Nashville | A taxable chemical is a chemical that is (i) listed in section 4661(b), and (ii) manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing. Copyright 2023 BDO USA LLP. The taxes will affect companies that manufacture, produce or import listed taxable chemicals or import specified taxable substances, as well as, indirectly, customers of such companies. Managing Director, Excise Tax Practice, KPMG US, Senior Manager, Tax | WNT - SALT Income & Incentives, KPMG US, Partner, Tax, Accounting Methods & Credits, KPMG US. Superfund Excise Tax on Chemicals Has Been Revived Effective July 1, 2022, Congress has revived the Superfund Excise tax on Taxable Chemicals and Taxable Substances that previously existed from 1980 through 1995. 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). For example, methane or butane used as a fuel, or nitric acid, sulfuric acid, ammonia, or methane used in production of fertilizer are exempt. The hazardous substance tax will be imposed at a rate of 16.4 cents per barrel and will be adjusted for inflation on January 1 of each year until it expires on December 31, 2032. Under what circumstances is registration required? Aside from this quarterly filing, taxpayers with a quarterly liability of greater than $2,500 will be required to make semi-monthly tax deposits of at least 95 percent of the net tax liability incurred during the tax period (unless a safe harbor The taxes are effective July 1, 2022. Are you capturing all of them? These credits are accrued when a taxable chemical or taxable substance is exported. IRC section 4661(b) lists 42 chemicals that are once again subject to the Superfund Excise Tax effective July 1, 2022. This webcast discusses the three Superfund Excise Taxes that are now in place, recent trends, and hot topics to be aware of as organizations solidify processes and procedures to ensure compliance by October 31, 2022. WebEffective July 1, 2022, Congress has revived the Superfund Excise tax on Taxable Chemicals and Taxable Substances that previously existed from 1980 through 1995. This legislation provided a federal Superfund to clean up hazardous-waste sites and accidents, spills, or other emergency releases of pollutants and contaminants into the environment. 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. The Inflation Reduction Act added excise tax on domestic crude oil and imported petroleum products starting on January 1,2023. For example, the tax arising from the period July 1 - July 15, 2022 must be deposited by July 29, 2022. 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. The Infrastructure Investment and Jobs Act signed into law November 15, 2021, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. A13. Orlando | (added June 24, 2022), Q2. 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. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. | Careers Accordingly, the procedural rules in26 C.F.R. Superfund Tax Chemicals List According to the IRS, A taxable chemical is a chemical that is (i) listed in section 4661 (b), and (ii) manufactured or produced in the United The Superfund Chemical Excise Tax was created in 1980 through the Comprehensive Environment Response, Compensation, and Liability Act. The Infrastructure Investment and Jobs Act (Pub.L. Tax on Imported Chemical Substances, IRS No. WebEarlier 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. 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). Below is the current list of taxable substances. Atlanta | Tax News & Views, our current events-focused tax podcast, can help provide clarity on the latest tax news and developments that could affect your business. The Superfund chemical taxes should be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes. In these cases, the other person would be liable for paying the excise tax, not the initial importer. The taxes are reported quarterly on the IRS Form 720, which is part of the Quarterly Federal Excise Tax Return. Page Last Reviewed or Updated: 24-Jun-2022, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation, Electronic Federal Tax Payment System (EFTPS), Fact Sheets for Frequently Asked Questions, Q1. Richmond | That penalty can be avoided if the taxpayer demonstrates that the failure was due to reasonable cause and not due to wilful neglect. Companies opting for the latter run the risk, however, of incurring penalties, should the IRS adopt a different view. FS-2022-31, June 2022. These Superfund tax credits can be taken by either the importer, the manufacturer, or the exporter, depending on the commercial agreements that have been established among those parties. There are 42 chemicals listed in section 4661(b). 4295) on December 22, 2022, that accomplishes three things: (1) eliminates the requirement to affirmatively elect New Jersey S corporation status, while including an opt-out provision; (2) adopts the federal centralized partnership audit regime, with certain modifications; and (3) ends certain COVID-related extensions. Elizabeth supports clients with sales and use tax nexus studies, tax registration, voluntary disclosure agreements, audit representation, item taxability, overpayment recovery, and exposure audits. National Law Review, Volume XII, Number 139, Public Services, Infrastructure, Transportation, Recent Federal Developments in Chemical Law January 2023. The Inflation Reduction Act (Pub.L. Our use of the terms our Firm and we and us and terms of similar import, denote the alternative practice structure of Cherry Bekaert LLP and Cherry Bekaert Advisory LLC. The tax The Superfund Excise Tax on chemical sales is back! Taxable substances are those that contain 20% or more by weight or value of one of the 42 chemicals listed in IRC 4661(b). The Anti-Money Laundering Act of 2020 Gets a Glow Up: Congress FINRA Files Amendments to Proposed Rule Change That Will Allow Remote Corporate Practice of Medicine Doctrine: Increased Enforcement on the Environmental Justice Update: EPA Announces $100 Million in EJ Grants Insurers Beware of Silent Crypto Exposure: PART III, Silent Crypto Court Rules that Brown Bread is Not Misleading, Whats Next in Washington? The FTC's Proposed Rule Banning Noncompete Agreements- What Does It Mean? 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). . There are 42 listed taxable chemicals under IRC 4661, which imposes excise tax on the sale or use by a manufacturer, producer or importer of such chemicals. Since its reinstatement, the excise tax has raised many questions and caused significant industry consternation. 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 Infrastructure Investment and Jobs Act lowered this threshold to 20%. Follow these steps to assess applicability and prepare for compliance: The sooner these steps are completed, the more seamless this new reporting and filing will be. Read about the challenges and opportunities that could lie ahead. Biobased chemicals and biofuels have taken root thanks to both popular appeal and political support. These taxes expired more than 25 years ago. | Privacy Policy The content and links on www.NatLawReview.comare intended for general information purposes only. We recommend taking the following steps now to determine how this excise tax applies to your company and to help ensure compliance: In addition, it is important to identify your available resources for determining taxability, exemptions, making tax deposits, filing applicable IRS registrations (Form 637, Application for Registration For Certain Excise Tax Activities) and filing quarterly tax returns (Form 720, Quarterly Federal Excise Tax Return, and attachment Form 6627, Environmental Taxes). Augusta | Is there a way to check the status of an application for Activity Letter G registration? 901, for the initial list of substances that the Secretary has added to the list of 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 a more than 26 year hiatus, on July 1, 2022, the Superfund chemical excise tax (the Superfund Chemical Tax) will again become effective. Cherry Bekaert: Tax, Audit and Advisory Services, Superfund Excise Taxes on Chemicals and Substances: How to Prepare, Starting a New Business & Launching Successfully: Tax and Business Planning Tips, IRS Rev. According to the IRS, A taxable chemical is a chemical that is (i) listed in section 4661(b), and (ii) manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing. Below is the current list of taxable chemicals. The imported substances tax is due upon the first sale or use after import. Each member firm is a separate legal entity. The taxes had previously expired on Dec. 31, 1995, but were reinstated as part of the infrastructure legislation signed by President Biden in November 2021. An official website of the United States Government. 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. The Time Is Now: Comment Period Open For The Federal Trade Commission Canadas Foreign Buyers Ban: What You Should Know About the Ban on CMS Proposed Rule for Refunding Overpayments Would Align With False EPAs Proposal to Tighten the Fine Particulate NAAQS: Whats Proposed Commonwealth Court Strikes Down 2021 Accessibility Regulations as Is Texas Getting Ready to Expand Its Compassionate Use Program? The excise tax applies to companies that manufacture, produce, or import any of the 42 specific chemicals listed in Section 4661 of the Tax Code, including ammonia, butane, Managing Director, Excise Tax Practice National Leader, State and Local Tax Partner, Sales & Use Tax National Leader, Business Restructuring & Turnaround Services, Management Advisory & Performance Improvement, Total Tax Transparency & ESG Tax Strategy, Financial Institutions & Specialty Finance. Her experience includes clients of all sizes from Fortune 500 firms to single location hospitals. The Treasury Department and the IRS (collectively the IRS) have released Notice 2022-15, which provides relief for certain reinstated Superfund chemical excise taxes You Meta Believe the GDPR Penalties Are No Joke! 2022-26 (Issued 6/28/2022), Exclusive Procedures to Request a Determination under IRC 4672 (a) (2) That a Substance Be Added To/Removed From the List of Taxable Substances under IRC 4672 (a) ( Link) Please These FAQs detail what the Superfund chemical excise tax is, how the tax is computed, and who may be liable for the tax. Currently, there are 42 taxable chemicals, each with a specified tax rate imposed on a per-ton basis, and 151 taxable substances for which the tax rate is dependent on the substances unique chemical composition. 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