Posted on August 1, 2022 by Jennifer Nijman
We’ve all read about the recent reinstatement of the taxes that fund the Comprehensive Environment Response, Compensation, and Liability Act (CERCLA). The new taxes are hitting the books as of July 1, 2022.
Briefly, in addition to requiring responsible parties (PRPs) to either perform clean-up activities or reimburse the government for EPA led clean-up work, CERCLA originally created the Superfund Trust. The Trust was used to fund EPA’s clean-up efforts (e.g., when responsible parties could not be identified), and was funded primarily through various taxes on the chemical and petroleum industries. They were last imposed in 1995.
The November 2021 Infrastructure Investment and Jobs Act (the Infrastructure Act) reinstated the Superfund excise taxes – now fondly referred to as the “4661 tax” or the “4671 tax” in reference to the applicable sections of the Internal Revenue Code. On July 1, 2022, the new excise taxes were imposed on (1) chemical sales and (2) chemical importers, and will be the responsibility of manufacturers, producers, and importers of specific listed “taxable chemicals” and on importers of “taxable substances.” There are currently 42 taxable chemicals listed in section 4661(b); taxable substances (section 4671) are also on a list (See Notice 2021-66, 2021-52 I.R.B. 901, for the initial list of substances) and there are currently 151 such substances listed.
As a practical matter, clients that are users of the taxable chemicals are seeing rising costs as their suppliers raise prices to include the tax imposed on the supplier/manufacturer/importer – a new line item on an invoice. Manufacturers, producers, and importers of taxable chemicals will bear the brunt of complying with the new tax (reporting and paying), and importers will report and pay the section 4671 tax for chemical substances. Reporting is quarterly, with the first report due by October 31, 2022 (for quarter ending September 30, 2022).
The reinstated excise taxes are expected to generate $14.5 billion of revenue for the Superfund program over the next 10 years, nine times the original 1980 trust fund of $1.6 billion. The IRS has published information concerning the reinstatement at: https://www.irs.gov/newsroom/irs-issues-superfund-chemical-excise-taxes-faqs.