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March 21, 2023

Petition Filed to Add Cellulose Acetate to List of Chemical Substances Subject to Superfund Excise Tax

Lynn L. Bergeson Carla N. Hutton

The Internal Revenue Service (IRS) announced on March 16, 2023, that it received a petition requesting that cellulose acetate (degree of substitution (DS) = 1.5-2.0) be added to the list of taxable substances under Section 4672(a) of the Internal Revenue Code. 88 Fed. Reg. 16307. The petitioner is Celanese Ltd., an exporter of cellulose acetate (DS = 1.5-2.0). According to the notice, cellulose acetate (DS = 1.5-2.0) “is made from cellulose (wood pulp) and methane. The production process is a reaction of cellulose (from wood pulp) with acetic anhydride, normally using a solvent such as acetic acid and a strong acid such as sulfuric acid as a catalyst.” The petition covers cellulose acetate (DS = 1.5-2.0), “commonly referred to as cellulose diacetate. Cellulose acetate in this range generally has similar properties. The petition uses the lowest end of the range cellulose acetate DS = 1.5 to demonstrate that >20% of the substance is made from taxable chemicals, and the midpoint cellulose acetate DS = 1.75 to calculate the tax rate for the entire range.” Comments and requests for a public hearing are due May 15, 2023. More information on the Superfund excise tax on chemicals is available in our July 13, 2022, memorandum, “Superfund Tax on Chemicals: What You Need to Know to Comply,” and our May 19, 2022, memorandum, “Reinstated Superfund Excise Tax Imposed on Certain Chemical Substances.”