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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. 1,4 butanediol 
  2. 1,3-butylene glycol
  3. 1,5,9-cyclododecatriene
  4. 2-ethyl hexanol
  5. 2-ethylhexyl acrylate
  6. 2,2,4-trimethyl-1,3-pentanediol diisobutyrate
  7. 2,2,4-trimethyl-1,3-pentanediol monoisobutyrate
  8. acetic acid
  9. acetylene black
  10. adipic acid
  11. adiponitrile
  12. allyl chloride
  13. alpha-methylstyrene
  14. aniline
  15. benzaldehyde
  16. benzoic acid
  17. bisphenol-A
  18. butanol
  19. butyl acrylate
  20. butyl benzyl phthalate
  21. chlorinated polyethylene
  22. cyclododecanol
  23. decabromodiphenyl oxide
  24. di-2 ethyl hexyl phthalate 
  25. di-n-hexyl adipate
  26. diethanolamine
  27. diglycidyl ether of bisphenol-A
  28. diisopropanolamine
  29. dimethyl terephthalate
  30. dimethyl-2, 6-naphthalene dicarboxylate
  31. diphenyl oxide
  32. diphenylamine
  33. epichlorohydrin
  34. ethyl acetate
  35. ethyl acrylate
  36. ethyl chloride
  37. ethylene dibromide
  38. ethylenebistetrabromophthalimide
  39. formic acid
  40. glycerine
  41. hexabromocyclododecane
  42. hexamethylenediamine
  43. isobutyl acetate
  44. isopropyl acetate
  45. linear alpha olefins
  46. methyl acrylate
  47. methyl chloroform 
  48. methyl isobutyl ketone
  49. methyl methacrylate
  50. monochlorobenzene
  51. monoethanolamine
  52. monoisopropanolamine
  53. normal butyl acetate
  54. normal propyl acetate
  55. nylon 6/6
  56. ortho-dichlorobenzene
  57. ortho-nitrochlorobenzene
  58. paraformaldehyde
  59. para-dichlorobenzene
  60. para-nitrochlorobenzene
  61. para-nitrophenol
  62. pentaerythritol
  63. perchloroethylene
  64. phenol
  65. phosphorous pentasulfide
  66. phosphorous trichloride
  67. poly 1,4 butyleneterephthalate
  68. poly (69/31 ethylene/cyclohexylenedimethylene terephthalate)
  69. poly (96.5/3.5 ethylene/cyclohexylenedimethylene terephthalate)
  70. poly (98.5/1.5 ethylene/cyclohexylenedimethylene terephthalate
  71. poly(ethyleneoxy)glycerol
  72. poly(propylene)glycol
  73. poly(propylene/ethylene)glycol
  74. poly(propyleneoxy)glycerol
  75. poly(propyleneoxy)sucrose
  76. poly(propyleneoxy/ethyleneoxy)benzenediamine
  77. poly(propyleneoxy/ethyleneoxy)diamine
  78. poly(propyleneoxy/ethyleneoxy)glycerol
  79. poly(propyleneoxy/ethyleneoxy)sucrose
  80. polyalphaolefins
  81. polybutene
  82. polybutylene
  83. polybutylene/ethylene
  84. polycarbonate
  85. polyethylene terephthalate pellets
  86. propanol
  87. sodium nitriolotriacetate monohydrate
  88. synthetic linear fatty alcohols
  89. synthetic linear fatty alcohol ethoxylates
  90. terephthalic acid
  91. tetrabromobisphenol-A
  92. tetrachlorophthalic anhydride
  93. tetrahydrofuran 
  94. texanol benzyl phthalate
  95. toluene diisocyanate
  96. toluenediamine
  97. trichloroethylene
  98. triethanolamine
  99. triisopropanolamine
  100. trimethylolpropane
  101. 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.

If you have any questions or need assistance, contact your BKD Trusted Advisor™ or submit the Contact Us form below.

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