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Reminder: Superfund Taxes on Petroleum Take Effect on Jan. 1

Reminder: Superfund Taxes on Petroleum Take Effect on Jan. 1

The “Inflation Reduction Act,” signed into law by President Biden on August 16, 2022, reinstates the Superfund excise taxes on crude oil and imported petroleum products (including base oils and finished lubricants) for the first time since 1995. The reinstated taxes, which take effect on January 1, 2023, and expire on December 31, 2032, are intended to be used to clean up abandoned hazardous waste sites. It is estimated that the reimposed petroleum excise taxes will generate $11.7 billion in revenue over the next 10 years.

The tax rate is 16.4 cents per barrel (approx. $0.0039 per gallon) on crude oil and petroleum-product imports, indexed to the inflation rate. This tax rate is an increase from the long-expired rate of 9.7 cents per barrel. The petroleum excise tax applies to crude oil received at a U.S. refinery (which tax must be paid by the operator of the refinery) and to petroleum products, including base oils and finished lubricants, entering the U.S. for consumption, use, or warehousing (which tax must be paid by the person importing the product into the U.S. for any of those purposes). ILMA members should expect to see the reinstated taxes passed through to them and shown as a separate line item on their suppliers’ invoices as of January 1.

Congress has now fully reinstated the suite of Superfund taxes on petroleum and chemicals. In December 2020, Congress used the “Taxpayer Certainty and Disaster Tax Relief Act of 2020” to extend the nine cents per barrel oil spill liability tax that is used to fund the Federal Oil Spill Tax Liability Trust Fund until December 31, 2025.

Then, in November 2021, Congress reinstated the Superfund tax on chemical feedstocks and chemicals in the “Infrastructure Investment and Jobs Act.” These reimposed chemicals taxes became effective on July 1, 2022, and will expire on December 31, 2031.

The reinstatement of the Superfund petroleum excise taxes will increase costs of oil imports, including base oils and finished lubricants. ILMA members who import oil products might be unfamiliar with their new tax liabilities and reporting requirements. They should take steps now to determine their tax compliance obligations.