I

104TH CONGRESS

1ST SESSION H. R. 1455

To amend the Internal Revenue Code of 1986 to increase the tax on tobacco

products, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 6, 1995

Mr. STARK (for himself, Mr. HANSEN, Mr. DURBIN, Mr. COYNE, Ms. PELOSI,

Mr. LEWIS of Georgia, Mr. LIPINSKI, Mr. MORAN, Mr. OBERSTAR, Mrs.

COLLINS of Illinois, and Mr. EVANS) introduced the following bill; which

was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to increase

the tax on tobacco products, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Tobacco Health Tax and Agricultural Conversion Act of

6 1995’’.

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment
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1 to, or repeal of, a section or other provision, the reference

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

4 SEC. 2. INCREASE IN EXCISE TAXES ON TOBACCO

5 PRODUCTS.

6 (a) CIGARETTES.—Subsection (b) of section 5701 is

7 amended—

8 (1) by striking ‘‘$12 per thousand ($10 per

9 thousand on cigarettes removed during 1991 or

10 1992)’’ in paragraph (1) and inserting ‘‘$100.00 per

11 thousand’’,

12 (2) by striking ‘‘$25.20 per thousand ($21 per

13 thousand on cigarettes removed during 1991 or

14 1992)’’ in paragraph (2) and inserting ‘‘$210.00 per

15 thousand’’, and

16 (3) by adding at the end thereof the following

17 new paragraph:

18 ‘‘(3) ADDITIONAL TAX ON PACKS CONTAINING

19 FEWER THAN 20 CIGARETTES.—On any pack of

20 cigarettes containing fewer than 20 cigarettes, the

21 excess of $2 over the tax imposed by paragraphs (1)

22 and (2) on the cigarettes in such pack.’’

23 (b) CIGARS.—Subsection (a) of section 5701 is

24 amended—
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1 (1) by striking ‘‘$1.125 cents per thousand

2 (93.75 cents per thousand on cigars removed during

3 1991 or 1992)’’ in paragraph (1) and inserting

4 ‘‘$89.14 per thousand’’, and

5 (2) by striking ‘‘equal to’’ and all that follows

6 in paragraph (2) and inserting ‘‘equal to 105.8 per7 cent of the price for which sold but not more than

8 $250.03 per thousand.’’

9 (c) CIGARETTE PAPERS.—Subsection (c) of section

10 5701 is amended by striking ‘‘0.75 cent (0.625 cent on

11 cigarette papers removed during 1991 or 1992)’’ and in12 serting ‘‘6.24 cents’’.

13 (d) CIGARETTE TUBES.—Subsection (d) of section

14 5701 is amended by striking ‘‘1.5 cents (1.25 cents on

15 cigarette tubes removed during 1991 or 1992)’’ and in16 serting ‘‘12.5 cents’’.

17 (e) SMOKELESS TOBACCO.—Subsection (e) of section

18 5701 is amended—

19 (1) by striking ‘‘36 cents (30 cents on snuff re20 moved during 1991 or 1992)’’ in paragraph (1) and

21 inserting ‘‘$29.70’’, and

22 (2) by striking ‘‘12 cents (10 cents on chewing

23 tobacco removed during 1991 or 1992)’’ in para24 graph (2) and inserting ‘‘$29.46’’.
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1 (f) PIPE TOBACCO.—Subsection (f) of section 5701

2 is amended by striking ‘‘67.5 cents (56.25 cents on pipe

3 tobacco removed during 1991 or 1992)’’ and inserting

4 ‘‘$30.01’’.

5 (g) INFLATION ADJUSTMENT OF TOBACCO TAX

6 RATES.—Section 5701 is amended by adding at the end

7 thereof the following new subsection:

8 ‘‘(i) INFLATION ADJUSTMENT.—

9 ‘‘(1) IN GENERAL.—In the case of articles re10 moved in any calendar year after 1995, each rate of

11 tax contained in this section shall be increased by an

12 amount equal to—

13 ‘‘(A) such rate, multiplied by

14 ‘‘(B) the greater of—

15 ‘‘(i) the cost-of-living adjustment de16 termined under section 1(f)(3) for the cal17 endar year in which the removal occurs by

18 substituting ‘calendar year 1994’ for ‘cal19 endar year 1992’ in subparagraph (B)

20 thereof, or

21 ‘‘(ii) the cost-of-living adjustment

22 which would be determined under clause

23 (i) if only changes in the tobacco and

24 smoking products component of the
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1 Consumer Price Index (as defined in sec2 tion 1(f)(5)) were taken into account.

3 If any increase determined under this subsection is

not a multiple of 1 4 ⁄4 cent, such increase shall be

rounded to the nearest 1 5 ⁄4 cent.

6 ‘‘(2) SPECIAL RULE.—No adjustment shall be

7 made under paragraph (1) in the percentage rate set

8 forth in subsection (a)(2) but such adjustment shall

9 apply to the dollar amount contained therein.’’

10 (h) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to articles removed (as defined in

12 section 5702(k) of the Internal Revenue Code of 1986,

13 as amended by this Act) after September 30, 1995.

14 (i) FLOOR STOCKS TAXES.—

15 (1) IMPOSITION OF TAX.—On tobacco products

16 and cigarette papers and tubes manufactured in or

17 imported into the United States which are removed

18 before October 1, 1995, and held on such date for

19 sale by any person, there is hereby imposed a tax in

20 an amount equal to the excess of—

21 (A) the tax which would be imposed under

22 section 5701 of the Internal Revenue Code of

23 1986 on the article if the article had been re24 moved on such date, over
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1 (B) the prior tax (if any) imposed under

2 section 5701 or 7652 of such Code on such

3 article.

4 (2) AUTHORITY TO EXEMPT CIGARETTES HELD

5 IN VENDING MACHINES.—To the extent provided in

6 regulations prescribed by the Secretary, no tax shall

7 be imposed by paragraph (1) on cigarettes held for

8 retail sale on October 1, 1995, by any person in any

9 vending machine. If the Secretary provides such a

10 benefit with respect to any person, the Secretary

11 may reduce the $500 amount in paragraph (3) with

12 respect to such person.

13 (3) CREDIT AGAINST TAX.—Each person shall

14 be allowed as a credit against the taxes imposed by

15 paragraph (1) an amount equal to $500. Such credit

16 shall not exceed the amount of taxes imposed by

17 paragraph (1) for which such person is liable.

18 (4) LIABILITY FOR TAX AND METHOD OF PAY19 MENT.—

20 (A) LIABILITY FOR TAX.—A person hold21 ing on October 1, 1995, articles to which any

22 tax imposed by paragraph (1) applies shall be

23 liable for such tax.

24 (B) METHOD OF PAYMENT.—The tax im25 posed by paragraph (1) shall be paid in such
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1 manner as the Secretary shall prescribe by reg2 ulations.

3 (C) TIME FOR PAYMENT.—The tax im4 posed by paragraph (1) shall be paid on or be5 fore December 31, 1995.

6 (5) ARTICLES IN FOREIGN TRADE ZONES.—

7 Notwithstanding the Act of June 18, 1934 (48 Stat.

8 998, 19 U.S.C. 81a) and any other provision of law,

9 any article which is located in a foreign trade zone

10 on October 1, 1995, shall be subject to the tax im11 posed by paragraph (1) if—

12 (A) internal revenue taxes have been deter13 mined, or customs duties liquidated, with re14 spect to such article before such date pursuant

15 to a request made under the 1st proviso of sec16 tion 3(a) of such Act, or

17 (B) such article is held on such date under

18 the supervision of a customs officer pursuant to

19 the 2d proviso of such section 3(a).

20 (6) DEFINITIONS.—For purposes of this sub21 section:

22 (A) IN GENERAL.—Terms used in this sub23 section which are also used in section 5702 of

24 the Internal Revenue Code of 1986 shall have

25 the respective meanings such terms have in
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1 such section, and the term ‘‘tobacco products’’

2 shall include articles first subject to the tax im3 posed by section 5701 of such Code by reason

4 of the amendments made by this Act.

5 (B) SECRETARY.—The term ‘‘Secretary’’

6 means the Secretary of the Treasury or his

7 delegate.

8 (7) CONTROLLED GROUPS.—Rules similar to

9 the rules of section 5061(e)(3) of such Code shall

10 apply for purposes of this subsection.

11 (8) OTHER LAWS APPLICABLE.—All provisions

12 of law, including penalties, applicable with respect to

13 the taxes imposed by section 5701 of such Code

14 shall, insofar as applicable and not inconsistent with

15 the provisions of this subsection, apply to the floor

16 stocks taxes imposed by paragraph (1), to the same

17 extent as if such taxes were imposed by such section

18 5701. The Secretary may treat any person who bore

19 the ultimate burden of the tax imposed by para20 graph (1) as the person to whom a credit or refund

21 under such provisions may be allowed or made.
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1 SEC. 3. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVI2 SIONS.

3 (a) EXEMPTION FOR EXPORTED TOBACCO PROD4 UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY

5 ONLY TO ARTICLES MARKED FOR EXPORT.—

6 (1) Subsection (b) of section 5704 is amended

7 by adding at the end thereof the following new sen8 tence: ‘‘Tobacco products and cigarette papers and

9 tubes may not be transferred or removed under this

10 subsection unless such products or papers and tubes

11 bear such marks, labels, or notices as the Secretary

12 shall by regulations prescribe.’’

13 (2) Section 5761 is amended by redesignating

14 subsections (c) and (d) as subsections (d) and (e),

15 respectively, and by inserting after subsection (b)

16 the following new subsection:

17 ‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE

18 PAPERS AND TUBES FOR EXPORT.—Except as provided

19 in subsections (b) and (d) of section 5704—

20 ‘‘(1) every person who sells, relands, or receives

21 within the jurisdiction of the United States any to22 bacco products or cigarette papers or tubes which

23 have been labeled or shipped for exportation under

24 this chapter,

25 ‘‘(2) every person who sells or receives such to26 bacco products or cigarette papers or tubes, and
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1 ‘‘(3) every person who aids or abets in such

2 selling, relanding, or receiving,

3 shall, in addition to the tax and any other penalty provided

4 in this title, be liable for a penalty equal to the greater

5 of $1,000 or 5 times the amount of the tax imposed by

6 this chapter. All tobacco products and cigarette papers

7 and tubes relanded within the jurisdiction of the United

8 States shall be forfeited to the United States.’’

9 (3) Subsection (a) of section 5761 is amended

10 by striking ‘‘subsection (b)’’ and inserting ‘‘sub11 section (b) or (c)’’.

12 (4) Subsection (d) of section 5761, as redesig13 nated by paragraph (2), is amended by striking

14 ‘‘The penalty imposed by subsection (b)’’ and insert15 ing ‘‘The penalties imposed by subsections (b) and

16 (c)’’.

17 (5)(A) Subpart F of chapter 52 is amended by

18 adding at the end thereof the following new section:

19 ‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE20 VIOUSLY EXPORTED TOBACCO PRODUCTS.

21 ‘‘(a) IN GENERAL.—Tobacco products and cigarette

22 papers and tubes previously exported from the United

23 States may be imported or brought into the United States

24 only as provided in section 5704(d).
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1 ‘‘(b) CROSS REFERENCE.—

‘‘For penalty for the sale of cigarettes in the United States which are labeled for export, see section

5761(d).’’

2 (B) The table of sections for subpart F of chap3 ter 52 is amended by adding at the end thereof the

4 following new item:

‘‘Sec. 5754. Restriction on importation of previously exported tobacco products.’’

5 (b) IMPORTERS REQUIRED TO BE QUALIFIED.—

6 (1) Sections 5712, 5713(a), 5721, 5722,

7 5762(a)(1), and 5763 (b) and (c) are each amended

8 by inserting ‘‘or importer’’ after ‘‘manufacturer’’.

9 (2) The heading of subsection (b) of section

10 5763 is amended by inserting ‘‘QUALIFIED IMPORT11 ERS,’’ after ‘‘MANUFACTURERS,’’.

12 (3) The heading for subchapter B of chapter 52

13 is amended by inserting ‘‘and Importers’’ after

14 ‘‘Manufacturers’’.

15 (4) The item relating to subchapter B in the

16 table of subchapters for chapter 52 is amended by

17 inserting ‘‘and importers’’ after ‘‘manufacturers’’.

18 (c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES

19 OF CIGARETTE MANUFACTURERS.—

20 (1) Subsection (a) of section 5704 is amend21 ed—
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1 (A) by striking ‘‘EMPLOYEE USE OR’’ in

2 the heading, and

3 (B) by striking ‘‘for use or consumption by

4 employees or’’ in the text.

5 (2) Subsection (e) of section 5723 is amended

6 by striking ‘‘for use or consumption by their employ7 ees, or for experimental purposes’’ and inserting

8 ‘‘for experimental purposes’’.

9 (d) REPEAL OF TAX-EXEMPT SALES TO UNITED

10 STATES.—Subsection (b) of section 5704 is amended by

11 striking ‘‘and manufacturers may similarly remove such

12 articles for use of the United States;’’.

13 (e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS

14 SUBJECT TO TAX.—Subsection (c) of section 5701 is

15 amended by striking ‘‘On each book or set of cigarette

16 papers containing more than 25 papers,’’ and inserting

17 ‘‘On cigarette papers,’’.

18 (f) STORAGE OF TOBACCO PRODUCTS.—Subsection

19 (k) of section 5702 is amended by inserting ‘‘under section

20 5704’’ after ‘‘internal revenue bond’’.

21 (g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC22 TURING ACTIVITY REQUIREMENTS.—Section 5712 is

23 amended by striking ‘‘or’’ at the end of paragraph (1),

24 by redesignating paragraph (2) as paragraph (3), and by

25 inserting after paragraph (1) the following new paragraph:
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1 ‘‘(2) the activity proposed to be carried out at

2 such premises does not meet such minimum capacity

3 or activity requirements as the Secretary may pre4 scribe, or’’.

5 (h) LIMITATION ON COVER OVER OF TAX ON TO6 BACCO PRODUCTS.—Section 7652 is amended by adding

7 at the end thereof the following new subsection:

8 ‘‘(h) LIMITATION ON COVER OVER OF TAX ON TO9 BACCO PRODUCTS.—For purposes of this section, with re10 spect to taxes imposed under section 5701 or this section

11 on any tobacco product or cigarette paper or tube, the

12 amount covered into the treasuries of Puerto Rico and the

13 Virgin Islands shall not exceed the rate of tax under sec14 tion 5701 in effect on the article on the day before the

15 date of the enactment of the Tobacco Tax Act of 1995.’’

16 (i) EFFECTIVE DATE.—The amendments made by

17 this section shall apply to articles removed (as defined in

18 section 5702(k) of the Internal Revenue Code of 1986,

19 as amended by this Act) after September 30, 1995.

20 SEC. 4. IMPOSITION OF EXCISE TAX ON MANUFACTURE

21 OR IMPORTATION OF ROLL-YOUR-OWN TO22 BACCO.

23 (a) IN GENERAL.—Section 5701 (relating to rate of

24 tax) is amended by redesignating subsection (g) as sub-
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1 section (h) and by inserting after subsection (f) the follow2 ing new subsection:

3 ‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own

4 tobacco, manufactured in or imported into the United

5 States, there shall be imposed a tax of $29.34 per pound

6 (and a proportionate tax at the like rate on all fractional

7 parts of a pound).’’

8 (b) ROLL-YOUR-OWN TOBACCO.—Section 5702 (re9 lating to definitions) is amended by adding at the end

10 thereof the following new subsection:

11 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll12 your-own tobacco’ means any tobacco which, because of

13 its appearance, type, packaging, or labeling, is suitable for

14 use and likely to be offered to, or purchased by, consumers

15 as tobacco for making cigarettes.’’

16 (c) TECHNICAL AMENDMENTS.—

17 (1) Subsection (c) of section 5702 is amended

18 by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe

19 tobacco, and roll-your-own tobacco’’.

20 (2) Subsection (d) of section 5702 is amend21 ed—

22 (A) in the material preceding paragraph

23 (1), by striking ‘‘or pipe tobacco’’ and inserting

24 ‘‘pipe tobacco, or roll-your-own tobacco’’, and
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1 (B) by striking paragraph (1) and insert2 ing the following new paragraph:

3 ‘‘(1) a person who produces cigars, cigarettes,

4 smokeless tobacco, pipe tobacco, or roll-your-own to5 bacco solely for his own personal consumption or

6 use, and’’.

7 (3) The chapter heading for chapter 52 is

8 amended to read as follows:

9 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND

10 CIGARETTE PAPERS AND TUBES’’.

11 (4) The table of chapters for subtitle E is

12 amended by striking the item relating to chapter 52

13 and inserting the following new item:

‘‘Chapter 52. Tobacco products and cigarette papers and tubes.’’

14 (d) EFFECTIVE DATE.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall apply to roll-your-own tobacco re17 moved (as defined in section 5702(k) of the Internal

18 Revenue Code of 1986, as amended by this Act)

19 after September 30, 1995.

20 (2) TRANSITIONAL RULE.—Any person who—

21 (A) on the date of the enactment of this

22 Act is engaged in business as a manufacturer of

23 roll-your-own tobacco or as an importer of to24 bacco products or cigarette papers and tubes,

25 and
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1 (B) before October 1, 1995, submits an

2 application under subchapter B of chapter 52

3 of such Code to engage in such business,

4 may, notwithstanding such subchapter B, continue

5 to engage in such business pending final action on

6 such application. Pending such final action, all pro7 visions of such chapter 52 shall apply to such appli8 cant in the same manner and to the same extent as

9 if such applicant were a holder of a permit under

10 such chapter 52 to engage in such business.

11 SEC. 5. ESTABLISHMENT OF TOBACCO CONVERSION AND

12 HEALTH EDUCATION TRUST FUND AND NA13 TIONAL FUND FOR MEDICAL RESEARCH.

14 (a) IN GENERAL.—Subchapter A of chapter 98 (re15 lating to trust fund code) is amended by adding at the

16 end thereof the following new sections:

17 ‘‘SEC. 9512. TOBACCO CONVERSION AND HEALTH EDU18 CATION TRUST FUND.

19 ‘‘(a) CREATION OF TRUST FUND.—There is estab20 lished in the Treasury of the United States a trust fund

21 to be known as the ‘Tobacco Conversion and Health Edu22 cation Trust Fund’, consisting of such amounts as may

23 be appropriated or credited to such Trust Fund as pro24 vided in this section or section 9602(b).

25 ‘‘(b) TRANSFERS TO TRUST FUND.—
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1 ‘‘(1) IN GENERAL.—There is hereby appro2 priated to the Tobacco Conversion and Health Edu3 cation Trust Fund amounts equivalent to 3 percent

4 (1 percent on and after October 1, 2000) of the net

5 revenue received in the Treasury from the 1995 to6 bacco tax increases.

7 ‘‘(2) NET REVENUES.—For purposes of para8 graph (1), the net revenue received in the Treasury

9 from the 1995 tobacco tax increases is the amount

10 estimated by the Secretary based on the excess of—

11 ‘‘(A) the additional taxes received in the

12 Treasury under section 5701 by reason of the

13 amendments made by the Tobacco Health Tax

14 and Agricultural Conversion Act of 1995 or

15 under section 2(i) of such Act, over

16 ‘‘(B) the decrease in the tax imposed by

17 chapter 1 resulting from such taxes.

18 ‘‘(c) TOBACCO CONVERSION ACCOUNT.—

19 ‘‘(1) IN GENERAL.—There is established in the

20 Tobacco Conversion and Health Education Trust

21 Fund a separate account to be known as the ‘To22 bacco Conversion Account’ consisting of such

23 amounts as may be transferred or credited to such

24 account as provided in this section or section

25 9602(b).
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1 ‘‘(2) TRANSFERS TO ACCOUNT.—The Secretary

2 of the Treasury shall transfer to the Tobacco Conversion Account 1 3 ⁄2 of the amounts appropriated to

4 the Tobacco Conversion and Health Education Trust

5 Fund under subsection (b)(1) for periods before Oc6 tober 1, 2000.

7 ‘‘(3) EXPENDITURES FROM ACCOUNT.—

8 Amounts in the Tobacco Conversion Account shall

9 be available, as provided in appropriation Acts, for

10 making expenditures for purposes of—

11 ‘‘(A) assisting farmers in converting from

12 tobacco to other crops, and

13 ‘‘(B) providing grants or loans to commu14 nities, and persons involved in the production or

15 manufacture of tobacco or tobacco products,

16 that are adversely affected by the tax increases

17 contained in the Tobacco Health Tax and Agri18 cultural Conversion Act of 1995.

19 The grants and loans referred to in subparagraph

20 (B) shall include grants and loans to assist in at21 tracting nontobacco sources of income and grants to

22 farmers who retire tobacco allotments.

23 ‘‘(d) HEALTH EDUCATION ACCOUNT.—

24 ‘‘(1) IN GENERAL.—There is established in the

25 Tobacco Conversion and Health Education Trust
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1 Fund a separate account to be known as the ‘Health

2 Education Account’, consisting of such amounts as

3 may be transferred or credited to such account as

4 provided in this section or section 9602(b).

5 ‘‘(2) TRANSFERS TO ACCOUNT.—The Secretary

6 of the Treasury shall transfer to the Health Education Account 1 7 ⁄2 (100 percent on and after Octo8 ber 1, 2000) of the amounts appropriated to the To9 bacco Conversion and Health Education Trust Fund

10 under subsection (b)(1).

11 ‘‘(3) EXPENDITURES FROM ACCOUNT.—

12 Amounts in the Health Education Account shall be

13 available, as provided in appropriation Acts, to the

14 Secretary of Health and Human Services for making

15 expenditures to increase public awareness of health

16 risks, including tobacco use.

17 ‘‘(e) TREATMENT OF SPENDING.—All funds trans18 ferred to the Tobacco Conversion and Health Education

19 Trust Fund and expended in accordance with appropria20 tion Acts shall be treated as direct spending not subject

21 to the discretionary spending limits in the Balanced Budg22 et and Emergency Deficit Control Act of 1985.

23 ‘‘SEC. 9513. NATIONAL FUND FOR MEDICAL RESEARCH.

24 ‘‘(a) CREATION OF TRUST FUND.—There is estab25 lished in the Treasury of the United States a trust fund
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1 to be known as the ‘National Fund for Medical Research’,

2 consisting of such amounts as may be appropriated or

3 credited to such Fund as provided in this section or sec4 tion 9602(b).

5 ‘‘(b) TRANSFERS TO FUND.—There is hereby appro6 priated to the National Fund for Medical Research

7 amounts equivalent to 9 percent of the net revenue re8 ceived in the Treasury from the 1995 tobacco tax in9 creases (within the meaning of section 9512(b)).

10 ‘‘(c) EXPENDITURES FROM FUND.—

11 ‘‘(1) IN GENERAL.—Amounts in the National

12 Fund for Medical Research shall be distributed to

13 member institutes of the National Institutes of

14 Health and Centers in the same proportion to the

15 total amount received under this section, as the

16 amount of annual appropriations under appropria17 tions Acts for each member institute and Centers for

18 the fiscal year bears to the total amount of appro19 priations under appropriations Acts for all member

20 institutes and Centers of the National Institutes of

21 Health for the fiscal year.

22 ‘‘(2) TRIGGER AND RELEASE OF FUND MON23 IES.—No amount shall be distributed under para24 graph (1) during any fiscal year in which the annual

25 amount appropriated for the National Institutes of
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1 Health (determined without regard to this section) is

2 less than the amount so appropriated for the prior

3 fiscal year.

4 ‘‘(d) TREATMENT OF SPENDING.—All funds trans5 ferred to the National Fund for Medical Research and ex6 pended in accordance with appropriation Acts shall be

7 treated as direct spending not subject to the discretionary

8 spending limits in the Balanced Budget and Emergency

9 Deficit Control Act of 1985.’’

10 (b) CLERICAL AMENDMENT.—The table of sections

11 for such subchapter A is amended by adding at the end

12 thereof the following new items:

‘‘Sec. 9512. Tobacco Conversion and Health Education Trust

Fund.

‘‘Sec. 9513. National Fund for Medical Research.’’

13 SEC. 6. TRANSFER OF REMAINING REVENUE TO HOSPITAL

14 INSURANCE TRUST FUND.

15 Subsection (a) of section 1817 of the Social Security

16 Act (relating to Federal Hospital Insurance Trust Fund)

17 is amended by striking ‘‘and’’ at the end of paragraph (1),

18 by striking the period at the end of paragraph (2) and

19 inserting ‘‘, and’’, and by inserting after paragraph (2)

20 the following new paragraph:

21 ‘‘(3) the net revenue received in the Treasury

22 from the 1995 tobacco tax increases (within the

23 meaning of section 9512(b) of the Internal Revenue

24 Code of 1986) to the extent such revenue exceeds
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1 the sum of the amounts deposited into the Tobacco

2 Conversion and Health Education Trust Fund es3 tablished by section 9512 of such Code and the

4 amounts deposited into the National Fund for Medi5 cal Research established under section 9513 of such

6 Code.’’

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