On November 15, 2021, President Joe Biden signed into law the Infrastructure Investment and Jobs Act (IIJA), which will lead to roughly $500 billion in new spending in the span of five years on new infrastructure projects. Notably, the IIJA also includes a revenue provision that revives excises taxes on chemicals under Sections 4661, 4662, 4671, and 4672 of the Internal Revenue Code (IRC) of 1986. These excises taxes were originally established in 1980 by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but later expired in 1995.

Section 80201 of the IIJA amends Section 4661 of the IRC of 1986 to reestablish the chemical superfund excise taxes for 42 different chemicals. These excise taxes range from $0.48 per ton to $9.74 per ton – double of what they were before under the CERCLA. The sales taxes, which will be effective starting July 1, 2022, will apply to all manufactures, producers, or importers of said items that are sold for consumption, use, or warehousing in the U.S. Notably, under Section 4662 of the IRC, there are also several tax exceptions for the taxes assessed on the 42 listed chemicals. A complete list of the 42 chemicals as well as their corresponding tax amount per ton, applicable HTSUS codes, and HTSUS descriptions is provided below.

In addition, Section 80201 of the IIJA also amends Sections 4671 and 4672 of the IRC, which impose a tax on the sale and/or use of certain imported chemical substances. Historically, there were 50 taxable substances; however, the Secretary of the Treasury may publish an updated list of the taxable substances under Section 4672 of the IRC by January 1, 2022.

Further, the Act also modifies the definition of a taxable substance under Section 4671 by lowering the percentage threshold for the chemical to qualify as a taxable substance. While a chemical needed to constitute more than 50% weight (or 50% value) of the materials used in the product to qualify as a taxable substance, the Act now lowers the threshold to 20%. Should an importer fail to report to the IRS the data needed to determine the tax on their chemical in a timely manner, the tax levied would be 10% of the appraised value of the taxable substance rather than the tax rate set under Section 4661.

The Infrastructure Investment and Jobs Act is available here.

For more information on chemical excise taxes and the IIJA, contact our team and see previous posts below.