On November 15, 2021, a provision of the infrastructure bill reinstated and modified superfund excise taxes under Internal Revenue Code (IRC) Sections 4661 and 4671. The bill explicitly listed 42 chemicals subject to the tax under §4661 along with a per-ton rate and stated the IRS was expected to release guidance regarding taxable chemicals under §4671 by January 1, 2022. For more details on the original superfund excise tax reinstatement, see this BKD Thoughtware® article.
On December 14, 2021, the IRS released Notice 2021-66 (Notice), which provides guidance on the reinstated excise taxes. The Notice provides (1) an updated list of taxable substances under §4671/4672, (2) suspension of Notice 89-61, (3) formal guidance on registration requirements under Form 637 Activity Letter G, and (4) request for taxpayers to provide comments on the tax through January 28, 2022.
Updated List of Taxable Substances Under IRC Sections 4671/4672
The Notice contained the original 66 substances taxable under §4672(a)(3) and added 101 additional substances. It also reiterates the reduction of the weight and value thresholds in §4672(a)(2)(B) from 50 percent to 20 percent deemed as taxable substances.
The Notice listed the following 101 additional substances:
- 1,4 butanediol
- 1,3-butylene glycol
- 2-ethyl hexanol
- 2-ethylhexyl acrylate
- 2,2,4-trimethyl-1,3-pentanediol diisobutyrate
- 2,2,4-trimethyl-1,3-pentanediol monoisobutyrate
- acetic acid
- acetylene black
- adipic acid
- allyl chloride
- benzoic acid
- butyl acrylate
- butyl benzyl phthalate
- chlorinated polyethylene
- decabromodiphenyl oxide
- di-2 ethyl hexyl phthalate
- di-n-hexyl adipate
- diglycidyl ether of bisphenol-A
- dimethyl terephthalate
- dimethyl-2, 6-naphthalene dicarboxylate
- diphenyl oxide
- ethyl acetate
- ethyl acrylate
- ethyl chloride
- ethylene dibromide
- formic acid
- isobutyl acetate
- isopropyl acetate
- linear alpha olefins
- methyl acrylate
- methyl chloroform
- methyl isobutyl ketone
- methyl methacrylate
- normal butyl acetate
- normal propyl acetate
- nylon 6/6
- phosphorous pentasulfide
- phosphorous trichloride
- poly 1,4 butyleneterephthalate
- poly (69/31 ethylene/cyclohexylenedimethylene terephthalate)
- poly (96.5/3.5 ethylene/cyclohexylenedimethylene terephthalate)
- poly (98.5/1.5 ethylene/cyclohexylenedimethylene terephthalate
- polyethylene terephthalate pellets
- sodium nitriolotriacetate monohydrate
- synthetic linear fatty alcohols
- synthetic linear fatty alcohol ethoxylates
- terephthalic acid
- tetrachlorophthalic anhydride
- texanol benzyl phthalate
- toluene diisocyanate
- vinyl acetate
Suspension of Notice 89-61
Notice 2021-66 also suspends Notice 89-61, which allowed taxpayers (importers and exporters) to request that certain substances be added or removed from the list of taxable substances. In the past, when substances were added to the list of taxable substances under 89-61, the IRS provided a tax rate per ton for the added substance. The Notice did not provide any tax rates and is unclear whether the IRS intends for the historical conversion factors, which led to the tax rates, to remain unchanged. However, the Notice did indicate that Treasury and the IRS intend to update 89-61 to reflect the changes made to §4672(a)(2) by the infrastructure bill. We anticipate the guidance to be issued prior to the July 1, 2022, enforcement date.
Registration Requirements & Compliance Requirements
The Notice states that applications for §4662(b)(10)(C) intermediate hydrocarbons stream registration and §4662(c)(2)(B) inventory exchange registrations must be made on Form 637, Application for Registration (For Certain Excise Tax Activities), under Activity Letter G, which is for persons making inventory exchanges of taxable chemicals under §4662(c)(2) or persons selling or buying intermediate hydrocarbon streams under §4662(b)(10). It also was noted that the IRS is updating Form 637 to include Activity Letter G but encourages affected taxpayers to submit Form 637 prior to its final revisions, as taxpayers needing a registration should seek to register as soon as possible.
The Notice also states that Superfund chemical taxes are reported on Form 6627, Environmental Taxes, which is attached to Form 720, Quarterly Federal Excise Tax Return.
Request for Taxpayers to Provide Comments on the Tax by January 28, 2022
The Notice includes a request for comments as to whether there are issues related to the reinstated Superfund excise taxes that require clarification or additional guidance. Comments should be submitted in writing by January 28, 2022, and should include the reference to Notice 2021-66. IRS expects to publish any comments submitted electronically to the extent practical.
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