II

104TH CONGRESS

1ST SESSION S. 598

To amend the Internal Revenue Code of 1986 to increase the excise taxes

on tobacco products, and to use a portion of the resulting revenues

to fund a trust fund for tobacco diversification, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 22 (legislative day, MARCH 16), 1995

Mr. BRADLEY (for himself and Mr. LAUTENBERG) introduced the following

bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to increase

the excise taxes on tobacco products, and to use a portion of the resulting revenues to fund a trust fund for

tobacco diversification, 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.

4 This Act may be cited as the ‘‘Tobacco Consumption

5 Reduction and Health Improvement Act of 1995’’.

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

7 (a) IN GENERAL.—
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1 (1) CIGARS.—Subsection (a) of section 5701 of

2 the Internal Revenue Code of 1986 (relating to rate

3 of tax on cigars) is amended—

4 (A) by striking ‘‘$1.125 cents per thou5 sand (93.75 cents per thousand on cigars re6 moved during 1991 and 1992)’’ in paragraph

7 (1) and inserting ‘‘$5.8125 per thousand’’; and

8 (B) by striking paragraph (2) and insert9 ing the following new paragraph:

10 ‘‘(2) LARGE CIGARS.—On cigars weighing more

11 than 3 pounds per thousand, a tax equal to 65.875

12 percent of the price for which sold but not more

13 than $155 per thousand.’’

14 (2) CIGARETTES.—Subsection (b) of section

15 5701 of such Code (relating to rate of tax on ciga16 rettes) is amended—

17 (A) by striking ‘‘$12 per thousand ($10

18 per thousand on cigarettes removed during

19 1991 and 1992)’’ in paragraph (1) and insert20 ing ‘‘$62 per thousand’’; and

21 (B) by striking ‘‘$25.20 per thousand ($21

22 per thousand on cigarettes removed during

23 1991 and 1992)’’ in paragraph (2) and insert24 ing ‘‘$130.20 per thousand’’.
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1 (3) CIGARETTE PAPERS.—Subsection (c) of sec2 tion 5701 of such Code (relating to rate of tax on

3 cigarette papers) is amended by striking ‘‘0.75 cent

4 (0.625 cent on cigarette papers removed during

5 1991 or 1992)’’ and inserting ‘‘3.875 cents’’.

6 (4) CIGARETTE TUBES.—Subsection (d) of sec7 tion 5701 of such Code (relating to rate of tax on

8 cigarette tubes) is amended by striking ‘‘1.5 cents

9 (1.25 cents on cigarette tubes removed during 1991

10 or 1992)’’ and inserting ‘‘7.75 cents’’.

11 (5) SNUFF.—Paragraph (1) of section 5701(e)

12 of such Code (relating to rate of tax on smokeless

13 tobacco) is amended by striking ‘‘36 cents (30 cents

14 on snuff removed during 1991 or 1992)’’ and insert15 ing ‘‘$1.86’’.

16 (6) CHEWING TOBACCO.—Paragraph (2) of sec17 tion 5701(e) of such Code is amended by striking

18 ‘‘12 cents (10 cents on chewing tobacco removed

19 during 1991 or 1992)’’ and inserting ‘‘62 cents’’.

20 (7) PIPE TOBACCO.—Subsection (f) of section

21 5701 of such Code (relating to rate of tax on pipe

22 tobacco) is amended by striking ‘‘67.5 cents (56.25

23 cents on chewing tobacco removed during 1991 or

24 1992)’’ and inserting ‘‘$3.4875’’.
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1 (8) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply with respect to cigars,

3 cigarettes, cigarette paper, cigarette tubes, snuff,

4 chewing tobacco, and pipe tobacco removed after De5 cember 31, 1995.

6 (b) IMPOSITION OF EXCISE TAX ON MANUFACTURE

7 OR IMPORTATION OF ROLL-YOUR-OWN TOBACCO.—

8 (1) IN GENERAL.—Section 5701 of the Internal

9 Revenue Code of 1986 (relating to rate of tax) is

10 amended by redesignating subsection (g) as sub11 section (h) and by inserting after subsection (f) the

12 following new subsection:

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

14 tobacco, manufactured in or imported into the United

15 States, there shall be imposed a tax of $1.86 per pound

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

17 parts of a pound).’’

18 (2) ROLL-YOUR-OWN TOBACCO.—Section 5702

19 of such Code (relating to definitions) is amended by

20 adding at the end the following new subsection:

21 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll22 your-own tobacco’ means any tobacco which, because of

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

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

25 as tobacco for making cigarettes.’’
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1 (3) TECHNICAL AMENDMENTS.—

2 (A) Subsection (c) of section 5702 of such

3 Code is amended by striking ‘‘and pipe to4 bacco’’ and inserting ‘‘pipe tobacco, and roll5 your-own tobacco’’.

6 (B) Subsection (d) of section 5702 of such

7 Code is amended—

8 (i) in the material preceding para9 graph (1), by striking ‘‘or pipe tobacco’’

10 and inserting ‘‘pipe tobacco, or roll-your11 own tobacco’’, and

12 (ii) by striking paragraph (1) and in13 serting the following new paragraph:

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

15 smokeless tobacco, pipe tobacco, or roll-your-own to16 bacco solely for the person’s own personal consump17 tion or use, and’’.

18 (C) The chapter heading for chapter 52 of

19 such Code is amended to read as follows:

20 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND

21 CIGARETTE PAPERS AND TUBES’’.

22 (D) The table of chapters for subtitle E of

23 such Code is amended by striking the item re24 lating to chapter 52 and inserting the following

25 new item:

‘‘CHAPTER 52. Tobacco products and cigarette papers and tubes.’’
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1 (4) EFFECTIVE DATE.—

2 (A) IN GENERAL.—The amendments made

3 by this subsection shall apply to roll-your-own

4 tobacco removed (as defined in section 5702(p)

5 of the Internal Revenue Code of 1986, as added

6 by this subsection) after December 31, 1995.

7 (B) TRANSITIONAL RULE.—Any person

8 who—

9 (i) on the date of the enactment of

10 this Act is engaged in business as a manu11 facturer of roll-your-own tobacco or as an

12 importer of tobacco products or cigarette

13 papers and tubes, and

14 (ii) before January 1, 1996, submits

15 an application under subchapter B of

16 chapter 52 of such Code to engage in such

17 business,

18 may, notwithstanding such subchapter B, con19 tinue to engage in such business pending final

20 action on such application. Pending such final

21 action, all provisions of such chapter 52 shall

22 apply to such applicant in the same manner

23 and to the same extent as if such applicant

24 were a holder of a permit under such chapter

25 52 to engage in such business.
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1 (c) FLOOR STOCKS.—

2 (1) IMPOSITION OF TAX.—On cigars, cigarettes,

3 cigarette paper, cigarette tubes, snuff, chewing to4 bacco, and pipe tobacco manufactured in or im5 ported into the United States which is removed be6 fore January 1, 1996, and held on such date for sale

7 by any person, there shall be imposed the following

8 taxes:

9 (A) SMALL CIGARS.—On cigars, weighing

10 not more than 3 pounds per thousand, $4.6875

11 per thousand.

12 (B) LARGE CIGARS.—On cigars, weighing

13 more than 3 pounds per thousand, a tax equal

14 to 53.125 percent of the price for which sold,

15 but not more than $125 per thousand.

16 (C) SMALL CIGARETTES.—On cigarettes,

17 weighing not more than 3 pounds per thousand,

18 $50 per thousand.

19 (D) LARGE CIGARETTES.—On cigarettes,

20 weighing more than 3 pounds per thousand,

21 $105 per thousand; except that, if more than

61 22 ⁄2 inches in length, they shall be taxable at

23 the rate prescribed for cigarettes weighing not

24 more than 3 pounds per thousand, counting
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each 23 1 ⁄4 inches, or fraction thereof, of the

2 length of each as one cigarette.

3 (E) CIGARETTE PAPERS.—On cigarette pa4 pers, 3.125 cents for each 50 papers or frac5 tional part thereof; except that, if cigarette papers measure more than 61 6 ⁄2 inches in length,

7 they shall be taxable at the rate prescribed,

counting each 23 8 ⁄4 inches, or fraction thereof, of

9 the length of each as one cigarette paper.

10 (F) CIGARETTE TUBES.—On cigarette

11 tubes, 6.25 cents for each 50 tubes or fractional

12 part thereof; except that, if cigarette tubes

measure more than 61 13 ⁄2 inches in length, they

14 shall be taxable at the rate prescribed, counting

each 23 15 ⁄4 inches, or fraction thereof, of the

16 length of each as one cigarette tube.

17 (G) SNUFF.—On snuff, $1.50 per pound

18 and a proportionate tax at the like rate on all

19 fractional parts of a pound.

20 (H) CHEWING TOBACCO.—On chewing to21 bacco, 50 cents per pound and a proportionate

22 tax at the like rate on all fractional parts of a

23 pound.
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1 (I) PIPE TOBACCO.—On pipe tobacco,

2 $2.8125 per pound and a proportionate tax at

3 the like rate on all fractional parts of a pound.

4 (2) LIABILITY FOR TAX AND METHOD OF PAY5 MENT.—

6 (A) LIABILITY FOR TAX.—A person hold7 ing cigars, cigarettes, cigarette paper, cigarette

8 tubes, snuff, chewing tobacco, and pipe tobacco

9 on January 1, 1996, to which any tax imposed

10 by paragraph (1) applies shall be liable for such

11 tax.

12 (B) METHOD OF PAYMENT.—The tax im13 posed by paragraph (1) shall be treated as a

14 tax imposed under section 5701 of the Internal

15 Revenue Code of 1986 and shall be due and

16 payable on February 15, 1996, in the same

17 manner as the tax imposed under such section

18 is payable with respect to cigars, cigarettes, cig19 arette paper, cigarette tubes, snuff, chewing to20 bacco, and pipe tobacco removed on January 1,

21 1996.

22 (3) CIGARS, CIGARETTES, CIGARETTE PAPER,

23 CIGARETTE TUBES, SNUFF, CHEWING TOBACCO, AND

24 PIPE TOBACCO.—For purposes of this subsection,

25 the terms ‘‘cigar’’, ‘‘cigarette’’, ‘‘cigarette paper’’,
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1 ‘‘cigarette tubes’’, ‘‘snuff’’, ‘‘chewing tobacco’’, and

2 ‘‘pipe tobacco’’ shall have the meaning given to such

3 terms by subsections (a), (b), (e), and (g), para4 graphs (2) and (3) of subsection (n), and subsection

5 (o) of section 5702 of the Internal Revenue Code of

6 1986, respectively.

7 (4) EXCEPTION FOR RETAIL STOCKS.—The

8 taxes imposed by paragraph (1) shall not apply to

9 cigars, cigarettes, cigarette paper, cigarette tubes,

10 snuff, chewing tobacco, and pipe tobacco in retail

11 stocks held on January 1, 1996, at the place where

12 intended to be sold at retail.

13 (5) FOREIGN TRADE ZONES.—Notwithstanding

14 the Act of June 18, 1934 (19 U.S.C. 81a et seq.)

15 or any other provision of law—

16 (A) cigars, cigarettes, cigarette paper, ciga17 rette tubes, snuff, chewing tobacco, and pipe

18 tobacco—

19 (i) on which taxes imposed by Federal

20 law are determined, or customs duties are

21 liquidated, by a customs officer pursuant

22 to a request made under the first proviso

23 of section 3(a) of the Act of June 18, 1934

24 (19 U.S.C. 81c(a)) before January 1,

25 1996, and
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1 (ii) which are entered into the cus2 toms territory of the United States on or

3 after January 1, 1996, from a foreign

4 trade zone, and

5 (B) cigars, cigarettes, cigarette paper, cig6 arette tubes, snuff, chewing tobacco, and pipe

7 tobacco which—

8 (i) are placed under the supervision of

9 a customs officer pursuant to the provi10 sions of the second proviso of section 3(a)

11 of the Act of June 18, 1934 (19 U.S.C.

12 81c(a)) before January 1, 1996, and

13 (ii) are entered into the customs terri14 tory of the United States on or after Janu15 ary 1, 1996, from a foreign trade zone,

16 shall be subject to the tax imposed by paragraph (1)

17 and such cigars, cigarettes, cigarette paper, cigarette

18 tubes, snuff, chewing tobacco, and pipe tobacco

19 shall, for purposes of paragraph (1), be treated as

20 being held on January 1, 1996, for sale.

21 (d) ESTABLISHMENT OF TRUST FUND.—

22 (1) IN GENERAL.—Subchapter A of chapter 98

23 of the Internal Revenue Code of 1986 (relating to

24 trust fund code) is amended by adding at the end

25 the following new section:
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1 ‘‘SEC. 9512. TOBACCO CONVERSION TRUST FUND.

2 ‘‘(a) CREATION OF TRUST FUND.—There is estab3 lished in the Treasury of the United States a trust fund

4 to be known as the ‘Tobacco Conversion Trust Fund’

5 (hereafter referred to in this section as the ‘Trust Fund’),

6 consisting of such amounts as may be appropriated or

7 credited to the Trust Fund as provided in this section or

8 section 9602(b).

9 ‘‘(b) TRANSFERS TO TRUST FUND.—The Secretary

10 shall transfer to the Trust Fund an amount equivalent

11 to 3 percent of the net increase in revenues received in

12 the Treasury attributable to the amendments made to sec13 tion 5701 by subsections (a) and (b) of section 2 and the

14 provisions contained in section 2(c) of the Tobacco Con15 sumption Reduction and Health Improvement Act of

16 1995, as estimated by the Secretary.

17 ‘‘(c) DISTRIBUTION OF AMOUNTS IN TRUST FUND.—

18 Amounts in the Trust Fund shall be available to the Sec19 retary of Agriculture, as provided by appropriation Acts,

20 for making expenditures for purposes of—

21 ‘‘(1) providing assistance to farmers in convert22 ing from tobacco to other crops and improving the

23 access of such farmers to markets for other crops,

24 and

25 ‘‘(2) providing grants or loans to communities,

26 and persons involved in the production or manufac-
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1 ture of tobacco or tobacco products, to support eco2 nomic diversification plans that provide economic

3 alternatives to tobacco to such communities and per4 sons.

5 The assistance referred to in paragraph (1) may include

6 government purchase of tobacco allotments for purposes

7 of retiring such allotments from allotment holders and

8 farmers who choose to terminate their involvement in

9 tobacco production.’’

10 (2) CLERICAL AMENDMENT.—The table of sec11 tions for such subchapter A is amended by adding

12 at the end the following new item:

‘‘Sec. 9512. Tobacco Conversion Trust Fund.’’

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