Section 80201 of the Infrastructure Investment and Jobs Act of 2021, Public Law 117-58, reinstates the long-expired federal excise taxes that are imposed on specified chemical substances used in common industrial applications pursuant to Sections 4661 and 4671 of the Internal Revenue Code. The effective date of this reinstatement is July 1, 2022, and these taxes expire on December 31, 2031. The Act “decoupled” these reinstated chemical taxes from the now-expired Superfund petroleum excise tax that also funded the Superfund Hazardous Substance Response Trust Fund, which was created when Superfund (formally known as the Comprehensive Environmental Response Compensation and Liability Act, or CERCLA) was enacted in 1980. The Secretary of the Treasury was directed to publish an initial list of taxable chemicals by January 1, 2022, and this initial list was set forth in IRS Notice 2021-66. The list contains not only the 50 taxable chemical substances listed in Section 4672 (a)(3) of the Internal Revenue Code but also the 101 taxable chemicals listed in this Notice. In addition, Section 80201 of the Act also modified the existing tax rates by raising them.
The tax falls on manufacturers and importers, and Notice 2021-66 provides that the IRS procedural rules located at 26 CFR part 40 control the filing and deposits of these reinstated chemical taxes. IRS form 6627, “Environmental Taxes” is used for these purposes. Please note that Section 4661(a) imposes a tax on any taxable chemicals on the manufacturer, producer or importer.
As enacted in 1980, CERCLA imposed taxes on crude oil, imported petroleum products and domestic chemical feedstocks to fund the Hazardous Substance Superfund Trust Fund to finance the cleanup of sites where financially responsible parties were absent. In addition to these excise taxes, a special environmental tax was imposed on corporate income, and these taxes all expired by the end of 1995. To make up the shortfall in the Fund, the Congress appropriated money from the General Fund of the U.S. Treasury. From time to time there are controversies regarding the collection of excise and other taxes to remediate oil spills and other similar incidents. A few months ago, the U.S. Court of Appeals for the Fifth Circuit, in the case of Trafigura Trading LLC v. United States, held that a tax placed on exports of domestic crude oil to replenish the Oil Spill Trust Fund (an important component of the Oil Pollution Act) was unconstitutional. According to the court, such a tax violates Article 1, § 9, cl. 5 of the Constitution, which provides that “no Tax or Duty shall be laid on Article exported from any State.”