Superfund Excise Taxes Reinstated

Companies that manufacture, produce, or import certain chemicals between July 1, 2022, and Dec. 31, 2031, may be liable for recently reinstated excise taxes.

The 2021 Infrastructure Investment and Jobs Act revived two excise taxes on specific chemicals and substances. These taxes were initially enacted as part of President Jimmy Carter’s Comprehensive Environmental Response, Compensation, and Liability Act of 1980, commonly known as “Superfund.” The excise taxes expired in 1995 but were reinstated July 1, 2022, to once again fund environmental clean-up efforts. This results in a new compliance challenge for certain businesses.

The first excise tax applies to “taxable chemicals.” A taxable chemical is any chemical listed in IRC § 4661 (see chart below for complete list). This excise tax is imposed on the first sale or use of a taxable chemical by the manufacturer, producer, or importer of the taxable chemical. The tax liability on these chemicals ranges from less than $1.00 per ton all the way up to nearly $10.00 per ton. (There are exceptions, including exceptions for certain substances used in the production of fertilizer and animal feed.)

The second tax, found in IRC § 4671, applies to “taxable substances.” 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 by the IRS. This excise tax is imposed on the sale or use of a taxable substance, but only by the importer of the taxable substance.

While the list of taxable chemicals is straightforward and defined by statute, the list of taxable substances is fluid. The IRS recently released an initial list of 121 substances along with the specific excise tax for each, which could change at a later date.

These excise taxes are due quarterly, with the first return due Oct. 31, 2022, covering the third quarter of 2022. In addition to quarterly returns, taxpayers with a quarterly liability in excess of $2,500 must make semi-monthly deposits totaling at least 95% of their quarterly liability. However, transitional relief is available regarding the semi-monthly deposit requirement for the third and fourth quarters of 2022 and the first quarter of 2023.

If your business is involved in manufacturing of any kind or your operations otherwise involve the manufacturing, production, or importation of chemicals, it may be prudent to review your processes to determine if any taxable chemicals or substances are present. Please reach out to your KSM advisor with any questions or complete this form.

Taxable Chemicals and the Amount of the Tax per Ton,
Effective July 1, 2022

Resources:

• IRS Superfund Chemical Excise Taxes FAQs
• IRS List of Taxable Chemicals
• IRS Initial List of Taxable Substances