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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4089 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 4089

   To amend the Internal Revenue Code of 1986 to increase the tax on 
               tobacco products, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 17, 1994

Mr. Stark (for himself, Mr. Durbin, Mr. Hansen, Mr. Waxman, Mr. Synar, 
    Mr. Evans, Mr. Oberstar, Mr. Andrews of Texas, Mr. Meehan, Mr. 
 Visclosky, Ms. Harman, Ms. Roybal-Allard, and Mr. Markey) 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.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Tobacco Health Tax 
and Agricultural Assistance Act of 1994''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

    (a) Cigarettes.--Subsection (b) of section 5701 is amended--
            (1) by striking ``$12 per thousand ($10 per thousand on 
        cigarettes removed during 1991 or 1992)'' in paragraph (1) and 
        inserting ``$100.00 per thousand'',
            (2) by striking ``$25.20 per thousand ($21 per thousand on 
        cigarettes removed during 1991 or 1992)'' in paragraph (2) and 
        inserting ``$210.00 per thousand'', and
            (3) by adding at the end thereof the following new 
        paragraph:
            ``(3) Additional tax on packs containing fewer than 20 
        cigarettes.--On any pack of cigarettes containing fewer than 20 
        cigarettes, the excess of $2 over the tax imposed by paragraphs 
        (1) and (2) on the cigarettes in such pack.''
    (b) Cigars.--Subsection (a) of section 5701 is amended--
            (1) by striking ``$1.125 cents per thousand (93.75 cents 
        per thousand on cigars removed during 1991 or 1992)'' in 
        paragraph (1) and inserting ``$89.14 per thousand'', and
            (2) by striking ``equal to'' and all that follows in 
        paragraph (2) and inserting ``equal to 105.8 percent of the 
        price for which sold but not more than $250.03 per thousand.''
    (c) Cigarette Papers.--Subsection (c) of section 5701 is amended by 
striking ``0.75 cent (0.625 cent on cigarette papers removed during 
1991 or 1992)'' and inserting ``6.24 cents''.
    (d) Cigarette Tubes.--Subsection (d) of section 5701 is amended by 
striking ``1.5 cents (1.25 cents on cigarette tubes removed during 1991 
or 1992)'' and inserting ``12.5 cents''.
    (e) Smokeless Tobacco.--Subsection (e) of section 5701 is amended--
            (1) by striking ``36 cents (30 cents on snuff removed 
        during 1991 or 1992)'' in paragraph (1) and inserting 
        ``$29.70'', and
            (2) by striking ``12 cents (10 cents on chewing tobacco 
        removed during 1991 or 1992)'' in paragraph (2) and inserting 
        ``$29.46''.
    (f) Pipe Tobacco.--Subsection (f) of section 5701 is amended by 
striking ``67.5 cents (56.25 cents on pipe tobacco removed during 1991 
or 1992)'' and inserting ``$30.01''.
    (g) Inflation Adjustment of Tobacco Tax Rates.--Section 5701 is 
amended by adding at the end thereof the following new subsection:
    ``(i) Inflation Adjustment.--
            ``(1) In general.--In the case of articles removed in any 
        calendar year after 1994, each rate of tax contained in this 
        section shall be increased by an amount equal to--
                    ``(A) such rate, multiplied by
                    ``(B) the greater of--
                            ``(i) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the removal occurs by 
                        substituting `calendar year 1993' for `calendar 
                        year 1992' in subparagraph (B) thereof, or
                            ``(ii) the cost-of-living adjustment which 
                        would be determined under clause (i) if only 
                        changes in the tobacco and smoking products 
                        component of the Consumer Price Index (as 
                        defined in section 1(f)(5)) were taken into 
                        account.
        If any increase determined under this subsection is not a 
        multiple of \1/4\ cent, such increase shall be rounded to the 
        nearest \1/4\ cent.
            ``(2) Special rule.--No adjustment shall be made under 
        paragraph (1) in the percentage rate set forth in subsection 
        (a)(2) but such adjustment shall apply to the dollar amount 
        contained therein.''
    (h) 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, as amended by this Act) after September 
30, 1994.
    (i) 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, 1994, 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, 1994, 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) for which such person is liable.
            (4) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding on October 
                1, 1994, articles 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 December 31, 1994.
            (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, 1994, 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, and the term ``tobacco 
                products'' shall include articles first subject to the 
                tax imposed by section 5701 of such Code by reason of 
                the amendments made by this Act.
                    (B) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or his 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.

SEC. 3. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.

    (a) Exemption for Exported Tobacco Products and Cigarette Papers 
and Tubes To Apply Only to Articles Marked for Export.--
            (1) Subsection (b) of section 5704 is amended by adding at 
        the end thereof the following new sentence: ``Tobacco products 
        and cigarette papers and tubes may not be transferred or 
        removed under this subsection unless such products or papers 
        and tubes bear such marks, labels, or notices as the Secretary 
        shall by regulations prescribe.''
            (2) Section 5761 is amended by redesignating subsections 
        (c) and (d) as subsections (d) and (e), respectively, and by 
        inserting after subsection (b) the following new subsection:
    ``(c) Sale of Tobacco Products and Cigarette Papers and Tubes for 
Export.--Except as provided in subsections (b) and (d) of section 
5704--
            ``(1) every person who sells, relands, or receives within 
        the jurisdiction of the United States any tobacco products or 
        cigarette papers or tubes which have been labeled or shipped 
        for exportation under this chapter,
            ``(2) every person who sells or receives such tobacco 
        products or cigarette papers or tubes, and
            ``(3) every person who aids or abets in such selling, 
        relanding, or receiving,
shall, in addition to the tax and any other penalty provided in this 
title, be liable for a penalty equal to the greater of $1,000 or 5 
times the amount of the tax imposed by this chapter. All tobacco 
products and cigarette papers and tubes relanded within the 
jurisdiction of the United States shall be forfeited to the United 
States.''
            (3) Subsection (a) of section 5761 is amended by striking 
        ``subsection (b)'' and inserting ``subsection (b) or (c)''.
            (4) Subsection (d) of section 5761, as redesignated by 
        paragraph (2), is amended by striking ``The penalty imposed by 
        subsection (b)'' and inserting ``The penalties imposed by 
        subsections (b) and (c)''.
            (5)(A) Subpart F of chapter 52 is amended by adding at the 
        end thereof the following new section:

``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED TOBACCO 
              PRODUCTS.

    ``(a) In General.--Tobacco products and cigarette papers and tubes 
previously exported from the United States may be imported or brought 
into the United States only as provided in section 5704(d).
    ``(b) Cross Reference.--

                                ``For penalty for the sale of 
cigarettes in the United States which are labeled for export, see 
section 5761(d).''
            (B) The table of sections for subpart F of chapter 52 is 
        amended by adding at the end thereof the following new item:

                              ``Sec. 5754. Restriction on importation 
                                        of previously exported tobacco 
                                        products.''
    (b) Importers Required To Be Qualified.--
            (1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 
        5763 (b) and (c) are each amended by inserting ``or importer'' 
        after ``manufacturer''.
            (2) The heading of subsection (b) of section 5763 is 
        amended by inserting ``Qualified Importers,'' after 
        ``Manufacturers,''.
            (3) The heading for subchapter B of chapter 52 is amended 
        by inserting ``and Importers'' after ``Manufacturers''.
            (4) The item relating to subchapter B in the table of 
        subchapters for chapter 52 is amended by inserting ``and 
        importers'' after ``manufacturers''.
    (c) Repeal of Tax-Exempt Sales to Employees of Cigarette 
Manufacturers.--
            (1) Subsection (a) of section 5704 is amended--
                    (A) by striking ``Employee Use or'' in the heading, 
                and
                    (B) by striking ``for use or consumption by 
                employees or'' in the text.
            (2) Subsection (e) of section 5723 is amended by striking 
        ``for use or consumption by their employees, or for 
        experimental purposes'' and inserting ``for experimental 
        purposes''.
    (d) Repeal of Tax-Exempt Sales to United States.--Subsection (b) of 
section 5704 is amended by striking ``and manufacturers may similarly 
remove such articles for use of the United States;''.
    (e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
Subsection (c) of section 5701 is amended by striking ``On each book or 
set of cigarette papers containing more than 25 papers,'' and inserting 
``On cigarette papers,''.
    (f) Storage of Tobacco Products.--Subsection (k) of section 5702 is 
amended by inserting ``under section 5704'' after ``internal revenue 
bond''.
    (g) Authority To Prescribe Minimum Manufacturing Activity 
Requirements.--Section 5712 is amended by striking ``or'' at the end of 
paragraph (1), by redesignating paragraph (2) as paragraph (3), and by 
inserting after paragraph (1) the following new paragraph:
            ``(2) the activity proposed to be carried out at such 
        premises does not meet such minimum capacity or activity 
        requirements as the Secretary may prescribe, or''.
    (h) Limitation on Cover Over of Tax on Tobacco Products.--Section 
7652 is amended by adding at the end thereof the following new 
subsection:
    ``(h) Limitation on Cover Over of Tax on Tobacco Products.--For 
purposes of this section, with respect to taxes imposed under section 
5701 or this section on any tobacco product or cigarette paper or tube, 
the amount covered into the treasuries of Puerto Rico and the Virgin 
Islands shall not exceed the rate of tax under section 5701 in effect 
on the article on the day before the date of the enactment of the 
Tobacco Tax Act of 1994.''
    (i) 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, as amended by this Act) after September 
30, 1994.

SEC. 4. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF ROLL-
              YOUR-OWN TOBACCO.

    (a) In General.--Section 5701 (relating to rate of tax) is amended 
by redesignating subsection (g) as subsection (h) and by inserting 
after subsection (f) the following new subsection:
    ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco, 
manufactured in or imported into the United States, there shall be 
imposed a tax of $29.34 per pound (and a proportionate tax at the like 
rate on all fractional parts of a pound).''
    (b) Roll-Your-Own Tobacco.--Section 5702 (relating to definitions) 
is amended by adding at the end thereof the following new subsection:
    ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own tobacco' 
means any tobacco which, because of its appearance, type, packaging, or 
labeling, is suitable for use and likely to be offered to, or purchased 
by, consumers as tobacco for making cigarettes.''
    (c) Technical Amendments.--
            (1) Subsection (c) of section 5702 is amended by striking 
        ``and pipe tobacco'' and inserting ``pipe tobacco, and roll-
        your-own tobacco''.
            (2) Subsection (d) of section 5702 is amended--
                    (A) in the material preceding paragraph (1), by 
                striking ``or pipe tobacco'' and inserting ``pipe 
                tobacco, or roll-your-own tobacco'', and
                    (B) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) a person who produces cigars, cigarettes, smokeless 
        tobacco, pipe tobacco, or roll-your-own tobacco solely for his 
        own personal consumption or use, and''.
            (3) The chapter heading for chapter 52 is amended to read 
        as follows:

    ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

            (4) The table of chapters for subtitle E is amended by 
        striking the item relating to chapter 52 and inserting the 
        following new item:

                              ``Chapter 52. Tobacco products and 
                                        cigarette papers and tubes.''
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to roll-your-own tobacco removed (as defined in section 
        5702(k) of the Internal Revenue Code of 1986, as amended by 
        this Act) after September 30, 1994.
            (2) Transitional rule.--Any person who--
                    (A) on the date of the enactment of this Act is 
                engaged in business as a manufacturer of roll-your-own 
                tobacco or as an importer of tobacco products or 
                cigarette papers and tubes, and
                    (B) before October 1, 1994, submits an application 
                under subchapter B of chapter 52 of such Code to engage 
                in such business,
        may, notwithstanding such subchapter B, continue to engage in 
        such business pending final action on such application. Pending 
        such final action, all provisions of such chapter 52 shall 
        apply to such applicant in the same manner and to the same 
        extent as if such applicant were a holder of a permit under 
        such chapter 52 to engage in such business.

SEC. 5. ESTABLISHMENT OF TOBACCO CONVERSION AND HEALTH EDUCATION TRUST 
              FUND.

    (a) In General.--Subchapter A of chapter 98 (relating to trust fund 
code) is amended by adding at the end thereof the following new 
section:

``SEC. 9512. TOBACCO CONVERSION AND HEALTH EDUCATION TRUST FUND.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Tobacco 
Conversion and Health Education Trust Fund', consisting of such amounts 
as may be appropriated or credited to such Trust Fund as provided in 
this section or section 9602(b).
    ``(b) Transfers to Trust Fund.--
            ``(1) In general.--There is hereby appropriated to the 
        Tobacco Conversion and Health Education Trust Fund amounts 
        equivalent to 3 percent (2 percent on and after October 1, 
        1999) of the net revenue received in the Treasury from the 1994 
        tobacco tax increases.
            ``(2) Net revenues.--For purposes of paragraph (1), the net 
        revenue received in the Treasury from the 1994 tobacco tax 
        increases is the amount estimated by the Secretary based on the 
        excess of--
                    ``(A) the additional taxes received in the Treasury 
                under section 5701 by reason of the amendments made by 
                the Tobacco Health Tax and Agricultural Assistance Act 
                of 1994 or under section 2(i) of such Act, over
                    ``(B) the decrease in the tax imposed by chapter 1 
                resulting from such taxes.
    ``(c) Tobacco Conversion Account.--
            ``(1) In general.--There is established in the Tobacco 
        Conversion and Health Education Trust Fund a separate account 
        to be known as the `Tobacco Conversion Account' consisting of 
        such amounts as may be transferred or credited to such account 
        as provided in this section or section 9602(b).
            ``(2) Transfers to account.--The Secretary of the Treasury 
        shall transfer to the Tobacco Conversion Account two-thirds of 
        the amounts appropriated to the Tobacco Conversion and Health 
        Education Trust Fund under subsection (b)(1) for periods before 
        October 1, 1999.
            ``(3) Expenditures from account.--Amounts in the Tobacco 
        Conversion Account shall be available, as provided in 
        appropriation Acts, for making expenditures for purposes of--
                    ``(A) assisting farmers in converting from tobacco 
                to other crops, and
                    ``(B) providing grants to communities, and persons 
                involved in the production or manufacture of tobacco or 
                tobacco products, that are adversely affected by the 
                tax increases contained in the Tobacco Health Tax and 
                Agricultural Assistance Act of 1994.
        The grants referred to in subparagraph (B) shall include grants 
        to assist in attracting nontobacco sources of income and grants 
        to farmers who retire tobacco allotments.
    ``(d) Health Education Account.--
            ``(1) In general.--There is established in the Tobacco 
        Conversion and Health Education Trust Fund a separate account 
        to be known as the `Health Education Account', consisting of 
        such amounts as may be transferred or credited to such account 
        as provided in this section or section 9602(b).
            ``(2) Transfers to account.--The Secretary of the Treasury 
        shall transfer to the Health Education Account one-third (100 
        percent on and after October 1, 1999) of the amounts 
        appropriated to the Tobacco Conversion and Health Education 
        Trust Fund under subsection (b)(1).
            ``(3) Expenditures from account.--Amounts in the Health 
        Education Account shall be available, as provided in 
        appropriation Acts, to the Secretary of Health and Human 
        Services for making expenditures to increase public awareness 
        of health risks, including tobacco use.''
    (b) Clerical Amendment.--The table of sections for such subchapter 
A is amended by adding at the end thereof the following new item:

                              ``Sec. 9512. Tobacco Conversion and 
                                        Health Education Trust Fund.''

                                 <all>

HR 4089 IH----2
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