To accomplish this, the current system capability should be assessed. statement, 2019 However, the IRS released a number of IRS Notices between 1990 and 1995 concerning taxpayer requests for a determination as to whether a listed chemical substance met the definition of taxable substance. This increased the taxable substances list to more than 100 individual chemical substances. A8. However, importers with estimated tax totals of more than $2,500 per year are required to start making bi-weekly deposits to the Superfund Tax as early as July 29, 2022. Nothing in the statute or in Notice 2021-66, for example, references manufactured items in the context of taxable substances. 8Id. 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. 15I.R.C. industry questions. (added June 24, 2022), Q3. Accordingly, the procedural rules in26 C.F.R. A list of taxable chemical substances and procedures for the reinstated Superfund chemical taxes are in Notice 2021-66. 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. It is not clear that that the IRS can offer any more relief to taxpayers than has already been given in Notice 2022-15. ADVANCED! 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. For instance, necessary data elements may not be available to properly identify the taxable chemicals and components. Applicants for registration may call 859-320-4091 and select menu option #1. How do you calculate the Superfund Excise Tax? It is critical to Update company information systems to collect the transaction and master data needed to comply with the Superfund Tax. In addition, exporters of chemicals and substances which were subject to the Superfund Tax can request a refund of the tax previously paid. Integrated software L. 96- 510, 42 U.S.C. The IRS has release additional information on the Superfund Excise Taxes on Chemicals. Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. More information on the procedures for petitioning the Secretary to add or remove substances from the list of taxable substances will be released in advance of July 1, 2022. IRC section 4662 directs the IRS to release guidance as to the appropriate manner of reporting exempt sales or claiming refunds. In addition to having deep tax technical knowledge surrounding federal excise taxes, Deloitte leverages leading technology tools and processes. Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. 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. Hampton Roads | Since its reinstatement, the excise tax has raised many questions and caused significant industry consternation. accounting firms, For 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. Is the rate different for taxable substances? Sitemap 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 Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) established the Hazardous Substance Response Trust Fund (the Superfund), which was to be administered by the Environmental Protection Agency (EPA).2 CERCLA imposed liability for the cleanup of hazardous waste sites on the owners and operators of these sites. Breaking the Link New Developments on U.S. This assessment should include a review of the transaction life cycle, master data setup, cost computation and recognition, and general entry posting. A taxable substance is defined as a substance that contains 20% or more by weight or value of any one of the chemicals listed in Section 4661 (down from 50% in the previous iteration of the law). There are two separate Superfund chemical excise taxes: a tax on the sale or use of "taxable chemicals" under section 4661 of the Internal Revenue Code and a tax on the sale or use of imported "taxable substances" under section 4671 (all section references are to the Internal Revenue Code unless otherwise stated). The Superfund chemical excise taxes are reported on Form 6627, Environmental Taxes, which is attached to Form 720, Quarterly Federal Excise Tax Return. The Act also doubles the tax rate on chemicals or chemical products and expands the reach of the tax. See Notice 2021-66, 2021-52 I.R.B. The term "ton" is. Notice 2021-66 does not specify the tax rate for each taxable substance. (added June 24, 2022), Q9. I am an importer of taxable substances. Get the insight and tools you need to fully understand and comply with changes resulting from this major tax reform. 13I.R.C. The National Law Review is a free to use, no-log in database of legal and business articles. For example, butane and methane are exempt if they are being used as fuel, but NOT if they are being used for some other purpose. Nota Bene Episode 160: European Update: Oliver Heinisch and Scott Federal Communications Commission to Consider Rules and Proposals to Whats the Standard? 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. Taxpayers must make semimonthly deposits of the Superfund chemical excise taxes. The excise taxes are effective July 1, 2022. The 2022 law revived a tax that previously expired in 1995, the Hazardous Substance Superfund tax rate. Los Angeles | BIPA ALERT: Illinois Supreme Court Opens the Door to Punitive, President Biden to Nominate Julie Su as New Secretary of Labor, The European Unitary Patent: Why Retailers Should Care, New York City Employers Prepare for AI Bias Law [VIDEO], Administration's WOTUS Rule Muddies Jurisdictional Waters. Heavy metals, halogens, acids, and bases are significant raw materials for many toxic inorganics.) Attorney Advertising Notice: Prior results do not guarantee a similar outcome. SaraBeth Smith The Infrastructure Bill lowered this threshold to 20%. 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. 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. 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). 4671(b)(2). Exemptions are available for some exported taxable chemicals and substances, as well as for chemicals/substances used in certain kinds of fertilizer, animal feed, and fuel. Key considerations for dealings with the reinstated Superfund Tax include: For producers, importers, exporters, and customers of businesses making and distributing identified chemicals and substances, action is needed quickly. The return of the Superfund excise tax on chemicals affects taxpayers that manufacture, produce, or import certain chemicals, as it imposes an excise tax on the sale of 42 specific chemicals listed in Section 4661 of the tax code, including ammonia, butane, benzene, mercury, and other common products. The Infrastructure Investment and Jobs Act signed into law November 15, 2021, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. US Executive Branch Update February 27, 2023. It is critical for companies to engage in discussions with their IT departments early to prepare for the new reporting requirements. shipping, and returns, Cookie 2Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), Pub. consulting, Infrastructure Investment and Jobs Act (IIJA), passed last November, the Internal Revenue Service (IRS) has reinstated the. Background Everyone loves infrastructure, but it pays to read the fine print. Since the Superfund excise tax expired almost three decades ago, the industrial chemical communitys familiarity with their application is attenuated at best. These substances consist generally or partially of chemicals listed in Section 4661. Along with the quarterly reporting requirements, taxpayers with a quarterly liability greater than $2,500 will be required to make semi-monthly tax deposits of the Superfund Excise Taxes. Do not delete! 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. See Terms of Use for more information. Self-assess the rate based on 10% of the appraisal value of the imported substances.*. It is important for companies to be aware of the existence of this tax, and to evaluate the chemicals and substances they import, to establish whether they owe any excise taxes. Helping businesses navigate financial due diligence engagements and domestic and cross-border transactions. In addition to the reinstatement of the federal superfund excise tax on chemicals and substances that went into effect on July 1, 2022, the Hazardous Substance Superfund excise tax went into effect on January 1, 2023 as part of the Inflation Reduction Act of 2022. research, news, insight, productivity tools, and more. Additionally, similar to what happened between 1990 and 1995 when importers and exporters petitioned the IRS to determine whether various chemical substances would qualify as taxable substances, taxpayers may again request a written determination from the IRS as to whether a product they export or import qualifies as a taxable substance, if its chemical makeup includes at least 20% of a listed taxable chemical in IRC section 4661.21 However, IRS Notice 2021-66 suspended prior guidance (IRS Notice 89-61) as to how to request this determination, and taxpayers await additional guidance from the IRS as to the procedure to do so. The Superfund tax rate will now be adjusted annually to . 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. . tax, Accounting & 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). Many entities are struggling with its application. 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. Please enable JavaScript to view the site. The Superfund Chemicals tax previously expired in 1995. Butane and methane users 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. 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). 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. 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. 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. (added June 24, 2022), Q13. Service. The Superfund tax on chemicals is also a tax on the import of taxable substances. Superfund Chemical Excise Taxes are reported on Form 6627 (Environmental Taxes), which attaches to Form 720 (Quarterly Federal Excise Tax Return). The JCT estimated that the proposal would increase revenues by approximately $38.4 billion over a 10-year period. Reporting (added June 24, 2022), Q10. Try our solution finder tool for a tailored set For each taxable substance metals, halogens, acids, and Liability of. The Standard free to use, no-log in database of legal and business articles you need to fully understand comply! Chemicals or chemical products and expands the reach of the appraisal value of the Superfund chemical taxes in. 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