Superfund Chemical Excise Tax Exemptions Explained
Introduction
The Superfund Chemical Excise Tax, reinstated by the Infrastructure Investment and Jobs Act, resumed on July 1, 2022, marking reinstitution of excise duties on certain chemicals (IRC §§ 4661–4671). Manufacturers, producers, and importers are required to report these taxes on Form 720 (Quarterly Federal Excise Tax Return) alongside Form 6627 (Environmental Taxes).
Available Exemptions
Under Internal Revenue Code (IRC) § 4662(b) and related provisions, the following exemptions apply to the Superfund Chemical Excise Tax:
Fuel Use Exemption — IRC § 4662(b)(1)
Methane or butane used solely as a fuel.Fertilizer Production Use — IRC § 4662(b)(2)
Nitric acid, sulfuric acid, ammonia, or methane used in fertilizer manufacturing.Air Pollution By-Product Exemption — IRC § 4662(b)(3)
Sulfuric acid produced as a by-product during air pollution control processes.Coal-Derived Substances — IRC § 4662(b)(4)
Substances derived from coal.Fuel Production Use — IRC § 4662(b)(5)
Chemicals used in producing gasoline, diesel, aviation fuel, or jet fuel.Transitory Presence During Refining — IRC § 4662(b)(6)
Substances with only a temporary presence during smelting or refining.Separated Xylene Isomer Exclusion — IRC § 4662(b)(7)
Any separated isomer of xylene (except when imported/exported).Recycled Metals — IRC § 4662(b)(8)
Recycled chromium, cobalt, and nickel recovered from solid waste.Animal Feed Use — IRC § 4662(b)(9)
Taxable chemicals used as qualified animal feed substances.Intermediate Hydrocarbon Stream Sales — IRC § 4662(b)(10)
Organic taxable chemicals sold as part of an intermediate hydrocarbon stream (requires both parties to register under Form 637, Activity Letter G).Inventory Exchanges — IRC § 4662(b)(11)
Exchanges of taxable chemicals between registered parties (Form 637, Activity Letter G required).Exports — IRC § 4662(e)
Tax-free sales for export; credits or refunds may be claimed with proof of export.
Source - https://www.federalregister.gov/documents/2023/03/29/2023-06278/superfund-chemical-taxes
Claiming Exemptions & Registration Process
Register with the IRS
To claim exemptions for intermediate hydrocarbon sales or inventory exchanges, register by filing Form 637, Activity Letter G.
Reporting on Tax Forms
File Form 720 (Quarterly Federal Excise Tax Return) along with Form 6627 attached to report exempt activities and applicable tax liability.
Documentation and Proof
For export-based exemptions and refunds, maintain clear evidence of export.
Keep thorough documentation for qualifying uses (fuel, fertilizer, refining, animal feed, etc.) as IRS guidance may require substantiation.
Refunds or Credits
Credit or refund claims for exports and qualifying uses are authorized under IRC § 4662(d)–(e) and must meet regulatory conditions.
Conclusion
The Superfund Chemical Excise Tax carries numerous exemptions designed to avoid penalizing legitimate, beneficial industrial uses—from fuel production to recycling and export. To leverage these exemptions effectively, businesses must know registration requirements (Form 637), understand form filings (Form 720 and 6627), and meticulously document qualifying activities.
Additionally, staying current with supplemental IRS and Treasury guidance ensures proper compliance and minimizes liability.