Complying with the Superfund tax, which Congress resurrected in 2021, has been a challenging process for both NACD members and our staff. It has been nearly three decades since the tax was last in effect, and it was unrealistic for Congress to expect the Internal Revenue Service (IRS) and taxpayers to get such a complex tax back online in only seven months.
While the process has been frustrating — and guidance from the IRS has been limited — last week, taxpayers received welcome relief. On March 27, the IRS extended its semimonthly deposit penalty relief; and a few days later, the agency issued proposed regulations that provide much needed clarity. This proposal by the IRS comes after multiple requests from NACD to provide additional guidance on the reinstated Superfund tax, including four letters sent in 2022 and 2023, two meetings with the IRS Chief Counsel’s office, and extensive outreach from Capitol Hill to IRS.
Many of the questions NACD raised with the IRS were addressed in the proposed regulations. For instance, NACD requested the IRS issue and/or expand definitions such as importer, sale, and use – as well as provide examples. All these terms were expanded upon in the proposed rule and the IRS provided detailed examples. Additionally, NACD requested, and the IRS provided, clarification on the treatment of mixtures. One of the most important issues raised by the association was the lack of Chemical Abstract Service (CAS) Registry Numbers or Harmonized Tariff Schedule (HTS) Codes associated with the chemicals and chemical substances subject to the tax. NACD was pleased the IRS requested input on the best ways to assign CAS numbers or HTS codes and which experts to consult.
The proposed regulations will go far in providing chemical distributors — many of which are small family-owned businesses — the information they need to comply with the Superfund tax. While we still have a long way to go to address questions that remain unanswered, NACD welcomes the proposed rule and penalty relief. The association will continue to review the notice of proposed rulemaking carefully and plans to submit additional comments during the 60-day comment period, which ends May 30, 2023.
NACD has produced a regulatory report on the proposed rulemaking and what the changes may mean for chemical distributors. More information on the Superfund tax and the association’s efforts on this subject can be found by clicking here.
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