After more than 25 years, two excise taxes on chemicals and imported hazardous substances were reinstated in the Infrastructure Investment and Jobs Act (Pub. L. 117-58), effective July 1, 2022. A third excise tax on crude oil and petroleum products was reinstated in the Inflation Reduction Act (Pub. L. 117-169), effective January 1, 2023. Companies should carefully review their operations to determine the impact, if any, of these taxes.
The Infrastructure Investment and Jobs Act (Pub.L. 117–58), which was signed into law on November 15, 2021, reinstated the Chemicals Superfund Tax and the Hazardous Substances Tax at twice the prior rates through 2031.
The Inflation Reduction Act (Pub.L. 117-169), which was signed into law on August 16, 2022, reinstated the Petroleum Superfund Tax at a rate of 16.4 cents per barrel.
The Joint Committee on Taxation estimates these excise taxes combined would increase revenues by over $52 billion over a 10-year period
How KPMG can help
The effective date for the Chemicals Superfund Tax and the Hazardous Substances Tax is July 2022. Companies will need to:
- Identify and educate key stakeholders impacted by the excise tax within the organization (supply chain, tax, EPA regulatory, IT, finance)
- Identify taxable chemicals, hazardous substances, and crude oil/ imported petroleum products
- Identify and document exceptions to the excise tax
- Forecast excise tax liability based on applicable rates
- Consider filing petition with IRS to request modifications to the list of taxable substances and rate of tax on taxable substances
- Assess supplier and consumer invoicing issues
- Assess internal and external communications regarding excise tax information
- Identify data sources required to track the lifecycle of affected chemicals and products, assess potential issues, and evaluate process and configuration changes to resolve issues
- Prepare for all aspects of compliance, including filing registrations on Form 637 and filing returns on Form 720 and Form 6627
Proposed regulations: Reinstated Superfund chemical tax and Superfund imported substance tax
Guidance on the application of the reinstated excise taxes imposed on certain chemicals and certain imported substances.
Guidance on the application of the reinstated excise taxes imposed on certain chemicals and certain imported substances.
Read the full report
What you need to know
Read more about the three reinstated excise taxes.
Read more about the three reinstated excise taxes.
Read more
Related content
This ABA Tax Times article provides an illustration of the challenges faced by the oil and gas industry in applying one of these special rules related to two products derived from natural gas: methane and butane.
