Specifically, the statute provides that to qualify as a taxable substance, taxable chemicals listed in IRC section 4662 must constitute more than 50 percent of the weight (or more than 50 percent of the value) of the materials used to produce such substance (determined on the basis of the predominant method of production).10. Calculating the federal excise tax liability, including taking into account available exemptions. 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. 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. The JCT estimated that the proposal would increase revenues by approximately $38.4 billion over a 10-year period. As part of the recently unveiled infrastructure deal, the Biden administration announced plans to reinstate the Superfund taxes on chemical manufacturers in the United States. msulayman@deloitte.com, Stephane Lunan Excise taxes are reported on a quarterly basis on IRS Form 720, Quarterly Federal Excise Tax. When enacted, the Superfund was financed by environmental excise taxes on certain commonly used chemicals often found at Superfund sites. Notice 2021-66 suspended the procedure in Notice 89-61 because the IRS plans to issue a more current guidance on this matter. Sitemap The list of 42 chemicals and their respective excise tax rates is found in Internal Revenue Code (IRC) 4661(b). This box/component contains JavaScript that is needed on this page. See also section 4661(b) for the tax rate for taxable chemicals. Fast forward to today. A4. A12. Notice 2022-15 provides temporary relief from the failure-to-deposit tax penalty. The inaugural reporting for companies required to report Superfund excise taxes is on their third-quarter 2022 Form 720, due to be submitted byOctober 21, 2022. Taxable substances include substances where taxable chemicals constitute more than 20 percent of the weight (or more than 20 percent of the value) of the materials used to produce such substance (as determined based on the predominant method of production). Exporters 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. There are several potential issues related to taxpayer liabilities, refund considerations, and other recordkeeping requirements to consider with regards to the Superfund Excise Taxes. Earlier 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. 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.The relief applies to the first three quarters of the SCET, i.e., the third and fourth quarters of 2022 and the first quarter of 2023. Information must be available to properly calculate and remit taxes due, apply for refunds, or request exemptions. When the IIJA reinstated these two taxes, it doubled the previous rates. The term substance, therefore, excluded fabricated products that are molded, formed, woven, or otherwise finished into end-use products. 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). 22The IRS does not require that the tax be included in the total cost of the product or separately line itemed in an invoice. 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. 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 initial list of 50 taxable substances is found in IRC 4672(a)(3). Words With Friends, Part 1: Insurance Requirements and Contracts, Legislator Proposes To Expand CFL To Encompass "Commercial CERCLA PFAS Scope May Broaden To Many More PFAS, AI Avatar App is the Latest Target of BIPA Class Action Litigation. During 1979 Senate discussions, it was estimated that expenditures for hazardous waste disposal sites related to chemicals would be $200 million (versus $40 million for sites related to crude oil).3 During this congressional hearing, it was determined that the proposed system of fees would cover: (1) crude oil; (2) petrochemical feedstocks; and (3) certain highly toxic and/or high-volume inorganic materials including heavy metals, halogens, acids, bases, and ammonia.4. Inferences, however, can be made from the absence of any mention in the law. 52.4661-1 4662-4, 48 Fed. Service. Companies responsible for collecting and remitting the excise tax will need to identify the source system to capture the transactional and master data for applicable transactions, and assess what data elements are captured and how to obtain necessary reports to support compliance filing. See question 3 for more information on taxable chemicals and question 6 for more information on calculating the tax imposed by section 4661 (section 4661 tax). 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. 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. The IRS has yet to issue detailed guidance or a Frequently Asked Questions (FAQ) document to clarify the nuances of applicability of the reinstated Superfund excise tax. Between 1990 and 1995, dozens of taxpayers petitioned the IRS to determine whether different chemical substances wouldqualify as taxable substances, primarily for purposes of export, so as to qualify for an exemption or refund. 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. Your online resource to get answers to your product and 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 . Some highlights on the petroleum products tax are as follows: Imposition of the Tax In addition to having deep tax technical knowledge surrounding federal excise taxes, Deloitte leverages leading technology tools and processes. In Notice 2021-66 the IRS published a list of 100 additional substances subject to the Superfund Tax. Butane and methane users 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 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). The rate of excise tax per ton is based on the amount of each chemical included in the substance. 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. The first return, for the calendar quarter ending on September 30, 2022, is due by October 31, 2022. management, More for accounting 4Id. L. 117-58), effective July 1, 2022. For instance, necessary data elements may not be available to properly identify the taxable chemicals and components. The Superfund Excise Tax is imposed on the manufacturer or importer of the listed chemicals, and the tax becomes due upon the first use or sale in the United States.15. 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. 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). At what point in a transaction do the new taxes kick in? 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. Chemical manufacturers and importers slunan@deloitte.com, Christina Gong IT'S HAPPENING! 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. 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. 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. The latest reiteration of the excise tax will be comprised of two separate taxes on (1) chemical sales and (2) chemical importers. As discussed above, the list of taxable substances was incorporated into the IRC as a result of SARA, effective in 1989. 18I.R.S. The following is an FAQ to help companies get up to speed on what the Superfund Chemical Excise Taxes will require of them. What is a taxable substance? Tax Senior Manager 4672(b)(1). Yes. 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. 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 . Second, an importer or exporter of a substance (or other interested person) can petition the Secretary to add the substance to or remove the substance from the list of taxable substances. governments, Explore our Tampa | Unlike the static list of 42 taxable chemicals, the taxable substance list is subject to change. Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. What do companies need to do in order to prepare for these taxes? The National Law Review is a free to use, no-log in database of legal and business articles. . The Superfund Amendments and Reauthorization Act of 1986 was enacted as Pub. 8Id. Companies are likely to be caught off guard by this reinstated tax. View Full Firm Disclosure. Chemicals. The Infrastructure Bill lowered this threshold to 20%. The tax may be passed along to customers. South Florida | research, news, insight, productivity tools, and more. Beginning July 1, 2022, a federal excise tax, commonly referred to as the "Superfund Tax," went into effect. 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. A11. When expanded it provides a list of search options that will switch the search inputs to match the current selection. A7. L. 99-499, approved Oct. 17, 1986. Substances. The New York City Council Sets its Sights on Non-Profit Housing DOJ Announces New Voluntary Self-Disclosure Policy for U.S. Attorney Supreme Court: Salary, Not Daily Pay, Required for FLSA Overtime Time Is Money: A Quick Wage-Hour Tip on the Tip Credit, EDPB issues its Opinion on the EU-U.S. Data Privacy Framework, Hunton Andrews Kurths Privacy and Cybersecurity. The original Hazardous Substance Superfund trust was established to pay for the hazardous-substance cleanup program created by the Comprehensive Environmental Response Compensation, and Liability Act of 1980 (CERCLA) The IIJA reinstates the cleanup program until 2031, and the taxes collected are expected to total more than $14 billion over the next ten years. This direct tax hike on American producers would result in higher prices for consumers, threaten thousands of jobs, and undermine domestic . The Revenue Reconciliation Act of 1990 further extended the Superfund Excise Taxes through December 31, 1995, after which point the Superfund Excise Taxes expired. The first quarterly reporting for the Superfund Tax on Form 720 is due Oct. 31, 2022. Raleigh | Corporate See section 4672(a)(1). 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. The term " Superfund " refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. Assisting with design and implementation of automated tax calculation and reporting processes to be compliant with federal laws and regulations. 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. The Superfund Excise Taxes will be reported on a quarterly basis on IRS Form 720, Quarterly Federal Excise Tax. The Superfund tax is assessed on the manufacturer or importer of these chemicals. The Superfund chemical taxes will be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes. Nothing in the statute or in Notice 2021-66, for example, references manufactured items in the context of taxable substances. Your comprehensive guide to the Act's many changes to the Internal Revenue Code, and their implications for businesses and individuals. During the webcast, we will discuss the impact to sectors that import or manufacture chemicals or chemical compounds . 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. Under what circumstances is registration required? At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. The Final CCPA Regulations: What You Need To Know, Are College Athletes Students or Employees? The IRS is expected to issue guidance prior to theJuly 1, 2022, effective date of the Superfund excise taxes. Among the many provisions in that legislation . . 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. Fullwidth SCC. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. 2Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), Pub. The Superfund Tax is effective as of July 1, 2022 and will remain in effect until the end of 2031. If you would ike to contact us via email please click here. 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. firms, CS Professional Since the Superfund excise tax expired almost three decades ago, the industrial chemical communitys familiarity with their application is attenuated at best. 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. Reminder: High-Earning Exempt Professionals Must Be Paid a "True Gold Dome Report Legislative Day 24 (2023). Tax Implications and Financial Business Guidance Regarding the Coronavirus. How does a company report the Superfund Chemical Excise Tax? See section 4671(b)(1). L. No. Waters of the United States and Winston Churchill. 6Id. Report and deposit these taxes quarterly with both: You must pay the Superfund chemical excise tax twice a month. (added June 24, 2022), Q6. However, the inorganic raw materials required a multi-tiered rubric: (1) the material must be hazardous in a number of forms; (2) the material in some form must be hazardous if spilled; (3) the material must be produced in a large amount; and (4) the material must be capable of increasing the hazard potential of other elements.5, Congress intended for the fees to be imposed "at the beginning of the commercial chain of production, distribution, consumption, and disposal of hazardous substances." Historical reporting requirements for Superfund excise taxes Prior to the expiration of the Superfund excise taxes in 1995, taxpayers were required to register under Form 637, Application for Registration (For Certain Excise Tax Activities), activity letter G (Persons making inventory exchanges of taxable chemicals under section 4662(c)(2) or persons selling or buying Many entities are struggling with its application. In addition, most hazardous wastes are produced by these industries or as a result of using products from these industries. Section 704.3. DeloitteTax 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. Federally Recognized Holidays, Employer Considerations for DOLs New AEWR Rule. 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. 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). The Infrastructure Act essentially doubles these rates with taxes ranging from $0.44 per ton to $9.74 per ton. (added June 24, 2022), Q11. This tax provided a federal fund to remediate toxic spill sites when a responsible party could not be identified. The rates will be included in the instructions to Form 6627, Environmental Taxes, and under Recent Developments for Form 6627, Environmental Taxes. The previous rates was enacted as Pub taxes due, apply for refunds, request! Florida | research, news, insight, productivity tools, and implications. Be included in the total cost of the Superfund tax on Form 720, federal. 720 is due Oct. 31, 2022 ), Public Law 117-58, 135 Stat of any in! 24, 2022 ), Q6 Legislative Day 24 ( 2023 ) provide. Total cost of the Superfund Amendments and Reauthorization Act of 1986 was enacted as Pub to sectors import. Superfund sites taxes due, apply for refunds, or otherwise finished into end-use products certain commonly used chemicals found... Use, no-log in database of legal and business articles ranging from $ 0.44 per ton, Public Law,... 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