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“Oil spill” excise tax has expired

“Oil spill” excise tax has expired

The “oil spill” excise tax under section 4611 that is imposed on crude oil and imported petroleum products expired at the end of 2018.

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Expiration of the excise tax under section 4611 may present issues for refiners and importers. 

Absent reinstatement of section 4611, there may be potential exposure to the penalty imposed by section 7211 if the expired excise tax is invoiced and passed on by refiners or importers to their customers. Accordingly, the credit and billing operations of entities previously subject to the section 4611 excise tax need to be evaluated. 

Prior reinstatement of “oil spill” excise tax

Section 4611 imposes a tax of $0.09 per barrel on crude oil received at a U.S. refinery, and on petroleum products entered into the United States for consumption, use, or warehousing (the “oil spill liability tax”). The oil spill liability tax expired at the end of 2017, but was subsequently extended and reinstated for the period beginning on March 1, 2018, and ending on December 31, 2018. Read TaxNewsFlash

Because of the expiration of the oil spill tax at the end of 2017, and its reinstatement effective March 1, 2018, the IRS issued guidance—Notice 2018-21—regarding application of a safe harbor look-back rule for deposits of the excise tax. Read TaxNewsFlash

Background

The excise tax under section 4611 (before it expired) was imposed on: (1) crude oil received at a U.S. refinery; (2) imported petroleum products entered into the United States for consumption, use, or warehousing; and (3) any domestically produced crude oil that is used (other than on the premises where produced for extracting oil or natural gas) in or exported from the United States if, before such use or exportation, no taxes were imposed on the crude oil. 

For purposes of the excise tax:

  • “Crude oil” includes crude oil condensates, natural gasoline, and tight oil. 
  • Petroleum products include crude oil and refined petroleum products. 
  • The person liable for the tax is the U.S. refinery operator or the importer.  
  • The rate of the excise tax under section 4611 is statutorily set at $0.09 per barrel, with that tax to be deposited in the "oil spill liability trust fund."

 

For more information, contact a tax professional with KPMG’s Excise Tax Practice group:

Deborah Gordon | +1 (202) 533 5965 | dkgordon@kpmg.com
Taylor Cortright | +1 (202) 533 6188 | tcortright@kpmg.com

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