The Superfund Tax that was established over two decades ago and taxed specific chemicals and hazardous substances has been restored after the passing of the Infrastructure Investment and Jobs Act last year. We recommend taking the following steps now to determine how this excise tax applies to your company and to help ensure compliance: In addition, it is important to identify your available resources for determining taxability, exemptions, making tax deposits, filing applicable IRS registrations (Form 637, Application for Registration For Certain Excise Tax Activities) and filing quarterly tax returns (Form 720, Quarterly Federal Excise Tax Return, and attachment Form 6627, Environmental Taxes). Operating now under a new set of rules, organizations manufacturing or importing certain chemicals now face new tax challenges. The section 4661 tax is imposed as a rate per ton of a taxable chemical. 177-58) and was signed on November 15, 2021. The microbusiness also charges $5 for delivery. (added June 24, 2022), Q8. You Meta Believe the GDPR Penalties Are No Joke! Relief provided for Superfund chemical excise tax semimonthly deposits. 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. This new tax does not need to add additional costs to your products. 17. The tax For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. Many in the industrial chemical community are unfamiliar with the Superfund excise tax legacy, and the IRS is seemingly unprepared for the learning curve challenge the reactivation of the tax has created. Specifically, the due date for the deposit accelerates to the immediately preceding date that is not a Saturday, Sunday, or legal holiday. Data Security Taxable substances are those that contain 20% or more by weight or value of one of the 42 chemicals listed in IRC 4661(b). 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. The Inflation Reduction Act (Pub.L. The Joint Committee on Taxation estimates these excise taxes combined would increase revenues by over $52 billion over a 10-year period. . The Infrastructure Investment and Jobs Act included the reauthorization of the Superfund law (P.L. The Inflation Reduction Act (Pub.L. Superfund Chemical Excise Taxes Effective July 1, 2022, excise taxes are reinstated on certain chemicals and imported chemical substances. This potential change in Brazilian transfer pricing policies could have significant consequences from a U.S. transfer pricing and international tax perspective. Any manufacturer, producer, or importer of a taxable chemical is subject to the superfund excise tax. Any taxable chemical or substance also qualifies for a Superfund Tax Credit. These credits are accrued when a taxable chemical or taxable substance is exported. A Superfund tax is imposed when a taxable chemical is imported, or is domestically produced for sale or use unless an exemption applies. IRC 4671 imposes the excise tax on the sale or use by an importer of specified taxable substances (as initially identified in IRC 4672(a)(3) and IRS Notice 2021-66). Notice 2022-15 recognizes the burden on taxpayers, explicitly noting the short time frame between the reinstatement of the Superfund chemical taxes and the due date of the first deposit, the unavailability of the 40.6302(c)-1(b)(2) deposit safe harbor in 2022, the possible difficulties of computing the correct amount of tax during the third calendar quarter of 2022 (which is both the first calendar quarter the taxes are in effect and the look-back quarter for the first calendar quarter of 2023), and the number of new taxpayers owing Superfund chemical taxes that have not previously had to comply with the deposit requirements of section 6302.. These taxes expired more than 25 years ago. The applicable rates of tax and related The excise tax applies to companies that manufacture, produce, or import any of the 42 specific chemicals listed in Section 4661 of the Tax Code, including ammonia, butane, These FAQs detail what the Superfund chemical excise tax is, how the tax is computed, and who may be liable for the tax. 177-58) reauthorizes Superfund with expanded provisions of doubled rates on Taxable Chemicals, and a vast expansion of Taxable Substances. How are the Superfund chemical excise taxes reported? View Full Firm Disclosure. The Superfund excise tax is currently set to expire on December 31, 2031. There are 42 chemicals listed in section 4661(b). The Inflation Reduction Act added excise tax on domestic crude oil and imported petroleum products starting on January 1,2023. Navigating the complex terrain of excise taxation and uncovering opportunities, Stay informed on excise tax-related news with ourKPMG TaxNewsFlasharchive. The Reinstated Superfund Excise Taxes. Take inventory of chemicals and determine effects on manufacturing processes and product pricing to ascertain business impact and identify tax exposure. Identify exempt chemicals and substances under export rules. However, Notice 2022-15, 2022-18 I.R.B. Among the requirements mentioned (briefly) in Notice 2021-66, SCET taxpayers with a net quarterly liability in excess of $2,500 must make deposits of tax for each semimonthly period in which the tax liability is incurred. Contributed by Stephanie C. Cason, CPA, MAcc, Manager in RKLs Tax Services Group. Its been a while since manufacturers or other affected organizations had to consider this levy, so lets take a closer look at these excise taxes and how taxpayers can determine applicability and prepare for compliance. 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. 2022 Global Digital Trust Insights Survey, Application Security and Controls Monitoring Managed Services, Controls Testing and Monitoring Managed Services, Financial Crimes Compliance Managed Services, Virtual Business Office services for healthcare. With over 10 years of experience, Sales Tax Manager Elizabeth Perez Gonzalez specializes in sales and use tax services. The recent reinstatement of Superfund chemical excise taxes on certain taxable chemicals and specified taxable substances takes effect July 1, 2022, and will be imposed For example, the tax arising from the period July 1 - July 15, 2022 must be deposited by July 29, 2022. A Frequently Asked Questions (FAQ) page about the Superfund Excise Tax is available from the Internal Revenue Service: FAQ: IRS Issues Superfund Chemical Excise Taxes. The term Superfund refers to chemical excise taxes imposed by the IRS on certain domestically produced and imported chemicals, and imported substances. 2022-26 (Issued 6/28/2022), Exclusive Procedures to Request a Determination under IRC 4672 (a) (2) That a Substance Be Added To/Removed From the List of Taxable Substances under IRC 4672 (a) ( Link) Please The Joint Committee on Taxation estimates these excise taxes combined would increase revenues by over $52 billion over a 10-year period How KPMG can help The importer of hazardous substances pays the tax, and it is due on the first sale or use after import. $300 plus $0.085 per each acre-foot greater than 10 acre-feet. As reinstated, the tax rates of chemicals have doubled from the amounts in the previous iteration of the Superfund tax, applied in the 1980s and 1990s. Yes. 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. 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. 901, for the initial list of substances that the Secretary has added to the list of taxable substances. Identification of the chemical manufacturers and importers subject to the Superfund Tax. The reinstated excise tax on chemicals and substances containing chemicals funds a portion of the Superfund Trust Fund. The hazardous substance tax will be imposed at a rate of 16.4 cents per barrel and will be adjusted for inflation on January 1 of each year until it expires on December 31, 2032. This is the first person/company at which the taxable chemical lands in the U.S. for the preceding reasons. What is a taxable chemical? 429 (2021)), effective July 1, 2022, with modifications to the applicable rates of tax and other provisions related to those taxes. The manufacturer or importer pays the excise tax for chemicals, which is due on the first use or sale in the United States. Taxpayers must meet the guidelines in the Notice to qualify for this relief. As reinstated, the excise tax rates are doubled from pre-1996 levels and range from $0.44 cents per ton to $9.74 per ton. New Jersey enacted a new tax law (A.B. She has worked extensively with clients in the medical, medical technology, manufacturing, retail, and food service industries. Final Regulations Governing Illinois Equal Pay Acts Certification Weekly Bankruptcy Alert: January 17, 2023 (For the week ending Bankruptcy Court Allows Service of a Subpoena Via Twitter. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Section 4671(a) imposes an excise tax on the sale or use of a taxable substance by the importer of the taxable substance. | All Locations, Cherry Bekaert is the brand name under which Cherry Bekaert LLP and Cherry Bekaert Advisory LLC, independently owned entities, provide professional services in an alternative practice structure in accordance with applicable professional standards. 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. 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. If you are a manufacturer or importer, it is essential that your organization be prepared to report and remit the excise tax. Normally, if a taxpayer deposits less than 95% of its required deposit and is not following the prescribed safe-harbor method, Section 6656 imposes a penalty that reaches its maximum rate of 10% after only 15 days. SECURE 2.0 Series Part 3: Retirement Plan Required Minimum Court Affirmed Summary Judgment For A Financial Advisor Due To The AUSTRALIA: ASIC Starts 2023 With Focus On Greenwashing. The IRS is expected to issue guidance prior to theJuly 1, 2022, effective date of the Superfund excise taxes. The reauthorization doubled the tax rates on taxable chemicals, vastly expanded listed taxable substances, and increased the cap size of the trust fund. What are the Superfund chemical excise taxes? Expanded Employee Retention Credit (ERC) & how our professionals can assist you. However, given the related compliance processes that need to be established (e.g., automating data capture, gathering exemption documentation, and return preparation and filing) and matters that need to be addressed (e.g, Form 637 registration and taxable substance listing), taxpayers should consider taking this opportunity to evaluate whether their overall SCET program is sufficiently robust and meets the greater needs of their organization for example, by reprioritizing activities within their project plans. The IRS is working on calculating tax rates for taxable substances and will release them as they become available. A14. The microbusiness also charges $5 for delivery. The Superfund Amendments and Reauthorization Act (SARA) of 19861995 expanded the programs scope. The Superfund Chemical Excise Tax was created in 1980 through the Comprehensive Environment Response, Compensation, and Liability Act. Now and for the future. July 1, 2021 thru June 30, 2022. For tax advice, consult your tax adviser. A taxable chemical is a chemical that is (i) listed in section 4661(b), and (ii) manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing. The IRS is working on calculating tax rates for taxable substances and will release the tax rates as they become available. Part II of Form 6627, Environmental Taxes, will be updated to reflect the tax rate per ton of each taxable chemical. 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. Partner, Tax Controversy and Regulatory Services, PwC US. Additional substances may be added if the weight or value of the substances is greater than 20% of the contained taxable chemical. A diversity, equity and inclusion video series. 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. The tax on substances depends on their chemical composition and if it has 20% or more of a chemical on the taxable list. This excise tax, which is imposed on certain chemicals and imported chemical substances, was reinstated effective July 1, 2022, as part of the Infrastructure Investment and Jobs Act of November Acetylene Benzene Butane Butylene Butadiene If your company is liable, this will require compliance with semi-monthly tax deposit rules and quarterly tax return reporting requirements along with IRS registrations for certain exemptions. The excise tax applies to companies that manufacture, produce, or import any of the 42 specific chemicals listed inSection 4661of the Tax Code, most of them common in consumer products, including ammonia, butane, benzene, and mercury. Managing Director, Excise Tax Practice, KPMG US, Senior Manager, Tax | WNT - SALT Income & Incentives, KPMG US, Partner, Tax, Accounting Methods & Credits, KPMG US. The excise tax collection expired in 1995 but resumed on July 1, 2022. As reinstated, the Superfund excise tax will apply to a list of taxable chemicals and taxable substances, as ofJuly 1, 2022,throughDecember 31, 2031, if not extended. The Infrastructure Bill reinstated the Superfund Excise Taxes on chemicals and taxable substances, effective July 1, 2022. The initial list of 50 taxable substances is found in IRC 4672(a)(3). This ABA Tax Times article provides an illustration of the challenges faced by the oil and gas industry in applying one of these special rules related to two products derived from natural gas: methane and butane. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. How are substances added to or removed from the list of taxable substances? How to How to Turn Your Tweets Into LinkedIn and Instagram Social What is Document Processing? See Section 4671(b)(2). Initially, the Superfund program called for taxes by manufacturers of crude oil and certain chemicals to fund a trust to pay for environmental cleanup activities. $300 plus $0.090 per each acre-foot greater than 10 acre-feet. 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. Manufacturers, producers, or importers that sell or use any of these chemicals must pay a tax of $0.22 to $4.87 per ton, depending on the chemical. For this example, the sales tax rate is 8.5 percent, the cannabis excise tax is 15 percent, and there is a 10 percent local business tax. FS-2022-31, June 2022. 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. Semimonthly periods are the first through 15th of the month and 16th through the end of the month, with the deposit being due the 14th day following the end of the semimonthly period. What is a taxable substance? The Superfund chemical excise taxes previously expired on December 31, 1995. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. Policy on Demand is a news platform that provides in-depth insights and analysis on policy developments that impact your business. Additional clarification and guidance are expected in the upcoming months. 11 In addition to the reinstatement of the taxes, 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. Accordingly, a manufacturer, producer, or importer of a taxable chemical is subject to the section 4661 tax on the sale or use of the taxable chemical on or after July 1, 2022. A Superfund excise tax on chemicals has been signed into law and went into effect on July 1, 2022. Various exemptions exist for taxable chemicals.
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