The reinstatement of federal Superfund excise taxes could raise the prices of many plastic resins and related feedstocks on July 1.
The Infrastructure Investment & Jobs Act was passed in November. It reinstated those taxes on chemicals and taxable substances, effective July 1. They originally had expired in 1995.
In addition to the reinstatement of the taxes, the bill doubled the prior tax rate on 42 listed chemicals, according to a report from financial firm Deloitte. This effectively doubled the tax rate of the imported taxable substances as well, the report said. The bill also increased the alternative method of calculation of the taxable substances to 10 percent of the value of import.
Resins on the taxable list include polyethylene, polypropylene, homopolymer polystyrene, PVC, polybutadiene, synthetic rubber, phenolics and melamine. Plastics feedstocks on the list include butadiene, propylene, benzene, ethylene, toluene and chlorine.
The tax directly applies to feedstocks. Common plastics feedstocks ethylene and propylene are taxed at $9.74 per ton, or 0.44 cents per pound. The Deloitte report said that the tax rate for related substances is dependent on individual chemical composition. The report uses the example of a PP resin, which if made of 50 percent propylene, would be taxed at half that rate, or 0.22 cents per pound.
The Superfund excise taxes are set to expire at the end of 2031. They're expected to generate $14.4 billion of revenue in total, or about $1.2 billion annually, the report said.
"The intent of the Superfund Excise Taxes is to target the chemicals primarily found in hazardous waste sites and to tax the chemicals at the earliest point possible in the process," officials said in the Deloitte report. "Accordingly, the chemicals are taxed upon the first sale or use after import or manufacture in the U.S., and the importer or manufacturer is liable for the excise tax, which it may pass along to its customers."
The excise taxes are being opposed by many members of the plastics and chemical industries. In a June 3 letter to IRS Commissioner Charles Rettig, American Chemistry Council President and CEO Chris Jahn said that "as our members work to implement this tax, additional concerns continue to arise."
"Most importantly … is our overarching concern that the IRS and taxpayers will not be ready in the next month to implement this tax," Jahn said. "ACC therefore asks on behalf of our approximately 200 members that the IRS delay implementation of the Superfund tax on chemicals."
He also noted ACC's "continuing opposition to the reinstatement of this tax, given its negative impact on our members and the adverse downstream impact on consumers as the price of many goods of will increase."
In a statement to Plastics News, Plastics Industry Association President Matt Seaholm said that, despite the bipartisan commitment to invest in infrastructure, the trade group "was disappointed with the reinstatement of this tax that will increase costs for consumers."
"It's a complicated tax that even the IRS is having difficulty getting its arms around," Seaholm said. "And, with the way Washington works, the revenue generated is likely to go toward things unrelated to the Superfund program. At the end of the day, this tax will increase the cost to manufacture many plastics and in turn, many of the products made from them."
Officials with Dow Inc. — a major producer of PE and other specialty plastics based in Midland, Mich. — said in a statement to PN that their firm will comply with the new taxes. But they added that Dow "disagrees with the imposition of this counterproductive tax, because it increases prices for chemical building blocks that support the maintenance and construction of important infrastructure."