Congress Reinstates and Expands Superfund Excise Taxes

The Infrastructure Investment and Jobs Act, which President Biden signed into law on November 15, 2021, reinstates Superfund excise taxes on the sale and import of certain chemicals as part of the law’s revenue raising provisions. The Act also doubles the tax rate on chemicals or chemical products and expands the reach of the tax. The changes are effective from July 1, 2022 to December 31, 2031.

Reinstates Superfund Excise Tax on Sale and Import of Chemicals: The bill reinstates IRC Section 4661, which imposes a per-ton tax on the sale of the chemicals listed in the section by a manufacturer, producer, or importer of the chemicals. The bill also reinstates IRC Section 4671, which imposes a tax on certain chemicals sold or used by an importer at the rate set by Section 4661.

Doubles Tax and Penalty Rates: The bill also doubles the tax rates listed under Section 4661. (See table below for the list of taxable chemicals under Section 4661.) Additionally, the bill doubles the penalty under Section 4671 from 5 percent ad valorem to 10 percent ad valorem for importers that do not report to the Internal Revenue Service (IRS) information that is sufficient to assess the taxability of a substance.

Expands the Reach of Excise Tax: The bill also expands the reach of Section 4671 by decreasing the weight or value required for a chemical to be taxable from 50 percent to 20 percent. The bill also requires the Treasury to update the list of taxable substances subject to Section 4671 by January 1, 2022.

Status of Crude and Petroleum Excise Taxes

The new legislation did not reinstate the IRC Section 4611 Hazardous Substance Superfund financing tax of 9.7 cents per barrel on crude oil and petroleum products. However, the Build Back Better Act currently under consideration in Congress proposes to reinstate the tax and increase the rate to 16.4 cents per barrel. This would also be effective from July 1, 2022 to December 31, 2031. Congress previously extended the 9-cents-per-barrel Section 4611 oil spill liability tax that funds the Federal Oil Spill Tax Liability Trust Fund until December 31, 2025.

What Should Taxpayers Do?

The reinstatement and expansion of Superfund excise taxes will impose a significant cost on taxpayers that use or import these chemicals. Additionally, taxpayers that have not been subject to Superfund excise taxes in the past could incur new tax liabilities and reporting requirements. With a July 1, 2022 effective date, taxpayers should begin now to understand their likely tax exposure and how the information requirements could affect their tax compliance program.

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© 2021