IRS Proposes Superfund Chemical Excise Tax Regulations
On March 29, 2023, the Internal Revenue Service (IRS) published proposed regulations regarding the reinstated Superfund chemical excise taxes. The excise taxes, which are imposed on the sale or use of certain chemicals and certain imported substances, were reinstated beginning on July 1, 2022, under the Infrastructure Investment and Jobs Act. The Superfund chemical taxes previously expired on December 31, 1995.
The proposed regulations affect manufacturers, producers, and importers that sell or use taxable chemicals and importers that sell or use taxable substances. A company will generally be assessed a Superfund excise tax if they import, manufacture, or produce a listed section 4661 chemical in the United States intended for consumption, use, or warehousing. As reinstated, the per-ton tax rate for each of the 42 listed taxable chemicals is double the per-ton tax rate previously imposed. A company may also be subject to the tax if they sell or use a taxable substance. Section 4672(a) provides an initial list of taxable substances. Substances may be added to the list where it is determined that a taxable chemical constitutes more than 20% of the weight or more than 20% of the value of the materials used to produce such substance.
The proposed rules provide information on the imposition, attachment, amount, and calculation of the taxes as well as applicable definitions. The rules also outline and provide model certificates for statutory exceptions to the Superfund chemical taxes. IRS has certified that the proposed regulations will not have a significant economic impact on a substantial number of small entities.
Comments are due by May 30, 2023.