June 21, 2022
Superfund Excise Taxes
In 1980, U.S. Congress established the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”), this was also known as the Superfund. This fund was enacted to finance government-led cleanups, and remediation of hazardous waste sites. This Excise Tax was in place up until 1995 when U.S. Congress failed to renew CERCLA.
On November 15, 2021, the Infrastructure Investment and Jobs Act (Pub.L. 117-58) was signed into law. The Infrastructure Investment and Jobs Act reinstated and expanded the scope of the Superfund Excise Tax.
The Superfund is a federal excise tax on various hazardous chemicals. This tax provided a federal fund to remediate toxic spill sites when a responsible party could not be identified. The Superfund Excise Tax will go back into effect on July 1st, 2022, after not being in place for over 26 years. The Superfund Excise Tax is not permanent and will expire on December 31, 2031. The new Superfund imposes a tax on the following:
- Section 4661– Excise Tax on Manufacture, Production, or Import of any of the following 42 Chemicals:
|Chemical Substance||Rate/Ton ($)||Chemical Substance||Rate/Ton ($)|
|Cuprous oxide||7.94||Zinc chloride||4.44|
- Section 4671 – Excise Taxes on related substances sold or used by importers:
IRC § 4672 (a)(3)
|Acrylic and methacrylic acid resins||Nickel oxide|
|Ammonium nitrate||Nickel waste and scrap|
|Carbon tetrachloride||Phenolic resins|
|Cumene||Polyethylene resins (total)|
|Ethyl alcohol for nonbeverage use||Polypropylene resins|
|Ethyl methyl ketone||Polystyrene homopolymer resins|
|Ethylbenzene||Polystyrene resins and copolymers|
|Ethylene dichloride||Polyvinylchloride resins|
|Ethylene glycol||Propylene glycol|
|Ethylene oxide||Propylene oxide|
|Ferrochrome ov 3 pct. carbon||Styrene|
|Ferrochromium nov 3 pct||Styrene-butadiene (latex)|
|Formaldehyde||Synthetic rubber (not containing fillers)|
|Hydrogen peroxide||Unwrought nickel|
|Isopropyl alcohol||Vinyl chloride|
|Maleic anhydride||Vinyl resins|
|Melamine||Vinyl resins (nspf)|
|Methanol||Wrought nickel rods and wire|
IRC § 4672 (a)(2)
|1,5,9-cyclododecatriene||Normal butyl acetate|
|2-ethyl hexanol||Normal propyl acetate|
|2-ethylhexyl acrylate||Nylon 6/6|
|Benzoic acid||Phosphorous trichloride|
|Bisphenol-A||Poly (69/31 ethylene/cyclohexylenedimethylene terephthalate)|
|Butanol||Poly (96.5/3.5 ethylene/cyclohexylenedimethylene terephthalate)|
|Butyl acrylate||Poly (98.5/1.5 ethylene/cyclohexylenedimethylene terephthalate)|
|Butyl benzyl phthalate||Polyalphaolefins|
|Diethanolamine||Poly 1,4 butyleneterephthalate|
|Di-2-ethyl hexyl phthalate||Polycarbonate|
|Diglycidyl ether of bisphenol-A||Polyethylene terephthalate pellets|
|Ethyl chloride||Sodium nitriolotriacetate monohydrate|
|Ethylenebistetrabromophthalimide||Synthetic linear fatty alcohols|
|Ethylene dibromide||Synthetic linear fatty alcohols ethoxylates|
|Formic acid||Terephthalic acid|
|Isobutyl acetate||Texanol benzyl phthalate|
|Linear alpha olefins||Toluene diisocyanate|
|Methyl isobutyl ketone||Triisopropanolamine|
Although the Excise tax is now in place, there are exemptions to this. Exemptions from the application of the excise tax are listed under Section 4662(b). Various taxable chemicals are exempt due to their specific use. For example, using methane or butane as fuel or methane used in production of fertilizer are exempt.
- Methane or butane used as fuel;
- Nitric acid, sulfuric acid, ammonia, or methane used to produce ammonia which is a qualified fertilizer substance;
- Sulfuric Acid Produced as a Byproduct of Air Pollution Control;
- Substances Derived from Coal
- Substances Used in the Production of Motor Fuel;
- Substance Having Transitory Presence during Refining Process;
- Separated isomer of xylene;
- Recycled chromium, cobalt, and nickel;
- Substances used in the production of animal feed;
- Hydrocarbon streams containing mixtures of organic taxable chemicals;
What’s Next? What does this mean
Taxpayers who fall within the Superfund Excise Taxes are subject to reporting and other compliance obligations. Superfund Taxes are reported on a document attached to Form 720 (Quarterly Federal Excise Tax Return). Taxpayers will need to make semi-monthly deposits to the IRS of at least 95% of their net tax due for the period to fulfill their tax responsibility unless safe harbor applies. If taxpayers fail to make deposits on time can receive a penalty under Sec. 6656 unless they show the failure is due to reasonable cause and not due to willful neglect.
The IRS released Notice 2022-15 which provides relief for the third and fourth calendar quarters of 2022 and the first calendar quarter of 2023 in regard to the failure to deposit penalties imposed by Section 6656 stated above. This Notice allows companies until October 31, 2022 to determine whether they will need to pay the Superfund Excise Tax. However some deposit amount is still needed to be made by July 29th, 2022 to meet the relief requirement of Notice 2022-15.
With the reinstatement of Superfund Excise taxes, many companies will be impacted. Taxpayers should implement a plan of action and consider the possible tax liabilities & reporting requirements that results from this reinstatement.
How CDH can help:
- Calculating the federal excise tax liability.
- Identify possible exemptions that may apply when filing Excise Tax.
- Assisting with filing the federal excise tax returns and semi-monthly deposit reporting.
- Assist with all compliance obligations, including filing returns on Forms 720 and Form 6627
If you need help, please contact Brian Yohannan ([email protected]).