IRS issues Rev. Proc. for new Superfund excise tax

The IRS recently released Rev. Proc. 2022-26. The rev. proc. provides guidance for taxpayers impacted by the reinstated Superfund excise tax. Specifically, the guidance sets forth procedures for requesting a determination that a substance be added to or removed from the list of taxable substances. The Infrastructure Investment and Jobs Act reinstates the Superfund excise taxes imposed by sections 4661 and 4671 of the IRC, effective July 1, 2022.

Rev. Proc. 2022-26 provides the procedures for importers, exporters and interested parties who seek to request modifications to the list of taxable substances. The guidance provides the following:

• Key definitions, including “importer”, “exporter,” “substance,” “taxable substance,” and “conversion factor”.
• Procedures for how to submit petitions to request additions/subtractions from the list of taxable substances
• Required information to include in the petition
• Stochiometric material consumption equation explanation and example
• Conversion factor explanation and example
• Rules related to IRS review and determination of petition including public hearing and publication in federal registration
• Allowance of retroactive refund claims for export for petitions filed before Jan. 1, 2023.

Washington National Tax Takeaways

Rev. Proc. 2022-26 provides the exclusive procedures for importers, exporters and interested parties to request a determination that a substance be added or removed from the list of taxable substances. This is important guidance for implementation of the Superfund excise tax for middle market importer and exporter companies. It establishes the procedures for how to add or remove substances from the list of taxable articles by filing a petition with the IRS. While the guidance generally follows the concepts that were set forth in the 1980s, it provides additional helpful information and examples.

Additionally, the IRS provided important transition rules. Section 11 provides that taxpayers will have a minimum of 90 days’ notice that a substance will be added or removed from the list. Notably, any petition accepted by the IRS before Jan. 1, 2023 is deemed filed on July 1, 2022. This is important because it essentially provides for retroactive export claims on substances related to accepted petitions for periods dating back to July 1, 2022, even if the petition was filed after that date.

The IRS guidance issued to date is important for companies to begin implementation of the tax on July 1, 2022. Taxpayers are still awaiting guidance on a number of key issues that will be important for implementation of the tax. These provisions include rules related to export claim requirements and rules related to tax-free sales and refunds for production of fertilizer, animal feed, fuel and other exemptions.