The excise tax was applied to a list of 42 chemicals used predominantly in the oil, gas, and chemical industries. A list of taxable chemical substances and procedures for the reinstated Superfund chemical taxes are in Notice 2021-66. In brief. 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. Taxpayers must meet the guidelines in the Notice to qualify for this relief. A10. The Revenue Reconciliation Act of 1990 further extended the Superfund Excise Taxes through December 31, 1995, after which point the Superfund Excise Taxes expired. At the time of publication of these FAQs, 151 substances are listed as taxable substances. 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. 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. 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). Your online resource to get answers to your product and A13. What do companies need to do in order to prepare for these taxes? The Superfund excise taxes are set to expire at the end of 2031. See also I.R.C. A third excise tax on crude oil and petroleum products was reinstated in the Inflation Reduction Act . Form 6627 must be filed alongside Form 720 on a quarterly basis. 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. The Superfund Excise Tax becomes effective on July 1, 2022. Cherry Bekaert Advisory LLC and its subsidiary entities are not licensed CPA firms. | Privacy Policy 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 . automatically and accurately calculating the amount of excise tax owed. 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 . (added June 24, 2022), Q3. Assisting with filing the federal excise tax returns and semi-monthly deposit reporting. (added June 24, 2022), Q11. *Note: Self-assessing based on 10% of appraisal value will almost always yield a higher tax rate than either of the other methods. 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). The inaugural reporting for companies required to report Superfund excise taxes is on their third-quarter 2022 Form 720, due to be submitted byOctober 21, 2022. It states that it was Congress intent that taxable substances only include chemicals that are intended for further chemical conversion. 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. Explore all Notice 2021-66. 8Id. Notice 2021-66 suspended the existing procedure inNotice 89-61for an importer or exporter to petition the IRS to add or remove substances from the list, pending the issuance of additional guidance. There are several potential issues related to taxpayer liabilities, refund considerations, and other recordkeeping requirements to consider with regards to the Superfund Excise Taxes. 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. An exporter who did not pay the initial assessment of the Superfund Tax may still be entitled to the refund if certain condition are met. The Superfund chemical taxes will be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes. Are semimonthly deposits required? Nashville | The applicable tax for a hazardous substance depends on its chemical composition. In fact, companies that export products comprised of taxable chemicals or substances are entitled to a refund if they paid prior to manufacturing. 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. Will Changes to the Option To Tax Regime Impact UK Insolvency Sales? There are three ways to arrive at a tax determination for the Superfund Tax: 2. 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. SaraBeth Smith Sitemap Frequently Asked Questions: Superfund Chemical Excise Taxes. GT's The Performance Review Episode 19: Is the Fight Over AB 51 5 Reasons Community Associations Need an Attorney That Specializes in New York Proposes Regulatory Review and Approval of Material Health CMS Issues Long-Awaiting Medicare Advantage RADV Final Rule, Preventing the Use of Cryptocurrencies to Evade Sanctions. 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. 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. 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. It is critical to Update company information systems to collect the transaction and master data needed to comply with the Superfund Tax. . This law levies taxes on the manufacture, production, or importation of 42 specific chemicals and another 121 chemical substances. 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? A2. The tax directly . The term " Superfund " refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. See section 4671(b)(1). Yes. The specified. research, news, insight, productivity tools, and more. An official website of the United States Government. Chicago | On November 15, 2021, President Biden signed into law theInfrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. An official website of the United States Government. President Joe Biden called for reinstating the Superfund taxes as part of his $2 trillion infrastructure proposal . shipping, and returns, Cookie Thomson Reuters/Tax & Accounting. The National Law Review is a free to use, no-log in database of legal and business articles. The Superfund tax rate will now be adjusted annually to . statement, 2019 Analyzing Superfund Excise Tax calculations and reporting requirements based on a companys unique business scenario. When is the first return due? The original excise tax expired on December 31, 1995. . 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. A taxable substance is one that is . 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. 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. The taxes, which should go in effect on 1 July 2022, are estimated to raise approximately $14.45bn over a 10-year period 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). 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. 2023. 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. Substances may be added or removed from the list of taxable substances at a later date. 4672(a)(2)(B)(2021). chrigong@deloitte.com. A12. Companies with large volumes of transactions should consider automating their tax calculation and reporting processes. 4672(b)(1). That number will likely change as substances are added to or removed from the list of taxable substances pursuant to section 4672(a)(2) or (4). IRC section 4662(e) provides for a refund of the Superfund Excise Tax for the exporter of both taxable chemicals and taxable substances. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. After more than 25 years, two excise taxes on chemicals and imported hazardous substances were reinstated in the Infrastructure Investment and Jobs Act (Pub. In addition, most hazardous wastes are produced by these industries or as a result of using products from these industries. Challenges to the No Surprises Act Continue: The Latest includes a Navigating Permissive State Laws in Light of the Federal Information FDA Publishes List of 2023 Priority Guidance Topics. Analyzing and assisting in documenting available exemptions (e.g., certain taxable chemicals used in the production of fuel). The JCT estimated that the proposal would increase revenues by approximately $38.4 billion over a 10-year period. (added June 24, 2022), Q15. sarsmith@deloitte.com, Frank Falvo Cherry Bekaert LLP is a licensed CPA firm that provides attest services, and Cherry Bekaert Advisory LLC and its subsidiary entities provide tax and advisory services. It is critical for companies to engage in discussions with their IT departments early to prepare for the new reporting requirements. Chemical tax to clean up toxic sites gets new life as part of infrastructure deal. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. At what point in a transaction do the new taxes kick in? These FAQs detail what the Superfund chemical excise tax is, how the tax is computed, and who may be liable for the tax. The legislation would impose an excise tax of fractions of a penny on crude oil and oil products, and between six cents and $14.30 on chemical feedstocks, while it would tax corporate income over $4.7 million at less than 1%. Tax Principal Tax Managing Director Ethylene and propylene may also be exempt, but only when used in the production of fuel (motor fuel, diesel fuel, aviation fuel, or jet fuel). Statement in compliance with Texas Rules of Professional Conduct. (added June 24, 2022), Q4. Nothing in the statute or in Notice 2021-66, for example, references manufactured items in the context of taxable substances. Under the rules, a late fee of 5% may be applied on the amount due for each month the form remains delinquent up to a total penalty of 25%. A Review of the Developing Legal Landscape Surrounding the "Student-Athlete" Debate. When the owner or operator was not identified, or the site cleanups needed to be expedited, financing for the cleanup was to be provided by the Superfund. Identification of the chemical manufacturers and importers subject to the Superfund Tax. Charlotte | Assisting with risk analyses and internal processes (design or documentation). The content and links on www.NatLawReview.comare intended for general information purposes only. (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. Your comprehensive guide to the Act's many changes to the Internal Revenue Code, and their implications for businesses and individuals. 4671. The first return, for the calendar quarter ending on September 30, 2022, is due by October 31, 2022. No such update has been issued to date, however. Cherry Bekaert LLP is a licensed independent CPA firm that provides attest services to its clients, and Cherry Bekaert Advisory LLC and its subsidiary entities provide tax and business advisory services to their clients. 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 Notice essentially allows taxpayers untilOctober 31, 2022, to determine whether a Superfund excise tax applies and to calculate how much taxed is owed. As explained in today's IRS release: 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. Part of the Tax News & Views podcast series. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Corporate 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. Our services include: The reinstatement of the Superfund Excise Taxes will impact companies throughout the country in a wide variety of industries. However, the first deposit of Superfund Tax is due as early as July 29, 2022. US Executive Branch Update February 27, 2023. 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 rationale for the fee collection point was so that the fee would be equally distributed among all hazardous waste generators and suppliers.6. More for Form 6627 must be led alongside Form 720 on a quarterly basis. Fullwidth SCC. As discussed above, the list of taxable substances was incorporated into the IRC as a result of SARA, effective in 1989. As defined, the taxable substances appear to stop short of what would be defined as an article according to40 C.F.R. They're expected to generate $14.4 billion of revenue in total, or about $1.2 billion annually, the report said. 4661 imposes tax on the sale or use by the manufacturer, producer, or importer of 42 listed chemicals. 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 The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. 16I.R.C. 15I.R.C. See section 4672(a)(1). 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. 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. The notice also addresses registration requirements to exempt certain sales and uses of taxable chemicals from 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. Certain services may not be available to attest clients under the rules and regulations of public accounting. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. Orlando | Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials. 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. 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. 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. Tax when they are audited and risk becoming liable for penalties on its chemical composition revenues approximately! Registration requirements to exempt certain Sales and uses of taxable chemicals or substances are listed as taxable substances ending September! Rate will now be adjusted annually to $ 2 trillion infrastructure proposal later date by the manufacturer, producer or... 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