Senate Infrastructure Bill would Reinstate the Superfund Excise Tax at Double Rate

The recently passed $1 trillion Infrastructure Investment and Jobs Act includes a proposal to reinstate Superfund excise taxes on the sale and import of certain chemicals as an offset to the bill’s spending provisions. The bill would reinstate and double the rate of the IRC Section 4661 tax on chemicals or chemical products and the IRC Section 4671 tax on chemical imports. The new taxes would be effective from July 1, 2022 to December 31, 2031.

Proposed Taxes

The bill proposes to reinstate 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, and would double the tax rates imposed under the section. The bill would also reinstate Section 4671, which imposes a tax on certain chemicals sold or used by an importer at the rate set by Section 4661.

The bill would also make changes to expand the reach of the Section 4671 tax and increase the penalties for non-compliance. Previously, a substance was taxable under Section 4672 if taxable chemicals constituted more than 50 percent of the weight or value of the materials used to produce the substance. The proposal would decrease that requirement to 20 percent.

Taxpayers that do not provide information to the Internal Revenue Service (IRS) to assess the taxability of a substance would also be subject to a fine of 10 percent of the appraised value of the substance under Section 4671, up from 5 percent previously. The bill would also require the Treasury to update the list of taxable substances subject to Section 4671.

Taxes on Oil Remain Unchanged

Notably, the bill does not propose to reinstate the IRC Section 4611 Hazardous Substance Superfund financing tax of 9.7 cents per barrel. Since 1996, oil has been subject to only the Section 4611 oil spill liability tax of 9 cents a barrel that is used to fund the Federal Oil Spill Tax Liability Trust Fund. Congress extended that tax to December 31, 2025 when it passed the Consolidated Appropriations Act of 2021.

What Does This Mean for Chemical Manufacturers and Importers?

The House of Representatives has yet to take up the bill for consideration, and the proposals could change. Any reinstatement of these Superfund taxes would be part of broader tax legislation that would likely take months to finalize. Nonetheless, with a possible July 1, 2022 effective date, taxpayers subject to Section 4661 and Section 4671 should understand how these possible tax increases could affect their operations, including their tax liability and tax compliance program.

Please contact us with any questions about how these tax changes could affect your business. We’re here to help.

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