Part Two. Excise Taxes Other Than Fuel Taxes 3. Environmental Taxes

Environmental taxes are imposed on domestic crude oil and imported petroleum products (petroleum tax), chemicals (other than ozone-depleting chemicals (ODCs)), imported chemical substances, ODCs, and imported products containing or manufactured with ODCs. In addition, a floor stocks tax is imposed on ODCs held on January 1 by any person (other than the manufacturer or importer of the ODCs) for sale or for use in further manufacture.

Figure the environmental tax on Form 6627. Enter the tax on the appropriate lines of Form 720 and attach Form 6627 to Form 720.

For environmental tax purposes, United States includes the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, any territory of the United States, the Commonwealth of the Northern Mariana Islands, the Trust Territory of the Pacific Islands, the continental shelf areas (applying the principles of section 638), and foreign trade zones. No one is exempt from the environmental taxes, including the federal government, state and local governments, Indian tribal governments, and nonprofit educational organizations.

The petroleum tax is reported on Form 6627, and Form 720 (IRS Nos. 16, 18, 21, and 53). The tax rate is the sum of the Oil Spill Liability Trust Fund financing rate (petroleum oil spill tax rate) and the Hazardous Substance Superfund financing rate (petroleum Superfund tax rate). The petroleum oil spill tax rate is $0.09 per barrel. This rate does not apply after December 31, 2025, unless the tax gets extended. The petroleum Superfund tax rate is $0.18 per barrel, for the 2026 calendar year, and will be adjusted annually for inflation. See Form 6627 for the rates.

Generally, the petroleum tax is imposed on crude oil received at a U.S. refinery and on petroleum products entered into the United States

for consumption, use, or warehousing. The tax also applies to certain uses of domestic crude oil.

Crude oil includes crude oil condensates and natural gasoline. Petroleum products include crude oil, refined and residual oil, and other liquid hydrocarbon refinery products.

Crude oil. Tax is imposed on crude oil when it’s received at a U.S. refinery. The operator of the refinery is liable for the tax.

Tax is imposed on domestic crude oil that’s used before it's received at a U.S. refinery. However, the use of crude oil for extracting oil or natural gas on the premises where such crude oil was produced isn't taxable. The user is liable for the tax.

Imported petroleum products. Tax is imposed on petroleum products when they enter the United States for consumption, use, or warehousing. The person entering the petroleum product into the country is liable for the tax, including the tax on imported crude oil, even if it's subsequently received at a U.S. refinery.

Tax is imposed only once on any imported petroleum product. So, the operator of a U.S. refinery that receives imported crude oil must establish that they’re not liable for the tax by establishing that the petroleum tax has already been imposed on the imported crude oil.

The Infrastructure Investment and Jobs Act reinstates the section 4661 excise tax on chemicals (other than ODCs) (IRS No. 54) and the section 4671 tax on imported chemical substances (IRS No. 17), effective July 1, 2022 (they previously expired on December 31,1995). See the Instructions for Form 6627.

Tax is imposed on the sale or use of taxable chemicals by manufacturers, producers, and importers of those chemicals. A taxable chemical is any substance listed in the table under section 4661(b) and is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing.

Tax is imposed on the sale or use of imported taxable substances by importers of those

taxable substances. An imported taxable substance is defined by section 4672(a). See the Table of Taxable Imported Chemical Substances in the Instructions for Form 6627.

Revenue Procedure 2022-26, I.R.B. 2022-29, at IRS.gov/irb/2022-29_IRB#REV- PROC-2022-26 , provides procedures for re- questing a determination that a substance be added or removed. Revenue Procedure 2023-20, I.R.B. 2023-15, at IRS.gov/irb/ 2023-15_IRB#REV-PROC-2023-20, modifies Revenue Procedure 2022-26 with respect to the date on which a taxable substance is added to the list of taxable substances for purposes of refund claims under section 4662(e).

For updates, such as the not yet shown tax rates for taxable imported chemical substances, or substances recently added or removed, go to IRS.gov/Form6627 . Also, see Superfund chemical excise taxes on IRS.gov.

For a list of the taxable ODCs and tax rates, see Instructions for the Form 6627.

Taxable event. Tax is imposed on an ODC when it's first used or sold by its manufacturer or importer. The manufacturer or importer is liable for the tax.

Use of ODCs. You use an ODC if you put it into service in a trade or business or for the production of income. Also, an ODC is used if you use it in the making of an article, including incorporation into the article, chemical transformation, or release into the air. The loss, destruction, packaging, repackaging, or warehousing of ODCs isn't a use of the ODC.

The creation of a mixture containing an ODC is treated as a taxable use of the ODC contained in the mixture. An ODC is contained in a mixture only if the chemical identity of the ODC isn't changed. Generally, tax is imposed when the mixture is created and not on its sale or use. However, you can choose to have the tax imposed on its sale or use by checking the appropriate box on Form 6627. You can revoke this choice only with IRS consent.

The creation of a mixture for export or for use as a feedstock isn't a taxable use of the ODCs contained in the mixture.

24 Chapter 3 Environmental Taxes Publication 510 (12-2025)

Exceptions. The following may be exempt from the tax on ODCs.

• Metered-dose inhalers.

• Recycled ODCs.

• Exported ODCs.

• ODCs used as feedstock.

Metered-dose inhalers. There is no tax on ODCs used or sold for use as propellants in metered-dose inhalers. For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the form as the sample certificate set forth in Regulations section 52.4682-2(d)(5) . The certificate may be included as part of the sales documentation. Keep the certificate with your records.

Recycled ODCs. There is no tax on any ODC diverted or recovered in the United States as part of a recycling process (and not as part of the original manufacturing or production process). There is no tax on recycled Halon-1301 or recycled Halon-2402 imported from a country that has signed the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol).

The Montreal Protocol is administered by the United Nations (UN). To determine if a country has signed the Montreal Protocol, see the status of the Montreal Protocol at Treaties.UN.org.

Exported ODCs. Generally, there is no tax on ODCs sold for export if certain requirements are met. For a sale to be nontaxable, you and the purchaser must be registered, see Form 637. Also, you must obtain from the purchaser an exemption certificate that you rely on in good faith. Keep the certificate with your records. The certificate must be in substantially the same form as the sample certificate set forth in Regulations section 52.4682-5(d)(3). The tax benefit of this exemption is limited. For more information, see Regulations section 52.4682-5 .

ODCs used as feedstock. There is no tax on ODCs sold for use or used as a feedstock. An ODC is used as a feedstock only if the ODC is entirely consumed in the manufacture of another chemical. The transformation of an ODC into one or more new compounds qualifies as use as a feedstock, but use of an ODC in a mixture doesn't qualify.

For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the same form as the sample certificate set forth in Regulations section 52.4682-2(d)(2) . Keep the certificate with your records.

Credits or refunds. A credit or refund (without interest) of tax paid on ODCs may be claimed if a taxed ODC is:

• Used as a propellant in a metered-dose inhaler (the person who used the ODC as a propellant may file a claim),

• Exported (the manufacturer may file a claim), or

• Used as a feedstock (the person who used the ODC may file a claim).

For information on how to file for credits or refunds, see the Instructions for Form 720, and Schedule 6 (Form 8849).

Conditions to allowance for ODCs exported. To claim a credit or refund for ODCs that are exported, you must have repaid or agreed to repay the tax to the exporter, or obtained the exporter's written consent to allowance of the credit or refund. You must also have the evidence required by the EPA as proof that the ODCs were exported.

Imported Taxable Products (ODC Tax on Imported Products)

An imported product containing or manufactured with ODCs is subject to tax if it's entered into the United States for consumption, use, or warehousing and is listed in the Imported Products Table. The Imported Products Table is listed in Regulations section 52.4682-3(f)(6) .

The tax is based on the weight of the ODCs used in the manufacture of the product. Use the following methods to figure the ODC weight.

• The actual (exact) weight of each ODC used as a material in manufacturing the product.

• If the actual weight can't be determined, the ODC weight listed for the product in the Imported Products Table.

However, if you can't determine the actual weight and the table doesn't list an ODC weight for the product, the rate of tax is 1% of the entry value of the product.

Taxable event. Tax is imposed on an imported taxable product when the product is first sold or used by its importer. The importer is liable for the tax.

Use of imported products. You use an imported product if you put it into service in a trade or business or for the production of income or use it in the making of an article, including incorporation into the article. The loss, destruction, packaging, repackaging, warehousing, or repair of an imported product isn't a use of that product.

Importer election. The importer may choose to treat the entry of a product into the United States as the use of the product. Tax is imposed on the date of entry instead of when the product is sold or used. The choice applies to all imported taxable products that you own and haven’t used when you make the choice and all later entries. Make the choice by checking the box in Form 6627, Part V, under Election. The choice is effective as of the beginning of the calendar quarter to which the Form 6627 applies. You can revoke this choice only with IRS consent.

Sale of article incorporating imported prod- uct. The importer may treat the sale of an article manufactured or assembled in the United States as the first sale or use of an imported taxable product incorporated in that article if both the following apply.

• The importer has consistently treated the sale of similar items as the first sale or use of similar taxable imported products.

• The importer hasn’t chosen to treat entry into the United States as use of the product.

Imported products table. The table lists all the products that are subject to the tax on imported taxable products and specifies the ODC weight of each product. See Regulations section 52.4682-3(f)(6) for the Imported Products Table.

Each listing in the table identifies a product by name and includes only products that are described by that name. Most listings identify a product by both name and Harmonized Tariff Schedule (HTS) heading. In those cases, a product is included in that listing only if the product is described by that name and the rate of duty on the product is determined by reference to that HTS heading. A product is included in the listing even if it's manufactured with or contains a different ODC than the one specified in the table.