IRS Grants Superfund Taxpayers Failure-to-Deposit Penalty Relief
The IRS recently issued Notice 2022-15, providing temporary relief from a penalty for failure to deposit Superfund excise taxes and confirming the availability of a safe harbor for deposits.
The Hazardous Substance Response Trust Fund, commonly known as the Superfund, taxes certain chemicals and chemical substances to fund cleanups of hazardous substances in the environment. The tax provisions sunset in 1995 but remained on the books in Sec. 4661 and Sec. 4671. The provisions were reenacted in modified form last November by the Infrastructure Investment and Jobs Act, P.L. 117-58. In December, the IRS published an initial list of taxable substances supplementing the statutory one, as required under the Infrastructure Act.
Superfund taxes are reported on a form attached to Form 720, Quarterly Federal Excise Tax Return. Filers must deposit the tax semimonthly, and the deposit must be at least 95% of the net tax liability incurred in the semimonthly period unless the deposit safe harbor applies.
The deposit safe harbor eligibility calculation for a calendar quarter involves the taxpayer's liability in a lookback quarter two calendar quarters prior. Because the taxes take effect July 1, 2022, no lookback quarter will be available until the first calendar quarter of 2023. The IRS acknowledged this issue in granting the relief.
The deposit safe harbor allows for a taxpayer that filed Form 720 for the lookback quarter to be considered to have met the semimonthly deposit requirement if 1) the deposit for each semimonthly period in the current calendar quarter is at least one-sixth of the net tax liability reported for the lookback quarter; 2) each deposit is made timely; 3) the amount of any underpayment is paid by the due date of the applicable Form 720; and 4) the taxpayer's liability does not include any tax that was not imposed during the lookback quarter.
Additionally, a taxpayer will be considered to have satisfied the reasonable-cause standard under Sec. 6656 for semimonthly periods in the third and fourth quarters of 2022 and the first quarter of 2023, with no penalty imposed, if the taxpayer 1) makes timely deposits of Superfund taxes, even if the deposit amounts are computed incorrectly; and 2) pays in full the amount of any underpayment for any calendar quarter by the due date for the Form 720 for that quarter.
The notice also stated that the IRS will not withdraw a taxpayer's right to use the deposit safe harbor during the first, second and third calendar quarters of 2023 due to a failure to make required deposits of Superfund taxes as long as the taxpayer satisfies the reasonable-cause standard for the related lookback quarter.