A bill to amend the Internal Revenue Code of 1986 to increase the excise taxes on tobacco products for the purpose of offsetting the Federal budgetary costs associated with the Child Health Insurance and Lower Deficit Act.

Summary: Amends the Internal Revenue Code to increase the excise tax on tobacco products.

SECTION 1. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS TO FUND THE 
              CHILD HEALTH INSURANCE AND LOWER DEFICIT ACT.

    (a) Cigarettes.--Section 5701(b) of the Internal Revenue Code of 
1986 is amended--
            (1) in paragraph (1), by striking ``$12 per thousand ($10 
        per thousand on cigarettes removed during 1991 or 1992)'' and 
        inserting ``$33.50 per thousand'', and
            (2) in paragraph (2), by striking ``$25.20 per thousand 
        ($21 per thousand on cigarettes removed during 1991 or 1992)'' 
        and inserting ``$70.35 per thousand''.
    (b) Cigars.--Section 5701(a) of the Internal Revenue Code of 1986 
is amended--
            (1) in paragraph (1), by striking ``$1.125 cents per 
        thousand (93.75 cents per thousand on cigars removed during 
        1991 or 1992)'' and inserting ``$3.141 cents per thousand'', 
        and
            (2) by striking ``equal to'' and all that follows in 
        paragraph (2) and inserting ``equal to 35.59 percent of the 
        price for which sold but not more than $83.75 per thousand.''
    (c) Cigarette Papers.--Section 5701(c) of the Internal Revenue Code 
of 1986 is amended by striking ``0.75 cent (0.625 cent on cigarette 
papers removed during 1991 or 1992)'' and inserting ``2.09 cents''.
    (d) Cigarette Tubes.--Section 5701(d) of the Internal Revenue Code 
of 1986 is amended by striking ``1.5 cents (1.25 cents on cigarette 
tubes removed during 1991 or 1992)'' and inserting ``4.18 cents''.
    (e) Smokeless Tobacco.--Section 5701(e) of the Internal Revenue 
Code of 1986 is amended--
            (1) in paragraph (1), by striking ``36 cents (30 cents on 
        snuff removed during 1991 or 1992)'' and inserting ``$6.09'', 
        and
            (2) by striking ``12 cents (10 cents on chewing tobacco 
        removed during 1991 or 1992)'' in paragraph (2) and inserting 
        ``$2.41''.
    (f) Pipe Tobacco.--Section 5701(f) of the Internal Revenue Code of 
1986 is amended by striking ``67.5 cents (56.25 cents on pipe tobacco 
removed during 1991 or 1992)'' and inserting ``$1.88''.
    (g) Effective Date.--The amendments made by this section shall 
apply to articles removed (as defined in section 5702(k) of the 
Internal Revenue Code of 1986) after September 30, 1997.
    (h) Floor Stocks Taxes.--
            (1) Imposition of tax.--On tobacco products and cigarette 
        papers and tubes manufactured in or imported into the United 
        States which are removed before October 1, 1997, and held on 
        such date for sale by any person, there is hereby imposed a tax 
        in an amount equal to the excess of--
                    (A) the tax which would be imposed under section 
                5701 of the Internal Revenue Code of 1986 on the 
                article if the article had been removed on such date, 
                over
                    (B) the prior tax (if any) imposed under section 
                5701 or 7652 of such Code on such article.
            (2) Authority to exempt cigarettes held in vending 
        machines.--To the extent provided in regulations prescribed by 
        the Secretary, no tax shall be imposed by paragraph (1) on 
        cigarettes held for retail sale on October 1, 1997, by any 
        person in any vending machine. If the Secretary provides such a 
        benefit with respect to any person, the Secretary may reduce 
        the $500 amount in paragraph (3) with respect to such person.
            (3) Credit against tax.--Each person shall be allowed as a 
        credit against the taxes imposed by paragraph (1) an amount 
        equal to $500. Such credit shall not exceed the amount of taxes 
        imposed by paragraph (1) on October 1, 1997, for which such 
        person is liable.
            (4) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding cigarettes 
                on October 1, 1997, to which any tax imposed by 
                paragraph (1) applies shall be liable for such tax.
                    (B) Method of payment.--The tax imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe by regulations.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) shall be paid on or before January 1, 1998.
            (5) Articles in foreign trade zones.--Notwithstanding the 
        Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
        other provision of law, any article which is located in a 
        foreign trade zone on October 1, 1997, shall be subject to the 
        tax imposed by paragraph (1) if--
                    (A) internal revenue taxes have been determined, or 
                customs duties liquidated, with respect to such article 
                before such date pursuant to a request made under the 
                1st proviso of section 3(a) of such Act, or
                    (B) such article is held on such date under the 
                supervision of a customs officer pursuant to the 2d 
                proviso of such section 3(a).
            (6) Definitions.--For purposes of this subsection--
                    (A) In general.--Terms used in this subsection 
                which are also used in section 5702 of the Internal 
                Revenue Code of 1986 shall have the respective meanings 
                such terms have in such section, as amended by this 
                Act.
                    (B) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
            (7) Controlled groups.--Rules similar to the rules of 
        section 5061(e)(3) of such Code shall apply for purposes of 
        this subsection.
            (8) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 5701 of such Code shall, insofar as 
        applicable and not inconsistent with the provisions of this 
        subsection, apply to the floor stocks taxes imposed by 
        paragraph (1), to the same extent as if such taxes were imposed 
        by such section 5701. The Secretary may treat any person who 
        bore the ultimate burden of the tax imposed by paragraph (1) as 
        the person to whom a credit or refund under such provisions may 
        be allowed or made.