July 1 is fast approaching and the window to prepare for compliance with the reinstated Superfund Tax is brief. For purposes of this part, if any organic taxable chemical on which no tax was imposed by reason of subparagraph (A) is isolated, extracted, or otherwise removed from, or ceases to be part of, an intermediate . For taxable chemicals, the manufacturer, producer, or importer of the taxable chemical is responsible for reporting and paying the section 4661 tax to the IRS. L. 99-499, approved Oct. 17, 1986. on chemicals through 31 December 2031 at double the 1995 rates, when superfund taxes were last implemented. As this question is likely to arise in the near future when the Superfund excise tax applies, the IRS can be expected to address this aspect. Nota Bene Episode 160: European Update: Oliver Heinisch and Scott Federal Communications Commission to Consider Rules and Proposals to Whats the Standard? Among the many provisions in that legislation . 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. 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. 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 assessed on the manufacturer or importer of these chemicals. on a wide range of chemicals and substances. 429. Such exemptions include methane or butane used as a fuel, chemicals used in the production of fertilizer (including nitric acid, sulfuric acid, ammonia, or methane) and substances derived from coal. (added June 24, 2022), Q15. At what point in a transaction do the new taxes kick in? Exceptional organizations are led by a purpose. Matt Levin Jul 2, 2021. This Week in 340B: February 21 27, 2023. Hampton Roads | The Infrastructure Investment and Jobs Act, which President Biden signed into law on November 15, 2021, reinstates Superfund excise taxes on the sale and import of certain chemicals as part of the law's revenue raising provisions. 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. Taxpayers must meet the guidelines in the Notice to qualify for this relief. 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%. Providence | Charlotte | technology solutions for global tax compliance and decision The Superfund tax on chemicals is also a tax on the import of taxable substances. statement, 2019 Your online resource to get answers to your product and Chemicals. In November 2021, President Biden signed the Infrastructure Investment and Jobs Act. This message will not be visible when page is activated. The taxes apply only to imported chemicals or substances, not those for export. 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. In fact, companies that export products comprised of taxable chemicals or substances are entitled to a refund if they paid prior to manufacturing. Analyzing and assisting in documenting available exemptions (e.g., certain taxable chemicals used in the production of fuel). L. 99-499, 42 U.S.C. Butane and methane users : Advanced Marketing Compels Trial on Arbitration in a TCPA Health Plans Gag Clause Attestations Due December 31, 2023. 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). The specified. Will the IRS prescribe tax rates for taxable substances? 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%. 16I.R.C. The tax expired under its terms in the mid-1990s but has now been reinstated. 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. Heres how to analyze the implications and plan now for the revitalized Superfund Excise Tax. Since the Superfund excise tax expired almost three decades ago, the industrial chemical communitys familiarity with their application is attenuated at best. Superfund Chemical Excise Taxes Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. Federal excise tax rates remain at $0.183/gal for gasoline and $0.243/gal for diesel fuel. There are three ways to arrive at a tax determination for the Superfund Tax: 2. Substances. 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. | All Locations, Cherry Bekaert is the brand name under which Cherry Bekaert LLP and Cherry Bekaert Advisory LLC, independently owned entities, provide professional services in an alternative practice structure in accordance with applicable professional standards. 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). Find the tax rates for 121 taxable substances. 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. 4672(a)(2)(B)(2021). (added June 24, 2022), Q7. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Since its reinstatement, the excise tax has raised many questions and caused significant industry consternation. We provide an overview of the origins of the Superfund Excise Tax and take a closer look at the revitalized tax (effective July 1, 2022), as included within the Infrastructure Investment and Jobs Act (the The Infrastructure Bill), signed into law on November 15, 2021.1 Through this lens, we highlight issues to consider in evaluating the Superfund tax on chemicals and chemical substances. 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. It's codified in IRC Sections 4671 and 4672, both of which were added by the Superfund Amendments and Reauthorization Act of 1986. Who is responsible for reporting and paying Superfund chemical excise taxes? Even companies that have been on the market for decades may not have many employees who were around when the previous excise tax applied. Taxpayers must make semimonthly deposits of the Superfund chemical excise taxes. Additionally, the Infrastructure Investment and Jobs Act ("IIJA") double the tax rate on chemicals or . 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. Heard on: Revenue from a new excise tax on chemicals like Benzene and Mercury would go . 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. Arizona Gets to Keep Its State-Operated Workplace Safety and Health Manufacturers Legal Considerations for Staffing Reductions, PCAOB Enforcement Activity Up Sharply in 2022. South Florida | 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. During the first, second, and third calendar quarters of2023, the IRS will not withdraw a taxpayers right to use the deposit safe harbor rules of the Excise Tax Procedural Regulations at 26 C.F.R. 19I.R.C. 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. Words With Friends, Part 1: Insurance Requirements and Contracts, Legislator Proposes To Expand CFL To Encompass "Commercial CERCLA PFAS Scope May Broaden To Many More PFAS, AI Avatar App is the Latest Target of BIPA Class Action Litigation. This tax provided a federal fund to remediate toxic spill sites when a responsible party could not be identified. (added June 24, 2022), Q13. Taxpayers should be proactive and carefully analyze and consider the potential tax liabilities, tax reporting requirements, and systems impacts as a result. 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. A5. 4662(e). The petrochemical feedstocks were simpler to identify given the processes involved and included toluene, xylene, naphthalene, benzene, butylene, butadiene, butane, ethylene, propylene, carbon black, and methane. Tax Implications and Financial Business Guidance Regarding the Coronavirus. corporations. Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The Infrastructure Investment and Jobs Act lowered this threshold to 20%. If the importer does not calculate the section 4671 tax for a taxable substance and the IRS has prescribed a tax rate for the taxable substance, the tax is calculated using the rate prescribed by the IRS. Los Angeles | 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. 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. 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. The Superfund excise taxes are set to expire at the end of 2031. What happens if an importer does not calculate the section 4671 tax? 429 (2021)), effective July 1, 2022, with modifications to the applicable rates of tax and other provisions related to those taxes. 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. The IRS is working on calculating tax rates for taxable substances and will release the tax rates as they become available. What Is the Difference Between a Grandfathered and a Grandmothered Health Plan? Substances may be added or removed from the list of taxable substances at a later date. The National Law Review is a free to use, no-log in database of legal and business articles. The taxes are set to be reinstated beginning on July 1, 2022. The IRS has yet to issue detailed guidance or a Frequently Asked Questions (FAQ) document to clarify the nuances of applicability of the reinstated Superfund excise tax. and services for tax and accounting professionals. Notice 2021-66 suspended the procedure in Notice 89-61 because the IRS plans to issue a more current guidance on this matter. DTTL and each of its member firms are legally separate and independent entities. See how we connect, collaborate, and drive impact across various locations. 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. 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. 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. See section 4671(b)(1). The more you buy, the more you save with our quantity Greenville | Part II of Form 6627, Environmental Taxes, will be updated to reflect the tax rate per ton of each taxable chemical. 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. Excise Tax on Select Chemicals. Your comprehensive guide to the Act's many changes to the Internal Revenue Code, and their implications for businesses and individuals. Treas. The IRS has release additional information on the Superfund Excise Taxes on Chemicals. The Superfund Chemical Excise Tax was created in 1980 through the Comprehensive Environment Response, Compensation, and Liability Act. Section 704.3. 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. | Agreed Terms of Use The applicable tax for a hazardous substance depends on its chemical composition. 17Prop. The relevance of this guidance to the new tax is unclear. When are the new Superfund Chemical Excise taxes due? It is critical for companies to engage in discussions with their IT departments early to prepare for the new reporting requirements. The rate of excise tax per ton is based on the amount of each chemical included in the substance. Superfund tax on chemicals. Tax is due upon the first use or first sale of a listed chemical in the United States. 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. discount pricing. No. Background Cherry Bekaert LLP and Cherry Bekaert Advisory LLC practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. . . 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. More information about reliance is available. While the majority of the 42 listed chemicals are taxable by the manufacturer or importer upon the first sale or use, butane and methane only become taxable upon the first use other than as a fuel.23 This creates a potential liability for downstream product sales such that the first company that uses the methane or butane in a manner other than as a fuel will have to report and remit the Superfund Excise Tax. Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. A2. After more than 25 years, two excise taxes on chemicals and imported hazardous substances were reinstated in the Infrastructure Investment and Jobs Act (Pub. The list of 42 chemicals and their respective excise tax rates is found in Internal Revenue Code (IRC) 4661(b). 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 proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. The 2022 law revived a tax that previously expired in 1995, the Hazardous Substance Superfund tax rate. 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. 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. 6Id. 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. Under what circumstances is registration required? A substance is listed as a taxable substance if it is listed under section 4672(a)(3), or if the Secretary of the Treasury or her delegate (Secretary) has added it to the list of taxable substances pursuant to section 4672(a)(2) or (4). 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.