Proposed reinstatement of superfund taxes; three excise taxes for petroleum and chemicals industries

If proposals in the Bipartisan Infrastructure Funding Bill (as passed the Senate) and the Build Back Better Act reconciliation bill (as approved by the House Budget Committee) are enacted in their current forms, three excise taxes would be reinstated next year—more than 25 years after the taxes expired. These legislative proposals would reintroduce excise taxes that fund the Hazardous Substance Superfund (“Superfund”), which funds the cleanup of hazardous waste sites.

The Superfund historically was funded by three separate but interrelated excise taxes applicable to crude oil and petroleum products, chemicals, and hazardous substances. The proposed extension and modification of the Superfund excise taxes are estimated by the staff of the Joint Committee on Taxation (JCT) to increase revenues by approximately $52.9 billion over a 10-year period, with the largest revenue source expected to be the reinstatement of the Superfund excise tax on crude oil and petroleum products.

• The proposed Build Back Better Act (as considered by the House Budget Committee) would, if enacted, reinstate the Petroleum Superfund Tax, at a rate of 16.4 cents per barrel—double the prior rate. The Petroleum Superfund Tax is proposed to be indexed for inflation beginning in calendar year 2023. The tax would apply after December 31, 2021, until January 1, 2032. The JCT estimated that the proposal would increase revenues by approximately $38.4 billion over a 10-year period.
• The Bipartisan Infrastructure Funding Bill, which has passed the Senate but has not yet been voted on by the House, would reinstate the Chemicals Superfund Tax and the Hazardous Substances Tax at twice the prior rates. The proposed rates vary from $0.44 to $9.74 per ton.
• The Bipartisan Infrastructure Funding Bill also proposes to double the tax rate imposed on taxable substances from to 10% (from 5%) if the importer fails to furnish sufficient information to the Secretary of Treasury to determine the amount of the Hazardous Substance Tax.
• In addition, the threshold for the IRS to add a substance to the list of taxable substances would be lowered to a determination that taxable chemicals constitute more than 20% of the weight (or more than 20% of the value) of the materials used to produce the substance. The proposal directs the Secretary of the Treasury to publish an initial list of taxable substances.
• If enacted, the Bipartisan Infrastructure Funding Bill Superfund excise tax proposals would be effective beginning July 1, 2022, and until January 1, 2032. The JCT estimates that these proposals would increase revenues by approximately $14.5 billion over a 10-year period.

Read an October 2021 report [PDF 143KB] prepared by KPMG LLP: What’s News in Tax: Proposed Reinstatement of Superfund Taxes Would Reintroduce Three Excise Taxes to the Petroleum and Chemicals Industries at Double the Rates