IRS Temporarily Suspends Failure to Deposit Penalties for Reinstated Superfund Tax

The IRS has issued Notice 2022-15, setting down certain conditions under which a taxpayer will be relieved of underpayment penalties under IRC Section 6656 for failing to make required deposits of the Superfund Tax, which is reinstated effective July 1, 2022.

Underpayment penalties will be waived for the third and fourth quarter of 2022 and the first quarter of 2023 provided the taxpayer shows reasonable cause. Notice 2022-15 provides that a taxpayer is deemed to have satisfied the reasonable cause standard if:

• “(i) the taxpayer makes timely deposits of applicable Superfund chemical taxes, even if the deposit amounts are computed incorrectly, and (ii) the amount of any underpayment of the applicable Superfund chemical taxes for each calendar quarter is paid in full by the due date for filing the Form 720 return for that quarter.”

The Superfund Tax is reported on Form 6627, Environmental Taxes, which is attached to Form 720, Quarterly Federal Excise Tax Return. Under the applicable excise tax regulations at 26 C.F.R. § 40.6302, taxpayers filing a Form 720 are required to make semi-monthly deposits of the tax liability incurred. The deposit is required to be no less than 95% of the amount of net tax liability incurred during the semi-monthly period unless a deposit safe harbor applies.

• “Under the deposit safe harbor rule, a taxpayer that filed a Form 720 return for the second preceding calendar quarter (look-back quarter) is considered to have met the semimonthly deposit requirement for the current quarter if: (i) the deposit for each semimonthly period in the current calendar quarter is not less than 1/6 of the net tax liability reported for the look-back quarter; (ii) each deposit is made on time; (iii) the amount of any underpayment is paid by the due date of the Form 720 return; and (iv) the person’s liability does not include any tax that was not imposed during the look-back quarter.”

A taxpayer that does not make the required semi-monthly deposits may lose the ability to use the safe harbor rule. Concerning the reinstatement of the Superfund Tax, Notice 2022-15 provides that the deposit safe harbor rule will not apply until the first quarter of 2023 and that a taxpayer’s ability to use the deposit safe harbor rule will not be withdrawn with respect to the Superfund tax prior to the fourth quarter of 2023.

The Notice was issued in response to the request for comments in Notice 2021-66 on whether any additional guidance was required.

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