On November 15, 2021, President Biden signed the infrastructure bill into law, which included implications for federal excise taxes. Specifically, two of the provisions in the bill reinstate and expand the superfund excise taxes under Sections 4661 and 4671. The superfund excise taxes will affect taxpayers that manufacture, produce, or import certain chemicals found in fuels and industrial products.
Section 4661 imposes a per-ton tax, ranging from $0.44 to $9.74 per ton on the following 42 chemicals:
Section 4671 imposes taxes on an importer’s sale or use of a list of specified substances. You can find the list of taxable substances in §4672(a)(3), though it generally includes substances consisting, or partially consisting, of chemicals identified in §4661. The U.S. Department of the Treasury (Treasury) is expected to provide an updated list by January 1, 2022, but most of the current list is expected to remain the same. The most notable changes to §4671 include substances deemed as taxable if a taxable chemical constitutes 20 percent (as opposed to 50 percent in the past) and an increase in penalties for failure to register or report from 5 percent to 10 percent. The superfund program will become effective July 1, 2022, and expire December 31, 2031.
As of the date of this article, Treasury has not yet provided any guidance on the registration and compliance requirements to remit such superfund taxes. Historically, taxpayers that were affected and had to comply with superfund taxes were required to register using Form 637, Application for Registration (For Certain Excise Tax Activities) activity letter G and compliance Form 6627, Environmental Taxes attached to Form 720, Federal Excise Tax Return. Therefore, it is expected that these registration and compliance requirements would be reinstated.
It should be noted that completing and obtaining the Form 637 registration can be a timely process. Therefore, taxpayers affected by the superfund excise taxes should look for the revised Form 637 and consider seeking a registration as soon as possible in order to comply by July 1, 2022, to avoid penalties for failure to register to report and comply.
Taxpayers can expect some guidance from Treasury in the next few weeks with respect to registration, filing requirements, and a finalized list of chemicals subject to the superfund taxes. In the meantime, taxpayers should review their operations and supply chain practices to determine if any of these superfund excise taxes could apply to their business operations.
For more information, please submit the Contact Us form below or reach out to your BKD Trusted Advisor™ to discuss and plan how you can prepare to comply with these new rules.