December 15 2021

IRS Provides Guidance on Reinstated Superfund Chemical Taxes

Source: IBFD Tax Research Platform News

The US Internal Revenue Service (IRS) has issued Notice 2021-66 providing guidance on the excise taxes imposed on certain chemical substances under sections 4661 and 4671 of the US Internal Revenue Code (IRC) (collectively, the "Superfund chemical taxes").

The Superfund chemical taxes include the section 4661(a) tax on sales of taxable chemicals and the section 4671(a) tax on sales or uses of imported taxable substances that use one or more taxable chemicals in their manufacture or production.

Effective 1 July 2022, the Infrastructure Investment and Jobs Act (IIJA) reinstates the Superfund chemical taxes which, as previously in effect, expired on 31 December 1995.

The IIJA requires the US Treasury Department and IRS to publish an initial list of taxable substances under IRC section 4672(a) no later than 1 January 2022. Notice 2021-66 provides that initial list.

Notice 2021-66 also discusses the registration requirements under IRC section 4662(b)(10)(C) and (c)(2)(B) for the exemption of certain sales and uses of taxable chemicals from the Superfund chemical taxes.

Further, Notice 2021-66 provides the procedural rules that taxpayers subject to the Superfund chemical taxes must follow.

Pending further guidance, Notice 2021-66 suspends Notice 89-61, as modified by Notice 95-39, which set up the previous framework for adding or removing certain substances from the list of taxable substances.

Finally, Notice 2021-66 requests public comments on whether any issues related to the Superfund chemical taxes require clarification or additional guidance. Comments should be submitted in writing by 28 January 2022.

Notice 2021-66 will appear in the Internal Revenue Bulletin (IRB) 2021-52, dated 27 December 2021.

Note: Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), informally referred to as the US federal Superfund law or the Superfund, to create a hazardous substance clean-up programme. For the programme, the CERCLA established the "Hazardous Substance Response Trust Fund," which was funded, in part, by the Superfund chemical taxes.