The U.S. Environmental Protection Agency (EPA) administered the expenditures and used the funds to clean up hazardous waste sites around the United States. 4662(b)(1). A5. The Final CCPA Regulations: What You Need To Know, Are College Athletes Students or Employees? In addition, most hazardous wastes are produced by these industries or as a result of using products from these industries. 48839 (Oct. 21, 1983). Read our analysis and reports on the landmark Supreme Court sales tax case, and learn how it impacts your clients and/or business. 3. The term substance, therefore, excluded fabricated products that are molded, formed, woven, or otherwise finished into end-use products. management, Document Accordingly, the chemicals are taxed upon the first sale or use after import or manufacture in the United States, and the importer or manufacturer is liable for the excise tax, which it may pass along to its customers.22. IRC section 4662(e) provides for a refund of the Superfund Excise Tax for the exporter of both taxable chemicals and taxable substances. 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. A14. Section 4661 imposes a per-ton tax, ranging from $0.44 to $9.74 per ton on the following 42 chemicals: Semi-monthly payments should be made by the 15th and 30th of each month, but the IRS is providing relief from penalties for non-payment up through the first quarter of 2023. The first return, for the. Find the tax rates for 121 taxable substances. Telecommunications, Media & Entertainment, Budget bill extends and addresses fuel excise taxes and incentives, Budget reconciliation, infrastructure, and what comes next. What is the purpose of the Superfund Chemical Excise Taxes? Unlike the static list of 42 taxable chemicals, the taxable substance list is subject to change. Companies must report the reinstated Superfund excise taxes onForm 6627, Environmental Taxes, attached toForm 720, Quarterly Federal Excise Tax Return. Explore all 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. 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. 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. 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. The Treasury Department and the IRS reportedly intend to update Notice 89-61 to reflect the changes made to Section 4672(a)(2) by the IIJA and to make other changes that may be necessary. When do the Superfund chemical excise taxes go into effect? 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 A12. Waters of the United States and Winston Churchill. 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. The Revenue Reconciliation Act of 1990 further extended the Superfund Excise Taxes through December 31, 1995, after which point the Superfund Excise Taxes expired. Alternatively, a taxpayer may base the rate for taxable substances on 10% of the value of the import.20. Deloitte Tax Substances may be added or removed from the list of taxable substances at a later date. The tax expired under its terms in the mid-1990s but has now been reinstated. Inferences, however, can be made from the absence of any mention in the law. 11Infrastructure Investment and Jobs Act, Pub. Austin | Friday Development: New Sanctions and Export Controls to Address Weekly IRS Roundup February 20 February 24, 2023, Everything to Know About Unbundled Legal Services. | Privacy Policy 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 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. _____________________________________________________________________________________________. accounts, Payment, The Superfund chemical excise taxes are reported on Form 6627, Environmental Taxes, which is attached to Form 720, Quarterly Federal Excise Tax Return. Often collectively referred to as the superfund taxes, Congress imposed excise taxes on domestic crude oil, imported petroleum products and identified chemicals, as well as imported substances comprised of such chemicals. Connect with other professionals in a trusted, secure, 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. From 1987 through 1995, an excise tax also applied to the sale by the manufacturer, producer or importer of 42 specified chemicals. Otherwise, companies risk finding out about this tax when they are audited and risk becoming liable for penalties. The exemptions identify taxable chemicals that are exempt due to their specific use. Technology/systems impacts Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. A6. Yes. 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. Form 6627 must be filed alongside Form 720 on a quarterly basis. Tax Partner 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. Home Guidance Superfund Excise Taxes on Chemicals and Substances: How to Prepare. The Superfund excise taxes are part of Subtitle D, Chapter 38 of the Tax Code. 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. 9See I.R.C. On Dec. 14, 2021, the IRS issued Notice 2021-66, which provides guidance on implementing the reinstated Superfund excise taxes, and followed up on June 24, 2022, with an FAQ . of products and services. The Basics of Californias Outside Salesperson Exemption. Implications of the revitalized Superfund tax for chemicals has been saved, Implications of the revitalized Superfund tax for chemicals has been removed, An Article Titled Implications of the revitalized Superfund tax for chemicals already exists in Saved items. Amendments. research, news, insight, productivity tools, and more. For taxable substances, the importer of the taxable substance is responsible for reporting and paying the section 4671 tax to the IRS. Analyzing Superfund Excise Tax calculations and reporting requirements based on a companys unique business scenario. Consider the action items above, particularly the last one, making sure the information systems are in place to capture the data needed to comply with this tax. Draft the To Each Their Own: Agency Must Consider Experience of Each Partner in CMS Updates List of Telehealth Services for CY 2023, What You Need to Know About the New Tariffs on Imports from Russia. The statute provides an initial list of 50 taxable substances and instructs the IRS to add any substance in which taxable chemicals constitute more than 20% of the weight or value. This tax provided a federal fund to remediate toxic spill sites when a responsible party could not be identified. However, Notice 2022-15, 2022-18 I.R.B. 429, Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), How Modern Manufacturing Plants Can Protect Against Ransomware, Cyberattacks, FTC Will Host May 23, 2023, Workshop on Recyclable Claims and the Green Guides. Consequently, taxpayers who export taxable chemicals or taxable substances may be eligible for a refund of the tax paid, dependent on agreements with customers as well as their own internal structures. The tax directly . 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. For purposes of claiming refunds under section 4662(e) for section 4661 tax paid on chemicals used in the production of an exported substance, in the case of a petition of an importer or exporter (i) that is filed and accepted by the Secretary before January 1, 2023, (ii) that seeks to add the substance to the list of taxable substances, and (iii) based on which the Secretary adds the substance to the list of taxable substances, both the filing date of the petition and the date the substance is added to the list of taxable substances will be deemed to be July 1, 2022. The information here is by no means comprehensive, but it does provide a basic understanding of the law and its implications for affected companies. It is important for companies to engage in early conversations with procurement, contracting, IT, and other internal departments to identify and assess their exposure and potential gaps in data gathering. The tax may be passed along to customers. At what point in a transaction do the new taxes kick in? 2Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), Pub. Please enable JavaScript to view the site. Additionally, the Infrastructure Investment and Jobs Act ("IIJA") double the tax rate on chemicals or . Hydrocarbon streams containing mixtures of organic taxable chemicals. Notice 2021-66. 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. The Reinstated Superfund Excise Taxes. (added June 24, 2022), Q4. An official website of the United States Government. Yes. 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. 15I.R.C. Companies opting for the latter run the risk, however, of incurring penalties, should the IRS adopt a different view. 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. This memorandum explains why. Procedures to request an IRS determination to add or remove a substance from the list of taxable substances under Internal Revenue Code Section 4672(a) are in Revenue Procedure 2022-26PDF. 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. brands, Corporate income 17Prop. 12I.R.S. 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. 16I.R.C. L. 96- 510, 42 U.S.C. 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. Please see links for details: 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. 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. 4672(a)(2)(B)(2021). Heres how to analyze the implications and plan now for the revitalized Superfund Excise Tax. The IRS is expected to issue guidance prior to theJuly 1, 2022, effective date of the Superfund excise taxes. Yes. Download pdf (1.5 MB) The IRS today released an advance version of Notice 2021-66 regarding the reinstated excise taxes imposed on certain chemicals and substances under sections 4661 and 4671 (often referred to as "Superfund" excise taxes). 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. How does a company report the Superfund Chemical Excise Tax? Greenville | The Infrastructure Investment and Jobs Act (the IIJA), signed into law on November 15, 2021, reinstated two environmental excise taxes that had been terminated over twenty-five years ago. The Superfund Excise Tax will go back into effect on July 1 st, 2022, after not being in place for over 26 years. DOL Provides Snapshot of ERISA Enforcement Statistics for Fiscal Year 2022, TPA Escapes Liability for Sending COBRA Notice to Employees Former Address, but Claims Proceed Against Employer, For 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). Additionally, Form 6627, Environmental Taxes, was previously used to report the Superfund Excise Taxes when the taxes were last in effect, and this form will be used again to report the taxes owed. Thomson Reuters/Tax & Accounting. Criminal Referrals and OSHA Violations, Part III: Industry Standards Oregon House Revenue Committee Set to Hear More About Pro-Taxpayer Buying or Selling a Small Business Government Contractor? Accordingly, the procedural rules in26 C.F.R. As defined, the taxable substances appear to stop short of what would be defined as an article according to40 C.F.R. A4. Rep. No. 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. (added June 24, 2022), Q8. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. 8Id. 429.Section 80201 of the IIJA reinstates the Superfund excise tax on certain chemical substances under Sections 4661 and 4671 of the Internal Revenue Code (Tax Code), effective July 1, 2022.Section 80201(c)(1) of the IIJA modified the method for determining . . (b) Amount of Tax The amount of tax imposed by subsection (a) shall be determined in accordance with the following table: (c) Termination No tax shall be imposed by this section after December 31, 2031. media, Press 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. The excise tax collection expired in 1995 but resumed on July 1, 2022. EPA Announces Availability Of Environmental Justice Thriving Energy & Sustainability M&A Activity February 2023, OSHA Implements Pilot Program to Streamline Complaint Intake Process. The first quarterly Superfund Tax reporting on Form 720 is due October 31, 2022. A1. Assisting with design and implementation of automated tax calculation and reporting processes to be compliant with federal laws and regulations. Therefore, a chemical substance could qualify as a taxable substance if taxable chemicals listed in IRC section 4662 constitute more than 20 percent of the weight (or more than 20 percent of the value) of the materials used to produce such substance.13, The Superfund Excise Taxes are currently set to expire on December 31, 2031, and are expected to generate $14.4 billion of revenue (or approximately $1.2 billion annually).14, IRC section 4661(b) lists 42 chemicals, identified in Exhibit A. Social login not available on Microsoft Edge browser at this time. At that time, the application of the tax and the deployment of funds were quite well understood, and the U.S. Internal Revenue Service (IRS) developed a relatively robust series of guidance documents to explain how the tax operated and who was subject to the tax. Congress directed the Department of Treasury to publish an additional list of the taxable substances by January 1, 2022. sarsmith@deloitte.com, Frank Falvo 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. 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. (added June 24, 2022), Q3. 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. (added June 24, 2022), Q14. For example, methane or butane used as a fuel, or nitric acid, sulfuric acid, ammonia, or methane used in production of fertilizer are exempt. Sitemap Companies with a large volume of transactions should consider automating their tax calculation and reporting processes to increase efficiency and accuracy. Who is responsible for reporting and paying Superfund chemical excise taxes? Under the new law, the excise tax applies to the use, sale, or import of 42 taxable chemicals and 151 hazardous substances. The IRS has issued lists for both the chemicals and substances included (under Section 4661 and 4671 of the Internal Revenue Code, respectively), but has cautioned importers that items on the list could change as chemicals or substances are either added or removed from the list over time. An official website of the United States Government. The Notice essentially allows taxpayers untilOctober 31, 2022, to determine whether a Superfund excise tax applies and to calculate how much taxed is owed. Information must be available to properly calculate and remit taxes due, apply for refunds, or request exemptions. The National Law Review - National Law Forum LLC 3 Grant Square #141 Hinsdale, IL 60521 Telephone (708) 357-3317 ortollfree(877)357-3317. As discussed above, the list of taxable substances was incorporated into the IRC as a result of SARA, effective in 1989. Comprehensive | Careers The proposal would essentially create a new excise tax on the manufacture, production, or importation of 42 chemicals. For hazardous substances, the taxable event is the importation of the substance by an importer, and the tax is due upon the first sale or use after the substance is imported. Your comprehensive guide to the Act's many changes to the Internal Revenue Code, and their implications for businesses and individuals. Complete Analysis of the Tax Cuts and Jobs Act, The future of Indirect Tax (IDT): How to take charge of change, How to overcome the most common challenges of tax engine implementation, The Tax Technology Transformation: Getting Started. The Infrastructure Bill lowers the thresholdfor a chemical substance to meet the definition of taxable substance, thus more imports may be subject to this tax. 2023. The Infrastructure Investment and Jobs Act signed into law November 15, 2021, reinstated the Superfund Excise Taxes (Superfund Tax) on chemicals and substances. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. The latest reiteration of the excise tax will be comprised of two separate taxes on (1) chemical sales and (2) chemical importers. Does the Supreme Court have the stomach to tackle the super fun SECs Pay vs. Chemical tax to clean up toxic sites gets new life as part of infrastructure deal. For instance, necessary data elements may not be available to properly identify the taxable chemicals and components. 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. Fast forward to today. 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. industry questions. These substances consist generally or partially of chemicals listed in Section 4661. 901, for the initial list of substances that the Secretary has added to the list of taxable substances. Importers When are the new Superfund Chemical Excise taxes due? How do you calculate the Superfund Excise Tax? 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. 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 . 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. What is a taxable chemical? (added June 24, 2022), Q13. California Law May Limit Hospitals Ability to Adopt The Joint Ankura CTIX FLASH Update - February 28, 2023, Ankura Cyber Threat Investigations and Expert Services. IRC section 4662 directs the IRS to release guidance as to the appropriate manner of reporting exempt sales or claiming refunds. customs, Benefits & In November 2021, President Biden signed the Infrastructure Investment and Jobs Act. Atlanta | There are two ways a substance can be added to or removed from the list of taxable substances pursuant to section 4672(a)(2) and (4). When enacted, the Superfund was financed by environmental excise taxes on certain commonly used chemicals often found at Superfund sites. 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. The term " Superfund " refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. corporations, For The Superfund Excise Taxes will be reported on a quarterly basis on IRS Form 720, Quarterly Federal Excise Tax. Exporters 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. accounting, Firm & workflow These FAQs detail what the Superfund chemical excise tax is, how the tax is computed, and who may be liable for the tax. Heavy metals, halogens, acids, and bases are significant raw materials for many toxic inorganics.) Raleigh | Companies that import taxable chemicals or taxable substances will be liable for the excise tax. Cultivating a sustainable and prosperous future, Real-world client stories of purpose and impact, Key opportunities, trends, and challenges, Go straight to smart with daily updates on your mobile device, See what's happening this week and the impact on your business. 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. EC Appeals European General Court Decision Annulling the Harmonized Weekly Bankruptcy Alert February 28, 2023. Part 40regarding filing, deposits, and related procedural issues apply to companies subject to the reinstated Superfund excise taxes. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Will Changes to the Option To Tax Regime Impact UK Insolvency Sales? 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. How are substances added to or removed from the list of taxable substances? Breaking the Link New Developments on U.S. Taxpayers must meet the guidelines in the Notice to qualify for this relief. The tax would apply after December 31, 2021, until January 1, 2032. (added June 24, 2022), Q7. ONESOURCE Determination gives companies the ability to quickly comply with Superfund Excise and Hazardous Substance taxes by automatically and accurately calculating the amount of excise tax owed. 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. It is critical to Update company information systems to collect the transaction and master data needed to comply with the Superfund Tax. technology solutions for global tax compliance and decision Deposit payments with the Electronic Federal Tax Payment System (EFTPS). 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). See section 4672(a)(1). Deloittte Tax Tax Principal Superfund Chemical Excise Taxes are reported on Form 6627 (Environmental Taxes), which attaches to Form 720 (Quarterly Federal Excise Tax Return). See section 4671(b)(3). What is a taxable substance? A3. US Executive Branch Update February 27, 2023. and accounting software suite that offers real-time The Superfund excise taxes are set to expire at the end of 2031. 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. Cherry Bekaert is the brand name under which Cherry Bekaert LLP and Cherry Bekaert Advisory LLC provide professional services. Substances. An exporter who did not pay the initial assessment of the Superfund Tax may still be entitled to the refund if certain condition are met.

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