Page 184 - TaxAdviser_2022

TAX CLINIC

1996, the rates of tax on those chemicals
ranged from $0.22 per ton to $4.87 per
ton. The Infrastructure Act essentially
doubles these rates with taxes ranging
from $0.44 per ton to $9.74 per ton.
There are several exemptions to the tax
listed under Sec. 4662(b), which include
but are not limited to methane or butane
used as a fuel, substances used in the
production of fertilizer, substances de-
rived from coal, and substances used in
the production of motor fuel.
Additionally, various activities give
rise to a credit or refund of the chemical
tax. Sec. 4662(d) provides refunds of the
tax for chemicals that are: (1) used in
the manufacture of any other substance
that is a taxable chemical; (2) used in
the production of a qualified fertilizer
substance that is used as a qualified fer- the appraised value of the substance at fertilizer substance that is used as quali-
tilizer substance; (3) a qualified fuel that the time of entry into the United States fied fertilizer substance; (2) a qualified
are used as a qualified fuel; or (4) used would be imposed. However, the Infra- fuel used as a qualified fuel; or (3) used
in the production of a qualified animal structure Act increases the rate to a 10% in the production of a qualified animal
feed substance that is used as a qualified default tax on the appraised value of the feed substance that is used as a qualified
animal feed substance. taxable substance at the time of entry. animal feed substance.
An initial list of taxable substances
Superfund tax on imported is provided in Sec. 4671. In December Compliance requirements
taxable substances 2021, Treasury and the IRS, following Notice 2021-66 addresses the report-
Sec. 4671 imposes tax on “taxable sub- the mandate in the statute, published a ing and registration requirement of the

stances” sold or used by an importer. Sec. list of 100 taxable substances that will be Superfund tax. The tax will be reported
4672(b)(1) provides that an importer is subject to tax (Notice 2021-66). quarterly on Form 720, Quarterly Federal
a person who enters a taxable substance Importers of any taxable substance Excise Tax Return, with an accompany-
into the United States for consumption, may file a petition for the substance to ing Form 6627, Environmental Taxes.

use, or warehousing. A taxable substance be added or removed from the list of Further, application for registration for
is any substance that is listed under Sec. taxable items. Petitions provide informa- certain tax-free sales and uses of taxable
4672(a)(3) at the time the substance is tion on the weight of chemicals and thus chemicals must be made on Form 637,
sold or used by the importer. the precise amount of tax due, which Application for Registration (For Certain
The amount of tax imposed on a may be less than the 10% default tax. Excise Tax Activities).
taxable substance is equivalent to the The government has not yet published
amount of tax that would have been procedures on the petition process. The How to prepare for the tax
imposed on the taxable chemicals used previous guidance, Notice 89-61, was In order to prepare for the Superfund
as materials in the manufacture of the suspended in Notice 2021-66. tax, taxpayers should determine the
taxable substance if the substance had Similar to Sec. 4661, Sec. 4671 chemicals that might be subject to
been manufactured in the United States. provides certain exemptions from the tax, identify any compliance gaps, and
An importer may furnish information tax. Some of these exemptions include calculate any potential tax exposure.
to Treasury by submitting a taxable sub- but are not limited to taxable substances Further, taxpayers should develop excise
stance petition. Prior to the enactment used as fuel or in the production of fer- tax compliance procedures and reporting PHOTO BY NOPADOL UENGBUNCHOO/ISTOCK
of the Infrastructure Act, if an importer tilizer and animal feed. Moreover, Sec. processes. In doing so, taxpayers should
did not furnish sufficient information to 4672(d) provides refunds of the tax paid evaluate transactions that may qualify
determine the amount of tax imposed on for the use of certain chemicals that are: for tax-free sales, exemptions, or credit
a taxable substance, a 5% default tax on (1) used in the production of a qualified opportunities. In preparation for the

14 April 2022 The Tax Adviser