The Leaking Underground Storage Tank (LUST) Fund adds an additional $0.001/gal federal fee. There are three ways to arrive at a tax determination for the Superfund Tax: 2. Chemical manufacturers and importers (added June 24, 2022), Q4. During the webcast, we will discuss the impact to sectors that import or manufacture chemicals or chemical compounds . 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. 117-58 (2021). Hydrocarbon streams containing mixtures of organic taxable chemicals. Sitemap Providence | 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. 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. Effective July 1, 2022, as required by the Infrastructure Investment and Jobs Act (IIJA)passed last November, the Internal Revenue Service (IRS) has reinstated the Superfund Chemical Excise Tax on a wide range of chemicals and substances. . 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. customs, Benefits & 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. See also I.R.C. Read our analysis and reports on the landmark Supreme Court sales tax case, and learn how it impacts your clients and/or business. More for More information about reliance is available. Get the insight and tools you need to fully understand and comply with changes resulting from this major tax reform. What is a taxable chemical? | 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. 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 . The IIJA reinstates the two taxes with several modifications. Taxpayers must make semimonthly deposits of the Superfund chemical excise taxes. 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 How are substances added to or removed from the list of 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. (added June 24, 2022), Q5. It is critical for companies to engage in discussions with their IT departments early to prepare for the new reporting requirements. See also section 4661(b) for the tax rate for taxable chemicals. 13I.R.C. (added June 24, 2022), Q3. Until then, companies may take the IRS previous position as an indication of how it is likely to view articles and fabricated products under the current Superfund excise tax. 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). 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. 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. Calculate the rate based on the percentage amount of each listed chemical included in the substance. 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. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. Since its reinstatement, the excise tax has raised many questions and caused significant industry consternation. A taxable substance is any substance that, at the time of sale or use by the importer of the substance, is listed as a taxable substance. The Hazardous Substance Superfund financing rate was an excise tax of 9.7 cents per barrel of crude oil that applied from 1987 through 1995. . The unique considerations of butane and methane require taxpayers further down the supply chain to be aware of the procedural issues affecting chemicals. The Superfund tax is assessed on the manufacturer or importer of these chemicals. South Florida | Fullwidth SCC. How do I calculate the section 4671 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. 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). Taxpayers should be proactive and carefully analyze and consider the potential tax liabilities, tax reporting requirements, and systems impacts as a result. Substances. (added June 24, 2022), Q15. 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. 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. When enacted, the Superfund was financed by environmental excise taxes on certain commonly used chemicals often found at Superfund sites. Telephone and Texting Compliance News: Regulatory Update February 2023. Companies with large volumes of transactions should consider automating their tax calculation and reporting processes. 12I.R.S. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. Atlanta | See how we connect, collaborate, and drive impact across various locations. 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. slunan@deloitte.com, Christina Gong of products and services. The amount of the section 4671 tax with respect to any taxable substance is generally the amount of section 4661 tax that would have been imposed on the taxable chemicals used in the manufacture or production of the taxable substance if the taxable chemicals had been sold in the United States for use in the manufacture or production of the taxable substance. Your comprehensive guide to the Act's many changes to the Internal Revenue Code, and their implications for businesses and individuals. The Superfund Chemicals tax previously expired in 1995. US Executive Branch Update February 27, 2023. CERCLA (and therefore the Superfund Excise Taxes) expired in 1985 but was extended for another five-year period through the Superfund Amendments and Reauthorization Act of 1986 (SARA), effective January 1, 1987.7 SARA expanded the Superfund Excise Tax on chemicals to include an additional tax on imported substances derived from taxable chemicals, effective January 1, 1989.8 This additional tax on taxable substances was structured to ensure that the amount of the tax correlated to the composition of the chemicals within the taxable substances.9 In other words, had the substance been purchased domestically, the Superfund Excise Tax on chemicals would have been included as part of the overall price of the substance. Washington DC |, Copyright 2023 Cherry Bekaert. There are other exemptions as welle.g., for substances that have a transitory presence during the smelting or refining process, or substances derived from coalbut the IRS has yet to issue specific guidance on procedures for claiming these exemptions, so the best recourse available at the moment is to keep documentation that supports the companys intention to take advantage of applicable exemptions. sarsmith@deloitte.com, Frank Falvo The taxes, which should go in effect on 1 July 2022, are estimated to raise approximately $14.45bn over a 10-year period and services for tax and accounting professionals. msulayman@deloitte.com, Stephane Lunan It has been almost 30 years since the Superfund excise tax was in effect. Breaking the Link New Developments on U.S. No such update has been issued to date, however. 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. Analyzing and assisting in documenting available exemptions (e.g., certain taxable chemicals used in the production of fuel). 4672(a)(2)(B)(1995). tax, Accounting & The Infrastructure Investment and Jobs Act (IIJA) reinstated the excise taxes imposed on certain chemicals and imported chemical substances under Internal Revenue Code sections 4661 through 4672 beginning July 1, 2022. A6. Accordingly, the procedural rules in26 C.F.R. July 1 is fast approaching and the window to prepare for compliance with the reinstated Superfund Tax is brief. The Superfund Tax is effective as of July 1, 2022 and will remain in effect until the end of 2031. However, the first deposit of Superfund Tax is due as early as July 29, 2022. 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. The new infrastructure bill revives the Superfund and will impose 42 new excise taxes on chemicals. chrigong@deloitte.com. Exceptional organizations are led by a purpose. Explore all Activity letter G is reinstated for persons making inventory exchanges of taxable chemicals under section 4662(c)(2), or persons selling or buying intermediate . Unlike the static list of 42 taxable chemicals, the taxable substance list is subject to change. Form 6627 must be filed alongside Form 720 on a quarterly basis. Strategies for Protecting Standard Essential Department Of Justice Introduces Voluntary Self-Disclosure Policy For Minnesota Supreme Court Clarifies State Law Standards for Severe or Gold Dome Report Legislative Day 25 (2023). Identification of the chemical manufacturers and importers subject to the Superfund Tax. Service. Notice 2021-66 does not specify the tax rate for each taxable substance. Taxpayers with a quarterly liability greater than $2,500 will be required to make semi-monthly tax deposits of the tax. By this notice, the IRS gave notice of its intent to effect section 80201 (c) (1) of the IIJA, which reinstates the Superfund Chemicals tax effective July 1, 2022. The term " Superfund " refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. Many entities are struggling with its application. 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. 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. Raleigh | Excise taxes are reported on a quarterly basis on IRS Form 720, Quarterly Federal Excise Tax. 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. 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. 19I.R.C. Certain services may not be available to attest clients under the rules and regulations of public accounting. The taxes are set to be reinstated beginning on July 1, 2022. 4661 imposes tax on the sale or use by the manufacturer, producer, or importer of 42 listed chemicals. What do companies need to do in order to prepare for these taxes? 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? Are semimonthly deposits required? Everyone loves infrastructure, but it pays to read the fine print. 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. As defined, the taxable substances appear to stop short of what would be defined as an article according to40 C.F.R. on a wide range of chemicals and substances. How do I calculate the section 4661 tax? At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. 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. Superfund Chemical Excise Taxes are reported on Form 6627 (Environmental Taxes), which attaches to Form 720 (Quarterly Federal Excise Tax Return). and accounting software suite that offers real-time Notice 2021-66. Some deposit amount is still required by July 29 to satisfy the relief provisions set out in Notice 2022-15. The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. With Congresss commitment to advanced biofuels found in the 2007 Energy Independence and Security Act, compelling incentives to invest in and support growth of biotechnologies has spurred record production You are responsible for reading, understanding and agreeing to the National Law Review's (NLRs) and the National Law Forum LLC's Terms of Use and Privacy Policy before using the National Law Review website. In fact, companies that export products comprised of taxable chemicals or substances are entitled to a refund if they paid prior to manufacturing. 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. Frequently Asked Questions: Superfund Chemical Excise Taxes. (All oil and almost all hazardous substances are products of the oil industry, chemical and allied industries, and heavy metals industries. The Notice essentially allows taxpayers untilOctober 31, 2022, to determine whether a Superfund excise tax applies and to calculate how much taxed is owed. Technology/systems impacts Hampton Roads | 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. 4671. The Final CCPA Regulations: What You Need To Know, Are College Athletes Students or Employees? 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. 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. 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. 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. 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. 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. Arizona Gets to Keep Its State-Operated Workplace Safety and Health Manufacturers Legal Considerations for Staffing Reductions, PCAOB Enforcement Activity Up Sharply in 2022. 4671(b)(2). This memorandum explains why. On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. 52.4661-1 4662-4, 48 Fed. Section 4662(c)(2) provides an additional exemption from tax liability where a company imports a taxable chemical and exchanges that chemical as part of an inventory exchange with another person. Companies with a large volume of transactions should consider automating their tax calculation and reporting processes to increase efficiency and accuracy. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. Considerations of butane and methane require taxpayers further down the supply chain to reinstated! The landmark Supreme Court sales tax case, and learn how it impacts your clients and/or business and industries! 2021-66 does not specify the tax rate for each taxable substance list is subject change! 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