IRS Proposes Rules for Reinstated Superfund Excise Tax

On March 27, 2023, the IRS released proposed rules on the Superfund excise tax, which was reinstated as part of the Infrastructure Investment and Jobs Act. The tax, effective as of July 1, 2022, had expired on December 31, 1995. It was designed to contribute to a Superfund created by Congress in 1980 to finance the cleanup of hazardous waste sites when the owner or operator could not be identified or when the cleanup needed to be expedited.

The tax is imposed on the sale of any taxable chemical by a manufacturer or importer and on the sale or use of any taxable substance by an importer. It is due upon the first sale or use after import. The rules, which were released in March, clarify that the tax will apply only to the first sale or use of the taxable chemical, which aligns with Congress’s intent to impose the tax only once per sale or use.

FAQs released by the IRS in June 2022 revealed tax rates for 121 taxable substances, ranging from $1.49 for ammonium nitrate to $23.65 per ton for methyl isobutyl ketone. Thirty additional chemicals were named, but those tax rates have not been determined. However, imported chemicals that have not been assigned a tax rate by the IRS are generally taxed at 10 percent of the chemical’s appraised value when it enters the United States. Taxpayers are only subject to the tax if the weight of the substance consists of 20 percent or more of a taxable chemical, a decrease from the 50 percent threshold under the previous law.

Many taxpayers have been frustrated by limited guidance on the Superfund excise tax, especially on key questions, such as how to claim exemptions, how to define key terminology regarding the supply chain process, and how to calculate the tax rate when the chemical substance contains greater than 20 percent of a taxable chemical. Certain exemptions have been clarified, such as for qualified fuel substances, fertilizer, and animal feed substances, and in cases where manufacturers or importers have obtained an exemption certificate from their customer for tax-free sales. However, many questions remain unanswered.

We anticipate further guidance, especially as the rules proposed on March 27 have not been finalized. Manufacturers and other affected businesses should watch closely for that additional guidance.

If you have questions or concerns relating to the Superfund excise tax, please contact a member of HBK Manufacturing Solutions at 330-758-8613, or email us at

About the Author(s)

Jim is a Principal of HBK CPAs & Consultants and the National Director of HBK Manufacturing Solutions, a group of specialists focused on manufacturing clients and their unique needs.

After joining the firm in 1988, Jim has spent his career working in a variety of industries, including manufacturing and distribution. As the National Director of HBK Manufacturing Solutions, Jim advises manufacturing clients on issues including tax planning, finance, succession planning, mergers and acquisitions, and ESOP transitions. In addition, he shares his knowledge and experiences with manufacturing specialists throughout the firm as well as local and regional organizations and trade associations focused on the manufacturing industry. To recognize his accomplishments, Jim was named Business Professional of the Year in August 2019 by the Youngstown Warren Regional Chamber of Commerce.

In addition to his HBK role, Jim is Chairman of the Board of the Youngstown Business Incubator, an internationally recognized incubator focused on programs including the use of additive manufacturing and advanced manufacturing technologies in the Mahoning Valley and Northeast Ohio.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.