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Business Tax

Procedures for Change to Taxable-Substance List Issued

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The IRS has issued procedures for additions to and removals from the list of substances subject to Superfund chemical taxes. The Infrastructure Investment and Jobs Act (IIJA, PL 117-58) reinstated the Superfund taxes effective July 1, 2022.

Superfund chemical taxes.

The Superfund was enacted through the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) to create a hazardous-substance cleanup program. CERCLA established the Hazardous Substance Response Trust Fund, which was funded, in part, by an excise tax on sales of “taxable chemicals” and sales or use of imported “taxable substances” that involve one or more taxable chemicals in their manufacture or production (the Superfund chemical taxes). These Superfund chemical taxes expired on December 31, 1995.

However, the IIJA reinstated, effective July 1 this year, the Superfund chemical taxes with several modifications, including to applicable tax rates. In addition, the IIJA modified the test for determining whether a substance is a taxable substance by lowering the required percentage of taxable chemicals used to produce the substance to 20% from 50% of the weight (or value) of the materials used in producing the substance.

Taxable chemicals and substances.

A list of taxable chemicals and the tax imposed on those chemicals can be found in Code Sec. 4661(b).

A taxable substance is any substance that is listed in (1) Code Sec. 4672(a)(3), (2) Notice 2021-66, or (3) on the Treasury Secretary’s list of taxable substances (the List). See IRS issues guidance on reinstated Superfund chemical excise taxes (12/15/2021).

An interested party—that is, an importer or exporter of chemicals—may request that a substance be added to, or removed from, the list.

Procedures for adding and removing substances from the list.

To request that a substance be added or removed from the list, an interested party must submit a petition to the IRS.

Note. Generally, for a substance to be added to the list, taxable chemicals must constitute more than 20% of the weight or value of the materials used to produce the substance. To be removed from the list, taxable chemicals must constitute 20% or less of the weight or value of the materials used to produce the substance.

The IRS requires a separate petition for each substance an interested party wants added to, or removed from, the list.

The petition may be submitted by fax, email, or certified mail. (Rev Proc 2022-25, Sec. 5.01)

For details on submitting a petition via fax, see Sec. 5.04; for emailing details, see Sec. 5.05; for mailing details, see Sec. 5.06.

However, the IRS will acknowledge receipt of the petition only by regular mail. (Rev Proc 2022-26, Sec. 5.03)

For purposes of the 180-day determination period in Code Sec. 4672(a)(2), a submitted petition is “filed” when it’s accepted by the IRS. The filing date is the date of the IRS’ letter accepting the petition. The IRS will accept a petition only if it includes all of the information required in Rev Proc 2022-26, Sec 6.

For more information, see Information about the tax implications of environmental cleanup costs.

 

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