What is a taxable substance? Identify and educate key stakeholders impacted by the excise tax within the organization (supply chain, tax, EPA regulatory, IT, finance), Identify taxable chemicals, hazardous substances, and crude oil/ imported petroleum products, Identify and document exceptions to the excise tax, Forecast excise tax liability based on applicable rates, Consider filing petition with IRS to request modifications to the list of taxable substances and rate of tax on taxable substances, Assess supplier and consumer invoicing issues, Assess internal and external communications regarding excise tax information, Identify data sources required to track the lifecycle of affected chemicals and products, assess potential issues, and evaluate process and configuration changes to resolve issues, Prepare for all aspects of compliance, including filing registrations on Form 637 and filing returns on Form 720 and Form 6627. 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 But under the Biden plan, those taxes would be reinstated. Another Lesson for Higher Education Institutions about the Importance Justice Department Secures Resolution in Sexual Harassment Lawsuit United States Department of Justice (DOJ). Reinstating the tax on chemicals will unduly burden consumers. 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). 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. If these deposits are missing, there is temporary relief until March 2023, which includes the third and fourth quarters of 2022 and the first quarter of 2023. All Rights Reserved. Form 6627 must be led alongside Form 720 on a quarterly basis. How are substances added to or removed from the list of taxable substances? Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. In response to pointed public comment, on April 15, 2022, the IRS released an advance version ofNotice 2022-15, providing relief for thethirdandfourth calendar quarters of 2022, and the first calendar quarter of2023, regarding the failure to deposit penalties imposed bySection 6656of the Tax Code, as those penalties relate to the Superfund excise taxes. How Law Firms Can Leverage ChatGPT To Get More Cases, FTC Pursues Crackdown on Employee Noncompetes, Chapter 93A Litigation Newsletter | 4th Quarter 2022, Landmark NLRB Decision Expands Labor Violations, Weekly IRS Roundup January 9 January 13, 2023. 429. The 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. Stephanie provides tax planning and compliance services to corporations, pass-through entities and individuals. The consumer and political goals of reducing Americas dependence on foreign oil, enhancing national security, and greening the economy converge in biobased chemicals and advanced biofuels, the promising technology of producing commercial chemicals and fuels from renewable resources. This potential change in Brazilian transfer pricing policies could have significant consequences from a U.S. transfer pricing and international tax perspective. Manufacturers, laboratories and other businesses may begin to see these excise taxes passed along to them on invoices from their suppliers. The taxes are effective July 1, 2022. Client Advisory Board, 1175 Lombardi Access Rd., Ste 500, Green Bay, WI 54304. Acetylene Benzene Butane Butylene Butadiene $300 plus $0.090 per each acre-foot greater than 10 acre-feet. 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. Are you capturing all of them? 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. For example, methane or butane used as a fuel, or nitric acid, sulfuric acid, ammonia, or methane used in production of fertilizer are exempt. That authority Accordingly, a manufacturer, producer, or importer of a taxable chemical is subject to the section 4661 tax on the sale or use of the taxable chemical on or after July 1, 2022. Each chemical has a specified rate of tax, imposed on a per-ton basis, which has now been doubled. The Inflation Reduction Act (Pub.L. Chemicals will be taxed based on how they're sold, used, or stored and can range from $0.44 to $9.74 and will be charged on a per-ton basis. $150 plus $0.069 per each acre-foot greater than 10 acre-feet. 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? Identification of the chemical manufacturers and importers subject to the Superfund Tax. A2. They were reinstated by section 80201(c)(3) of the Infrastructure Investment and Jobs Act (Public Law 117-58, 135 Stat. All rights reserved. DOE Publishes Notice of Intent to Fund Clean Hydrogen Projects. When do the Superfund chemical excise taxes go into effect? Los Angeles | 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. Nashville | Persons wanting to engage in tax-free sales of intermediate hydrocarbon streams containing organic taxable chemicals and/or conduct tax-free inventory exchanges must be registered by the IRS under Activity Letter G. Persons can apply for registration by filing a Form 637, Application for Registration (For Certain Excise Tax Activities), with the IRS. Yes. 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. Connecting with our core purpose through a renewed lens. 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. The money gathered from the taxes A Frequently Asked Questions (FAQ) page about the Superfund Excise Tax is available from the Internal Revenue Service: FAQ: IRS Issues Superfund Chemical Excise Taxes. 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. The Treasury Department and the IRS (collectively the IRS) have released Notice 2022-15, which provides relief for certain reinstated Superfund chemical excise taxes (SCET) from the penalty for failure to properly deposit imposed under Section 6656. Austin | This current iteration is set to expire on December 31, 2031. 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. After a more than 26 year hiatus, on July 1, 2022, the Superfund chemical excise tax (the Superfund Chemical Tax) will again become effective. Notice 2022-15 recognizes the burden on taxpayers, explicitly noting the short time frame between the reinstatement of the Superfund chemical taxes and the due date of the first deposit, the unavailability of the 40.6302(c)-1(b)(2) deposit safe harbor in 2022, the possible difficulties of computing the correct amount of tax during the third calendar quarter of 2022 (which is both the first calendar quarter the taxes are in effect and the look-back quarter for the first calendar quarter of 2023), and the number of new taxpayers owing Superfund chemical taxes that have not previously had to comply with the deposit requirements of section 6302.. The Superfund Chemicals Excise Tax Makes a Comeback. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. The IRS noted that the full list of taxable chemicals and substances could change over time. Form 6627, Environmental Taxes, previously used to report the Superfund Tax, will likely be used again to report the tax owed. The revived A substance may be removed from the list of taxable substances if the Secretary determines that taxable chemicals constitute 20 percent or less of the weight and 20 percent or less of the value of the materials used to produce the substance (determined on the basis of the predominant method of production). Managing Director, Excise Tax Practice, KPMG US, Senior Manager, Tax | WNT - SALT Income & Incentives, KPMG US, Partner, Tax, Accounting Methods & Credits, KPMG US. In Notice 2021-66 the IRS published a list of 100 additional substances subject to the Superfund Tax. 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. 117-169), which was signed into law on August 16, 2022, reinstated the Petroleum Superfund Tax at a rate of 16.4 cents per barrel. 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). Helping businesses navigate financial due diligence engagements and domestic and cross-border transactions. As a result, large and small companies alike who produce or import these chemicals or substances are about to be slammed with additional costs. Download list of 42 taxable chemicals and 151 taxable substances. The Superfund excise tax is currently set to expire on December 31, 2031. July 1, 2021 thru June 30, 2022. Implementing process improvements including potential technology solutions to efficiently monitor products subject to tax and possible exemptions. Superfund Excise Tax - What You Need to Know, This analysis is intended for informational purposes only and is not tax advice. 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. This would be for the periodJuly 1-September 30, 2022. Cherry Bekaert Advisory LLC and its subsidiary entities are not licensed CPA firms. South Florida | published tax rates for 121 of the 151 taxable substances. Aerojet and its subsidiaries have These credits are accrued when a taxable chemical or taxable substance is exported. Initially, the Superfund program called for taxes by manufacturers of crude oil and certain chemicals to fund a trust to pay for environmental cleanup activities. 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. Petitions to Add Polyoxymethylene and Polyphenylene Sulfide. I am an importer of taxable substances. The Environmental Protection Agency (EPA) identifies sites such as Kti Chemicals Inc because they pose or had once posed a potential risk to human health and/or the environment due to contamination by one or more hazardous wastes. There is some ambiguity in the calculation of the tax on substances, but IRS Notice 2021-66 suggests that the default tax calculation will be 10 percent of the assessed import value. 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). 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. See also section 4661(b) for the tax rate for taxable chemicals. Any taxable chemical or substance also qualifies for a Superfund Tax Credit. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. 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%. Take inventory of chemicals and determine effects on manufacturing processes and product pricing to ascertain business impact and identify tax exposure. See section 4672(a)(1). A6. Notice 2021-66 suspended the procedure in Notice 89-61 because the IRS plans to issue a more current guidance on this matter. Learn more about Superfund Excise Tax changes effective July 1, 2022, including key considerations for dealings with the reinstated Superfund Tax on chemicals and substances. The Infrastructure Investment and Jobs Act signed into law November 15, 2021, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. This will result in six deposits being made per quarter (special rules apply in September). Read more about the three reinstated excise taxes. A9. 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 (added June 24, 2022), Q10. 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). July 1 is fast approaching and the window to prepare for compliance with the reinstated Superfund Tax is brief. It has been almost 30 years since the Superfund excise tax was in effect. Copyright 2023 BDO USA LLP. Final Regulations Governing Illinois Equal Pay Acts Certification Weekly Bankruptcy Alert: January 17, 2023 (For the week ending Bankruptcy Court Allows Service of a Subpoena Via Twitter. Hampton Roads | Any manufacturer, producer, or importer of a taxable chemical is subject to the superfund excise tax. The excise tax collection expired in 1995 but resumed on July 1, 2022. New Jersey enacted a new tax law (A.B. The first return, for the calendar quarter ending on September 30, 2022, is due by October 31, 2022. The entities falling under the Cherry Bekaert brand are independently owned and are not liable for the services provided by any other entity providing services under the Cherry Bekaert brand. As reinstated, the tax The money gathered from the taxes was used to fund the clean-up of hazardous waste disposal sites across the United States. The relief applies to the first three quarters of the SCET, i.e., the third and fourth quarters of 2022 and the first An official website of the United States Government. See section 4671(b)(1). 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. Nearly three decades after expiring, the Superfund chemical excise tax is back. Superfund excise taxes are reported on Form 6627, Environmental Taxes, which must be attached to Form 720 Quarterly Federal Excise Tax Return. Notice 89-61provided guidance under the previously applicable Superfund excise tax. Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. | Careers A12. Houston | 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. | Privacy Policy Drive maximum value across your supply chain. However, the first Relief provided for Superfund chemical excise tax semimonthly deposits. A15. 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. (added June 24, 2022), Q12. Calculating A11. (added June 24, 2022), Q8. This field is for validation purposes and should be left unchanged. Proc. Exporters that export either a taxable chemical or taxable substance generate Superfund credits. How are the Superfund chemical excise taxes reported? | Agreed Terms of Use The microbusiness also charges $5 for delivery. 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. Corresponding with the IRS, including requests for determination and other guidance. A13. 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. Retailer's Wholesale Cost ($1,000 + $200) $1,200.00. Aerojet and its subsidiaries have researched, designed and made rocket engines and chemicals on site since 1953. The frequent and sizeable requirements of the reinstated superfund excise tax reporting can be burdensomeespecially for resource-constrained tax departments or those unfamiliar with the requirements. Companies opting for the latter run the risk, however, of incurring penalties, should the IRS adopt a different view. The Infrastructure Investment and Jobs Act signed into law November 15, 2021, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. Sitemap Heres more on what is included in the Superfund Excise Tax and what to keep an eye out for. Companies must report the reinstated Superfund excise taxes onForm 6627, Environmental Taxes, attached toForm 720, Quarterly Federal Excise Tax Return. How do I calculate the section 4671 tax? 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. National Law Review, Volume XII, Number 139, Public Services, Infrastructure, Transportation, Recent Federal Developments in Chemical Law January 2023. The first reporting of Superfund excise taxes is due October 31, 2022 (for the period July 1, 2022, through September 30, 2022). The Superfund chemical taxes will be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes. Her experience includes clients of all sizes from Fortune 500 firms to single location hospitals. All rights reserved. Go back five years for manufacturing drawback. Kti Chemicals Inc is a superfund site located at 1170 Sonora Ct, Sunnyvale, CA 94086. Superfund is also imposed when a taxable substance is imported for consumption, use, or warehousing. The microbusiness also charges $5 for delivery. The Infrastructure Investment and Jobs Act (Pub.L. Download list of 42 taxable chemicals and 151 taxable substances. Helping tax leaders embrace disruption, seize new opportunities and drive greater value. The Superfund Tax is effective as of July 1, 2022 and will remain in effect until the end of 2031. Part III. Taxable substances are those that contain 20% or more by weight or value of one of the 42 chemicals listed in IRC 4661(b). BDOs excise tax professionals can help affected companies by performing a phased approach to determining the impact of the Superfund chemical excise taxes on your business. The Aerojet General Corp. Superfund site covers about 5,900 acres near Rancho Cordova. Since its reinstatement, the excise tax has raised many questions and caused significant industry consternation. See the full preliminary list in Internal Revenue Code 4661, 4671, 4672; Notice 2021-66. 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. Richmond | The recent reinstatement of Superfund chemical excise taxes on certain taxable chemicals and specified taxable substances takes effect July 1, 2022, and will be imposed through 2031. When the Superfund tax was last applied back in 1995, a taxable substance was required to have 50% of a chemical. Substances treated as taxable will significantly increase over the pre-1996 levels, when the threshold determination only applied when more than 50% of the substances weight or value consisted of taxable chemicals. Aerojets previous disposal and operating practices led to soil and groundwater contamination. 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. With world scale integrated manufacturing facilities we are This ABA Tax Times article provides an illustration of the challenges faced by the oil and gas industry in applying one of these special rules related to two products derived from natural gas: methane and butane. 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. If your organization believes it may be subject to the reinstated Superfund Excise taxes, be prepared to begin reporting on chemical use. The Treasury Department and the IRS (collectively the IRS) have released Notice 2022-15, which provides relief for certain reinstated Superfund chemical excise taxes For example, butane and methane are exempt if used in fuel but not if they are used for other purposes. At the time of publication of these FAQs, 151 substances are listed as taxable substances. (added June 24, 2022), Q9. 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. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. Excise taxes are reported on a quarterly basis on IRS Form 720, Quarterly Federal Excise Tax. Chemicals. Notice IR-2022-132 focused on issuing tax rates for 121 taxable substances. 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.

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