IRS issues Superfund Chemical Excise Taxes FAQs

A1. There are two separate Superfund chemical excise taxes: a tax on the sale or use of "taxable chemicals" under section 4661 of the Internal Revenue Code and a tax on the sale or use of imported "taxable substances" under section 4671 (all section references are to the Internal Revenue Code unless otherwise stated).

Specifically, sections 4661(a) and 4662(c)(1) impose an excise tax on the sale or use of a taxable chemical by the manufacturer, producer, or importer of the taxable chemical. See question 3 for more information on taxable chemicals and question 6 for more information on calculating the tax imposed by section 4661 (section 4661 tax).

Section 4671(a) imposes an excise tax on the sale or use of a taxable substance by the importer of the taxable substance. See questions 4-5 for more information on taxable substances and questions 7-9 for more information on calculating the tax imposed by section 4671 (section 4671 tax).

A2. July 1, 2022. The Superfund chemical excise taxes previously expired on December 31, 1995. They were reinstated by section 80201(c)(3) of the Infrastructure Investment and Jobs Act (Public Law 117-58, 135 Stat. 429 (2021)), effective July 1, 2022, with modifications to the applicable rates of tax and other provisions related to those taxes. 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. 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.

A3. 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. There are 42 chemicals listed in section 4661(b).

A4. 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. See section 4672(a)(1). A substance is listed as a taxable substance if it is listed 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). See Notice 2021-66, 2021-52 I.R.B. 901, for the initial list of substances that the Secretary has added to the list of taxable substances.

At the time of publication of these FAQs, 151 substances are listed as taxable substances. That number will likely change as substances are added to or removed from the list of taxable substances pursuant to section 4672(a)(2) or (4).

A5. There are two ways a substance can be added to or removed from the list of taxable substances pursuant to section 4672(a)(2) and (4).

First, a substance can be added to the list of taxable substances by the Secretary, in consultation with the Administrator of the Environmental Protection Agency and the Commissioner of U.S. Customs and Border Protection, if the Secretary determines that taxable chemicals constitute more than 20 percent of the weight (or more than 20 percent of the value) of the materials used to produce the substance (determined on the basis of the predominant method of production). A substance may be removed from the list of taxable substances if the Secretary determines that taxable chemicals constitute 20 percent or less of the weight and 20 percent or less of the value of the materials used to produce the substance (determined on the basis of the predominant method of production).

Second, an importer or exporter of a substance (or other interested person) can petition the Secretary to add the substance to or remove the substance from the list of taxable substances. 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. More information on the procedures for petitioning the Secretary to add or remove substances from the list of taxable substances will be released in advance of July 1, 2022.

A6. The section 4661 tax is imposed as a rate per ton of a taxable chemical. Part II of Form 6627, Environmental Taxes, will be updated to reflect the tax rate per ton of each taxable chemical. See also section 4661(b) for the tax rate for taxable chemicals.

A7. 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. See section 4671(b)(1).

A8. 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. See section 4671(b)(3).

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. See Section 4671(b)(2).

A9. The IRS is working on calculating tax rates for taxable substances and will release the tax rates as they become available. As noted above, importers are not required to use the IRS-prescribed tax rates for the section 4671 tax and may calculate their own rates.

A10. For taxable chemicals, the manufacturer, producer, or importer of the taxable chemical is responsible for reporting and paying the section 4661 tax to the IRS. For taxable substances, the importer of the taxable substance is responsible for reporting and paying the section 4671 tax to the IRS.

A11. The Superfund chemical excise taxes are reported on Form 6627, Environmental Taxes, which is attached to Form 720, Quarterly Federal Excise Tax Return.

A12. The first return, for the calendar quarter ending on September 30, 2022, is due by October 31, 2022.

A13. Yes. Taxpayers must make semimonthly deposits of the Superfund chemical excise taxes. A semimonthly period is the first fifteen (15) days of a calendar month or the portion of a calendar month following the 15th day of the month. See § 40.0-1(c) and § 40.6302(c)-1 of the Excise Tax Procedural Regulations.

However, Notice 2022-15, 2022-18 I.R.B. 1043, provides transitional relief for the third and fourth calendar quarters of 2022, and the first calendar quarter of 2023, regarding the failure to deposit penalties imposed by section 6656 for failures to deposit Superfund chemical excise taxes through March 31, 2023.

A14. Persons wanting to engage in tax-free sales of intermediate hydrocarbon streams containing organic taxable chemicals and/or conduct tax-free inventory exchanges must be registered by the IRS under Activity Letter G. Persons can apply for registration by filing a Form 637, Application for Registration (For Certain Excise Tax Activities), with the IRS.

A15. Yes. Applicants for registration may call 859-320-4091 and select menu option #1.