The Internal Revenue Service (IRS) recently issued prescribed tax rates for 121 taxable substances in IRS release IR-2022-132 and set the procedure for Superfund list changes in Rev. Proc. 2022-26. The taxes are set to be reinstated beginning July 1, 2022.
Background
As part of the Infrastructure Investment and Jobs Act (“the Act”), H.R. 3684, enacted by Congress on November 5, 2021, the Internal Revenue Code (IRC) will be modified to reinstate the chemical production Superfund excise tax contained in IRC § 4661. President Biden signed the legislation on Monday, November 15, 2021.
The tax was originally enacted in 1980 and imposed until 1995. It established funds to clean up chemically contaminated waste sites. Improving the environment is a key element to the Act. The Act changes the termination date of § 4661(c) to December 31, 2031.
The taxes will apply to the production and importation of these chemicals. They are double the rate they were initially imposed in 1980. It will increase costs to numerous businesses as well as create excise tax compliance burdens.
Taxable Substance Rates
Taxable substances are subject to the Superfund chemical excise tax imposed by § 4671(a) and are listed (“the List”) in either § 4672(a)(3) of the IRC or Notice 2021-66. Substances may be added or removed from the list of taxable substances at a later date. The rates will be included in the instructions to Form 6627, Environmental Taxes, and under Recent Developments for Form 6627, Environmental Taxes.
Superfund List Changes
Exclusive procedures (“revenue procedure”) have been released by the IRS for requesting a determination under § 4672(a)(2) that a substance be added to or removed from the list of substances subject to tax. An importer or exporter of any substance, or a person other than an importer or exporter of such substance (“interested person”), may request to add a substance to the List or remove such substance from the List by submitting a petition to the IRS in accordance with the procedures described in Sections 5 and 6 of the revenue procedure. Any requests to modify the List that were submitted prior to publication of this revenue procedure or in response to the request for comments in Notice 2021-66 do not meet the requirements of Sections 5 and 6 of this revenue procedure. Such requests will not be processed and must be submitted in accordance with the procedures described in Sections 5 and 6 of the revenue procedure.
An importer, exporter, or interested person may submit a petition to add a substance to the List if such person determines that taxable chemicals constitute more than 20% of the weight or value of the materials used to produce such substance, determined on the basis of the predominant method of production. An importer, exporter, or interested person may submit a petition to remove a substance from the List if such person determines that taxable chemicals constitute 20% or less of the weight and 20% or less of the value of the materials used to produce such substance, determined on the basis of the predominant method of production.
Our Ryan experts have been monitoring the Act and, based on previous experience with the Superfund taxes, are well equipped to assist you with the reinstatement of these laws after more than 25 years of inactivity. Contact your Ryan expert to understand how the increase to the Superfund Tax will increase your costs and affect your excise tax compliance burdens.
TECHNICAL INFORMATION CONTACTS:
David Pustejovsky
Principal
Ryan
469.399.4370
david.pustejovsky@ryan.com
Nathan Hutchings
Manager
Ryan
913.338.2005
nathan.hutchings@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.