The Reinstated Superfund Excise Tax for Chemicals and Imported Substances

As of July 1, 2022, The Infrastructure Investment and Jobs Act (IIJA) has reinstated excise taxes imposed on certain chemicals and imported chemical substances. The original excise tax expired on December 31, 1995. This current iteration is set to expire on December 31, 2031. The excise tax was not only brought back, but the IIJA doubled the prior tax rate on chemicals. In turn, the tax rate of imported substances was effectively doubled as well. Manufacturers, laboratories and other businesses may begin to see these excise taxes passed along to them on invoices from their suppliers. Here’s more on what is included in the Superfund Excise Tax and what to keep an eye out for.

The infrastructure bill imposes taxes on certain chemicals and imported substances under Internal Revenue Code sections 4661 through 4672. More substances are expected to be added in the future, but the list as it stands is available below. Any manufacturer, producer, or importer of a taxable chemical is subject to the superfund excise tax. The Superfund chemical taxes should be reported on Form 720, Quarterly Federal Excise Tax Return, and Form 6627, Environmental Taxes.

As is the case with many excise taxes, the cost to businesses is expected to be passed down the supply chain, and ultimately to the end consumer in the form of increased prices and fees. Unless your company is a manufacturer or importer of chemicals and substances, there is no additional reporting required regarding the superfund excise tax.

If you are a manufacturer or importer, it is essential that your organization be prepared to report and remit the excise tax. The calculation of the superfund excise taxes is complex, and accurate reporting data can help companies reduce their tax burden.

The section 4661 tax is imposed as a rate per ton of a taxable chemical. Part II of IRS Form 6627 has been updated to reflect these rates.

The amount of the section 4671 tax with respect to any taxable substance is generally the amount of section 4661 tax that would have been imposed on the taxable chemicals used in the manufacture or production of the taxable substance if the taxable chemicals had been sold in the United States for use in the manufacture or production of the taxable substance.

If the importer does not calculate the section 4671 tax for a taxable substance and the IRS has prescribed a tax rate for the taxable substance, the tax is calculated using the rate prescribed by the IRS.

If the importer does not calculate the section 4671 tax for a taxable substance and the IRS has not prescribed a tax rate for the taxable substance, then the amount of tax is 10 percent of the appraised value of the taxable substance as of the time the taxable substance was entered into the United States for consumption, use, or warehousing.

The IRS is working on calculating tax rates for taxable substances and will release them as they become available.

According to the IRS, “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.” Below is the current list of taxable chemicals.

AcetyleneBenzeneButaneButyleneButadieneEthyleneMethaneNaphthalenePropyleneTolueneXyleneAmmoniaAntimonyAntimony trioxide

Arsenic

Arsenic trioxideBarium sulfideBromineCadmiumChlorineChromiumChromitePotassium dichromateSodium dichromateCobaltCupric sulfateCupric oxideCuprous oxide

Hydrochloric acid

Hydrogen fluorideLead oxideMercuryNickelPhosphorusStannous chlorideStannic chlorideZinc chlorideZinc sulfatePotassium hydroxideSodium hydroxideSulfuric acidNitric acid

According to the IRS, “A taxable substance is any substance that, at the time of sale or use by the importer of the substance, is listed as a taxable substance. . . under section 4672(a)(3), or if the Secretary of the Treasury or her delegate (Secretary) has added it to the list of taxable substances pursuant to section 4672(a)(2) or (4).” Below is the current list of taxable substances.

CumeneMethylene chlorideStyrenePolypropyleneAmmonium nitratePropylene glycolNickel oxideFormaldehydeIsopropyl alcoholAcetoneEthylene glycolAcrylonitrileVinyl chlorideMethanolPolyethylene resins, totalPropylene oxidePolybutadienePolypropylene resinsStyrene-butadiene, snpfEthylene dichlorideSynthetic rubber, not containing fillersCyclohexaneUreaIsophthalic acidFerronickelMaleic anhydrideFerrochromium nov 3 pctPhthalic anhydrideFerrochrome ov 3 pct. carbonEthyl methyl ketoneUnwrought nickelChloroformNickel waste and scrapCarbon tetrachloride

Styrene-butadiene, latex

Wrought nickel rods and wireChromic acidNickel powdersHydrogen peroxidePhenolic resinsPolystyrene homo­polymer resinsPolyvinylchloride resinsMelaminePolystyrene resins and copolymersAcrylic and methacrylic acid resinsEthyl alcohol for nonbeverage useVinyl resinsEthylbenzeneVinyl resins, NSPF.

Ethylene oxide

If your organization believes it may be subject to the reinstated Superfund Excise taxes, be prepared to begin reporting on chemical use. Please reach out to our team if you have any questions about the implications of the infrastructure bill.