The Future Of Superfund Taxes Lie In IRS Flexibility

Now that the Biden administration has resurrected decades-old Superfund excise taxes on dozens of chemicals and hazardous substances, the countdown is on for the IRS to release highly anticipated rules before the taxes start July 1.

In the meantime, chemicals industry groups are lobbying for the agency to ease taxpayers into the new regime. Some, including Battery Council International, are even supporting legislation that would eliminate the reinstated Superfund taxes on chemicals such as lead oxide and sulfuric acid.

That feedback underscores that the Biden administration and IRS are in a pivotal period. The original Superfund taxes — used to fund hazardous waste site cleanups, including landfills and abandoned factories — expired in 1995, and their reinstatement is a success, both for environmental justice in the United States and the country’s international reputation.

For years the U.S. has lagged behind its peers on environmental taxation.

But reinstating the taxes was one battle, and administering them is another. The responses the IRS has received so far strongly suggest that the success of the Superfund excise taxes will partially lie in the government’s ability to ease the transition for taxpayers so that Congress won’t again decide to let the taxes expire when they come up for renewal in 2031.

The original Superfund taxes targeted three areas: petroleum excise taxes, chemical feedstock excise taxes, and environmental income taxes. The reinstated taxes focus on chemicals and hazardous imported substances and will have much higher rates for an expanded group of substances. The tax rates, which apply to hazardous substances that enter the U.S. for consumption, use, or warehousing, will be doubled.

Several industry groups are particularly concerned about a reinstated hazardous substances excise tax in IRC section 4671. Last December the IRS published a preliminary list of taxable substances, which, if finalized, would apply to 152 chemicals, such as glycerine and acetic acid. That’s a considerable expansion — the previous regime covered 50 chemicals — and the IRS has since received some taxpayer suggestions.