Section 4611 of the Internal Revenue Code (Code) imposes a per-barrel tax on certain crude oil and imported petroleum products (petroleum tax). Crude Oil Exports Section 4611(b) of the Code imposes a tax on certain domestic crude oil exports. A recent court case held that the tax is unconstitutional. As a result of the court case and the IRS' acquiescence in the court's decision, the Section 4611(b) tax no longer applies to crude oil exports. See Formal Memorandum 2023-01PDF prepared by the IRS Office of Chief Counsel and Internal Revenue Bulletin 2023-10 (March 6, 2023). Tax Rate Public Law 117-169, 136 Statute 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022, reinstates the Hazardous Substance Superfund financing rate, effective January 1, 2023. As a result, starting January 1, 2023, the petroleum 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 The petroleum Superfund tax rate is $0.164 per barrel for 2023 (rate is indexed annually for inflation) For 2023, this equals $0.254 per barrel. How to Report Report the petroleum tax on a quarterly basis on both of the following forms: Form 720, Quarterly Federal Excise Tax Return Form 6627, Environmental Taxes Tax is imposed on crude oil when it is received at a U.S. refinery. Tax is reported on lines 18 and 53. Tax is also imposed on imported petroleum products when they are entered into the U.S. for consumption, use or warehousing. Tax is reported on lines 16 and 21. Deposits of Tax Taxpayers are required to make deposits of the petroleum tax for each semimonthly period in which tax liability is incurred. Deposits are made using the Electronic Federal Tax Payment System (EFTPS). How Much to Pay Each semimonthly deposit must be at least 95% of the amount of net tax liability for that semimonthly period unless you apply the deposit safe harbor rule. How to Apply the Deposit Safe Harbor Rule Due to the reinstatement of the petroleum Superfund tax rate on January 1, 2023, the safe harbor rule can be applied only during the first and second calendar quarters (Q1 and Q2) of 2023 if you follow these steps to calculate the semimonthly deposit amount: Start with the amount of your petroleum tax liability for the lookback quarter (the petroleum tax rate was then $0.09 per barrel, which represents the petroleum oil spill tax rate). Adjust the tax liability amount to reflect both the $0.09 per barrel petroleum oil spill tax rate and the $0.164 per barrel petroleum Superfund tax rate (this represents the total petroleum tax amount for the quarter if the petroleum Superfund tax rate had been in effect during the lookback quarter). Deposit at least 1/6 of the adjusted amount for each semimonthly period of the quarter.) Lookback Quarter The lookback quarter is the second calendar quarter before the current quarter: Q1 2023 - Lookback quarter is Q3 2022. Q2 2023 - Lookback quarter is Q4 2022. Example: X is the operator of a U.S. refinery that receives crude oil during Q1 2023. X may apply the deposit safe harbor during Q1 2023 to calculate the amount of its semimonthly deposits during that quarter as follows: During the lookback quarter (Q3 2022), X's refinery received 100,000 barrels of crude oil and reported a tax liability of $9,000 ($0.09 per barrel petroleum oil spill tax rate x 100,000). X must divide $25,400 (($0.09 petroleum per barrel oil spill tax rate + $0.164 per barrel petroleum oil spill tax rate) x 100,000) by 6. X must deposit at least $4,233 for each semimonthly period in Q1 2023.
