 2021-66). Substances are generally determined to be taxable if more than 20% of the weight or value of the materials used to produce the substance are taxable chemicals identified in IRC 4661. The IRS determined this threshold in consultation with the Environmental Protection Agency and U.S. Customs and Border Protection. Substances treated as taxable will significantly increase over the pre-1996 levels, when the threshold determination only applied when more than 50% of the substance’s weight or value consisted of taxable chemicals.
The IRS has provided taxpayers temporary relief from penalties for failure to deposit superfund chemical taxes in the third and fourth calendar quarters of 2022 and the first quarter of 2023 through Notice 2022-15. The IRS recently issued FAQs and published tax rates for 121 of the 151 taxable substances.
Download list of 42 taxable chemicals and 151 taxable substances.
How BDO Can Help
BDO’s excise tax professionals can help affected companies by performing a phased approach to determining the impact of the Superfund chemical excise taxes on your business. This approach includes:
- Conducting a feasibility review.
- Assisting with tax return preparation.
- Pursuing refunds and/or credits.
- Corresponding with the IRS, including requests for determination and other guidance.
- Requesting additions and/or deletions to the taxable substances list pursuant to updated IRS guidance and procedure.
- Providing audit support and assistance.
- Implementing process improvements including potential technology solutions to efficiently monitor products subject to tax and possible exemptions.
Let us help you address the compliance issues associated with reinstatement of Superfund chemical excise taxes.
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