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 also effectively doubled. 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.

Superfund Infrastructure Bill

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, but the list is 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.

How to Calculate the Superfund Excise Tax

As with many excise taxes, the cost to businesses is expected to be passed down the supply chain and ultimately to the end consumer through 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, your organization must be prepared to report and remit the excise tax. Calculating the superfund excise taxes is complex, and accurate reporting data can help companies reduce their tax burden.

Taxing Chemicals in Section 4661

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.

Taxing Substances in Section 4671

The amount of the Section 4671 tax 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.

Suppose 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. In that case, 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.

Superfund Tax Chemicals List

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.

Acetylene
Benzene
Butane
Butylene
Butadiene
Ethylene
Methane
Naphthalene
Propylene
Toluene
Xylene
Ammonia
Antimony
Antimony trioxide
Arsenic
Arsenic trioxide
Barium sulfide
Bromine
Cadmium
Chlorine
Chromium
Chromite
Potassium
dichromate
Sodium dichromate
Cobalt
Cupric sulfate
Cupric oxide
Cuprous oxide
Hydrochloric acid
Hydrogen fluoride
Lead oxide
Mercury
Nickel
Phosphorus
Stannous chloride
Stannic chloride
Zinc chloride
Zinc sulfate
Potassium hydroxide
Sodium hydroxide
Sulfuric acid
Nitric acid

Superfund Tax Substances List

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.

Cumene
Methylene chloride
Styrene
Polypropylene
Ammonium nitrate
Propylene glycol
Nickel oxide
Formaldehyde
Isopropyl alcohol
Acetone
Ethylene glycol
Acrylonitrile
Vinyl chloride
Methanol
Polyethylene resins, total
Propylene oxide
Polybutadiene
Polypropylene resins
Styrene-butadiene, latex
Ethylene oxide
Styrene-butadiene, snpf
Ethylene dichloride
Synthetic rubber, not containing fillers
Cyclohexane
Urea
Isophthalic acid
Ferronickel
Maleic anhydride
Ferrochromium nov 3 pct
Phthalic anhydride
Ferrochrome ov 3 pct. carbon
Ethyl methyl ketone
Unwrought nickel
Chloroform
Nickel waste and scrap
Carbon tetrachloride
Wrought nickel rods and wire
Chromic acid
Nickel powders
Hydrogen peroxide
Phenolic resins
Polystyrene
homo-polymer resins
Polyvinylchloride resins
Melamine
Polystyrene resins and copolymers
Acrylic and methacrylic acid resins
Ethyl alcohol for nonbeverage use
Vinyl resins
Ethylbenzene
Vinyl resins, NSPF

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