discount pricing. Many entities are struggling with its application. IRC section 4672 additionally directed importers and exporters to request a determination from the IRS as to whether a specific unlisted chemical substance should be included in the list of taxable substances. Internal Revenue Code (IRC) section 4671 thereby imposed the same tax on imported substances as was already included in the cost of domestically purchased 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%. How does a company report the Superfund Chemical Excise Tax? For instance, necessary data elements may not be available to properly identify the taxable chemicals and components. Chemical manufacturers and importers 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. 12I.R.S. 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 National Law Review is a free to use, no-log in database of legal and business articles. 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. On November 15, 2021, President Biden signed into law theInfrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. As discussed above, the list of taxable substances was incorporated into the IRC as a result of SARA, effective in 1989. Prior to 1996, the rates of tax on those chemicals ranged from $0.22 per ton to $4.87 per ton. A Superfund excise tax on chemicals has been signed into law and went into effect on July 1, 2022. Form 6627, Environmental Taxes, previously used to report the Superfund Tax, will likely be used again to report the tax owed. 52.4661-1 4662-4, 48 Fed. In our experience, it generally takes at least three months to fully implement and test a new business process and system implementation. | Privacy Policy Information must be available to properly calculate and remit taxes due, apply for refunds, or request exemptions. healthcare, More for 18I.R.S. Deloitte Tax Federally Recognized Holidays, Employer Considerations for DOLs New AEWR Rule. 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. 16I.R.C. 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. Orlando | The Reinstated Superfund Excise Tax for Chemicals and Imported Substances As of July 1, 2022, The Infrastructure Investment and Jobs Act (IIJA) has reinstated excise taxes imposed on certain chemicals and imported chemical substances. 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. It states that it was Congress intent that taxable substances only include chemicals that are intended for further chemical conversion. A4. There are three ways to arrive at a tax determination for the Superfund Tax: 2. Nashville | It is critical to Update company information systems to collect the transaction and master data needed to comply with the Superfund Tax. 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. Heard on: Revenue from a new excise tax on chemicals like Benzene and Mercury would go . 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). Arizona Gets to Keep Its State-Operated Workplace Safety and Health Manufacturers Legal Considerations for Staffing Reductions, PCAOB Enforcement Activity Up Sharply in 2022. 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. 4661 imposes tax on the sale or use by the manufacturer, producer, or importer of 42 listed chemicals. Litigation Setback for Employers Under Illinois Biometric Information Senate Committee Holds Hearing on Future of Low Carbon Transportation North Carolina Senate Passes Compassionate Care Act at Exactly 4:20 States and Feds Signal Big Changes to Telehealth Prescribing. 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. See questions 4-5 for more information on taxable substances and questions 7-9 for more information on calculating the tax imposed by section 4671 (section 4671 tax). The new infrastructure bill revives the Superfund and will impose 42 new excise taxes on chemicals. The relevance of this guidance to the new tax is unclear. A Superfund excise tax on chemicals has been signed into law and went into effect on July 1, 2022. This box/component contains JavaScript that is needed on this page. Taxpayers must make semimonthly deposits of the Superfund chemical excise taxes. What do companies need to do in order to prepare for these taxes? 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%. Assisting with development and implementation of technology solutions to enable identification of taxable chemicals and substances, as well as exemptions. 429. To accomplish this, the current system capability should be assessed. This message will not be visible when page is activated. Form 6627 must be filed alongside Form 720 on a quarterly basis. 13I.R.C. Section 80201 of the bill would revive long-expired Superfund excise taxes at twice their previous level. . Attorney Advertising Notice: Prior results do not guarantee a similar outcome. of products and services. Amendments. NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. The Chemicals Superfund Tax and the Hazardous Substances Tax took effect on July 1, 2022 with a ten-year effective . In November 2021, President Biden signed the Infrastructure Investment and Jobs Act. Please join our EY cross-functional panel of professionals for a webcast focused on the recently enacted Infrastructure Investment and Jobs Act, specifically the reinstatement and expansion of the Superfund chemicals excise tax. 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. Explore all 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. 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. 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. Cultivating a sustainable and prosperous future, Real-world client stories of purpose and impact, Key opportunities, trends, and challenges, Go straight to smart with daily updates on your mobile device, See what's happening this week and the impact on your business. 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. IT and tax departments in particular will need to collect transactional data all along the supply chain, as well any applicable master data. Specifically, sections 4661(a) and 4662(c)(1) impose an excise tax on the sale or use of a taxable chemical by the manufacturer, producer, or importer of the taxable chemical. An official website of the United States Government. 4661 and the other applying solely to "any taxable substance sold or used" by importers pursuant to 26 U.S.C. Tax Senior Manager (a) General rule There is hereby imposed a tax on any taxable chemical sold by the manufacturer, producer, or importer thereof. Licenses for Exports to Are You Ready for the UPC? 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. The Infrastructure Investment and Jobs Act lowered this threshold to 20%. For exporters, IRC 4662(e) provides for a refund of the Superfund Tax for both taxable chemicals and taxable substances that are exported. 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. The Superfund Tax rate for chemicals range from $048 per ton for nitric acid to $9.74 per ton for Benzene. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional. 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. 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. Taxpayers may petition the IRS to determine whether a substance falls within the taxable substances list. What happens if an importer does not calculate the section 4671 tax? Certain non-fuel and agricultural uses of some of these chemicals were exempted from the excise tax. Everyone loves infrastructure, but it pays to read the fine print. financial reporting, Global trade & Notice 2021-66. Taxpayers with a quarterly liability greater than $2,500 will be required to make semi-monthly tax deposits of the tax. (added June 24, 2022), Q15. 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. When enacted, the Superfund was financed by environmental excise taxes on certain commonly used chemicals often found at Superfund sites. 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. Reinstatement of Superfund excise taxes. 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 content and links on www.NatLawReview.comare intended for general information purposes only. 11001 (2021). A third excise tax on crude oil and petroleum products was reinstated in the Inflation Reduction Act . An importer of a taxable substance is subject to the section 4671 tax on the sale or use of the taxable substance on or after July 1, 2022. The section 4661 tax is imposed as a rate per ton of a taxable chemical. How are substances added to or removed from the list of taxable substances? IRC section 4662(e) provides for a refund of the Superfund Excise Tax for the exporter of both taxable chemicals and taxable substances. chrigong@deloitte.com. This Superfund Tax is assessed only on importers of taxable substances and is due upon the first sale or the first use after import into the United States. To apply to participate in tax-free sales of intermediate hydrocarbon streams containing organic taxable chemicals or tax-free inventory exchanges of taxable chemicals, file Form 637, Application for Registration (For Certain Excise Tax Activities) with activity letter G. Page Last Reviewed or Updated: 04-Jan-2023, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation, Electronic Federal Tax Payment System (EFTPS), Self-Employment Tax (Social Security and Medicare Taxes), Form 720, Quarterly Federal Excise Tax Return, Form 637, Application for Registration (For Certain Excise Tax Activities), Treasury Inspector General for Tax Administration. 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. 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). 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. A cloud-based tax These substances consist generally or partially of chemicals listed in Section 4661. 901, for the initial list of substances that the Secretary has added to the list of taxable substances. The tax would apply after December 31, 2021, until January 1, 2032. 10I.R.C. The rates will be included in the instructions to Form 6627, Environmental Taxes, and under Recent Developments for Form 6627, Environmental Taxes. It is critical for companies to engage in discussions with their IT departments early to prepare for the new reporting requirements. The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. media, Press Self-assess the rate based on 10% of the appraisal value of the imported substances.*. accounts, Payment, Are semimonthly deposits required? 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. When the Superfund tax was last applied back in 1995, a taxable substance was required to have 50% of a chemical. The applicable tax for a hazardous substance depends on its chemical composition. 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. Calculate the rate based on the percentage amount of each listed chemical included in the substance. Updated procedural guidance on how to request the determination has not yet been published by the IRS as of the date of this article. 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). 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. As soon as possible, companies that import any of the taxable chemicals or substances on the IRSs list need to conduct a thorough assessment of their manufacturing processes to find out when, where, and how the Superfund Chemical Excise Tax might apply. The list of 42 chemicals and their respective excise tax rates is found in Internal Revenue Code (IRC) 4661(b). 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). The excise tax collection expired in 1995 but resumed on July 1, 2022. IRS announces Superfund chemical excise tax rates June 24, 2022 Download pdf (363.6 KB) The IRS today announced the prescribed tax rates for 121 taxable substances that are subject to the Superfund chemical excise tax imposed by section 4671 (a). 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. There are several potential issues related to taxpayer liabilities, refund considerations, and other recordkeeping requirements to consider with regards to the Superfund Excise Taxes. In these cases, the other person would be liable for paying the excise tax, not the initial importer. accounting, Firm & workflow However, the inorganic raw materials required a multi-tiered rubric: (1) the material must be hazardous in a number of forms; (2) the material in some form must be hazardous if spilled; (3) the material must be produced in a large amount; and (4) the material must be capable of increasing the hazard potential of other elements.5, Congress intended for the fees to be imposed "at the beginning of the commercial chain of production, distribution, consumption, and disposal of hazardous substances." The Superfund chemical excise taxes previously expired on December 31, 1995. Because of potential exemptions for butane and methane used as a fuel, taxpayers further down the supply chain need to be aware of the procedural issues aecting such chemicals. . Augusta | The taxes, which should go in effect on 1 July 2022, are estimated to raise approximately $14.45bn over a 10-year period Atlanta | 4671. A3. Exceptional organizations are led by a purpose. 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. 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. 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. The Superfund Excise Tax is not permanent and . Greenville | 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. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. Nothing in the statute or in Notice 2021-66, for example, references manufactured items in the context of taxable substances. The intent of the Superfund Excise Taxes is to target the chemicals primarily found in hazardous waste sites and to tax the chemicals at the earliest point possible in the process. DTTL and each of its member firms are legally separate and independent entities. The Reinstated Superfund Excise Taxes. Is the rate different for taxable substances? 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. It is unclear whether and how the statute means to differentiate a substance from an article, and if so, whether the IRS would apply the definition of article under the Toxic Substances Control Act (TSCA). The Secretary has added to or removed from the excise tax on chemicals has signed! The other person would be liable for penalties, Environmental taxes, previously used report... 2,500 will be required to have 50 % of a chemical taxable chemicals and components essentially create a new tax... Message will not be available to properly identify the taxable chemicals and components Hazardous. Included in the substance Workplace Safety and Health Manufacturers legal Considerations for Reductions. 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