How the Superfund Excise Tax Is Impacting Plastic Resins and Feedstocks
Almost three decades after its original expiration, the U.S. reinstated the Superfund Excise Tax on July 1, 2022. The tax applies to chemicals commonly found in hazardous waste sites, including several substances used in the plastics industry. Read on to better understand how the new tax is impacting producers, distributors, importers and processors in the plastics industry.
The New Superfund Excise Tax
The Infrastructure Investment and Jobs Act was signed into federal law in the U.S. in November 2021. The Act reinstates the Superfund Excise Tax, which was originally enacted as part of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) that expired in 1995. The newly modified Superfund Excise Tax will be used to fund efforts to clean up existing risks to public health, such as abandoned mines and orphaned oil and gas wells.
The mandatory tax went into effect on July 1, 2022 and is currently set to expire on December 31, 2031. The tax applies to resins as follows:
- Chemicals listed in Section 4661(b) of the Internal Revenue Code (IRC) upon sale or use. The tax ranges from $0.48–$9.74 per ton and applies to chemicals such as ethylene and propylene.
- Substances composed of at least 20% of a taxable chemical listed in the IRC Section 4672 and IRS Notice 2021-66, such as polypropylene, polyethylene or polystyrene, upon import. The tax rate is based on the amount of taxable chemical contained within the substance, or 10% of the total value.
The taxable chemical and substance lists in the IRC are not necessarily final or complete. The lists are evolving as the IRS evaluates new substances that may be subject to the tax by formal request.
Understandably, there is some confusion over which substances are taxable. Now that the tax is in effect, it is likely that the lists of taxable chemicals and substances will be updated frequently. Importers of these substances should check the IRC regularly to ensure they are not liable for additional taxes. Exporters of taxable substances should remain up to date too, because they could be entitled to a tax refund if the substances are exported instead of distributed domestically.
Plastics Industry Implications
Deloitte recommended taxpayers be proactive and “carefully analyze and consider the potential tax liabilities, tax reporting requirements and systems impacts” related to the Superfund Excise Tax.
According to Deloitte, the tax is applied to chemicals at the earliest point possible in the supply chain. That means it will directly impact producers, distributors, importers and processors in the chemicals and plastics industries. The new tax will likely raise costs of taxable plastic resins as companies add it into their selling prices or as a surcharge. For common commodity resins, the surcharge usually equates to a fraction of a penny per pound.
Service Updates for M. Holland’s Clients
At M. Holland, we are committed to transparency in our handling of the new tax. The infrastructure bill imposes a per-ton tax on specified chemicals and substances that are either domestically produced or imported into the U.S. for consumption. M. Holland sells some of these taxable substances to its clients, and as a distributor and importer, we are subject to these excise taxes.
Effective for shipments occurring on or after July 1, 2022, M. Holland will invoice a flat rate per pound as a separate line item to recover the new tax. Click here for a list of the taxable substances M. Holland sells with the applicable rate per pound that will be invoiced. Please note that tax recovery charges may vary for similar products and there are still some charges for substances that have not been clarified by the IRS. Our list of fees may change as we receive more guidance from the IRS or our suppliers.
For more information on the Superfund Excise Tax and M. Holland’s response, review our Frequently Asked Questions. For specific concerns related to your business with M. Holland, please contact your account manager.
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