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[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 1129 Introduced in Senate (IS)]

114th CONGRESS
  1st Session
                                S. 1129

   To amend the Internal Revenue Code of 1986 to reform and enforce 
                     taxation of tobacco products.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             April 29, 2015

  Mr. Blumenthal (for himself, Mr. Durbin, Mr. Reed, and Mrs. Boxer) 
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 reform and enforce 
                     taxation of tobacco products.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Tobacco Tax and 
Enforcement Reform Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title and table of contents.
                TITLE I--TOBACCO TAX INCREASE AND PARITY

Sec. 101. Tobacco tax increase and parity.
         TITLE II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

Sec. 201. Amendment of 1986 code.
Sec. 202. Machines used to manufacture or package tobacco products or 
                            processed tobacco.
Sec. 203. Improved marking and labeling.
Sec. 204. Wholesalers and manufacturers, importers, and sellers of 
                            tobacco production machines required to 
                            have permit.
Sec. 205. Conditions of permit.
Sec. 206. Records to be maintained.
Sec. 207. Reports.
Sec. 208. Fraudulent offenses.
Sec. 209. Penalties.
Sec. 210. Coordination with other government officials.
Sec. 211. Definitions.
Sec. 212. Conforming amendments.
Sec. 213. Effective date.
                        TITLE III--IMPORT FRAUD

Sec. 301. Maximum penalty for importation of tobacco products and 
                            cigarette papers and tubes by fraudulent 
                            means.
    TITLE IV--EXCLUSIONS REGARDING INDIAN TRIBES AND TRIBAL MATTERS

Sec. 401. Exclusions regarding Indian Tribes and Tribal matters.

                TITLE I--TOBACCO TAX INCREASE AND PARITY

SEC. 101. TOBACCO TAX INCREASE AND PARITY.

    (a) Increase in Excise Tax on Small Cigars and Cigarettes.--
            (1) Small cigars.--Section 5701(a)(1) of the Internal 
        Revenue Code of 1986 is amended by striking ``$50.33'' and 
        inserting ``$97.65''.
            (2) Cigarettes.--Section 5701(b) of such Code is amended--
                    (A) by striking ``$50.33'' in paragraph (1) and 
                inserting ``$97.65'', and
                    (B) by striking ``$105.69'' in paragraph (2) and 
                inserting ``$205.06''.
    (b) Tax Parity for Pipe Tobacco and Roll-Your-Own Tobacco.--
            (1) Pipe tobacco.--Section 5701(f) of the Internal Revenue 
        Code of 1986 is amended by striking ``$2.8311 cents'' and 
        inserting ``$48.08''.
            (2) Roll-your-own tobacco.--Section 5701(g) of such Code is 
        amended by striking ``$24.78'' and inserting ``$48.08''.
    (c) Tax Parity for Large Cigars.--
            (1) In general.--Paragraph (2) of section 5701(a) of the 
        Internal Revenue Code of 1986 is amended by striking ``52.75 
        percent'' and all that follows through the period and inserting 
        ``$24.78 per pound (and a proportionate tax at the like rate on 
        all fractional parts of a pound) but not less than 5.033 cents 
        per cigar.''.
            (2) Guidance.--The Secretary of the Treasury or the 
        Secretary of the Treasury's delegate may issue guidance 
        regarding the appropriate method for determining the weight of 
        large cigars for purposes of calculating the applicable tax 
        under section 5701(a)(2) of the Internal Revenue Code of 1986.
    (d) Tax Parity for Roll-Your-Own Tobacco and Certain Processed 
Tobacco.--Subsection (o) of section 5702 of the Internal Revenue Code 
of 1986 is amended to read as follows:
    ``(o) Roll-Your-Own Tobacco.--The term `roll-your-own tobacco' 
means--
            ``(1) 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 or cigars, or for use as wrappers thereof, or
            ``(2) any processed tobacco which is--
                    ``(A) not removed for exportation, and
                    ``(B) removed or transferred to a person who has 
                not been issued a permit pursuant to section 5713.''.
    (e) Tax Parity for Smokeless Tobacco.--
            (1) In general.--Section 5701(e) of the Internal Revenue 
        Code of 1986 is amended--
                    (A) in paragraph (1), by striking ``$1.51'' and 
                inserting ``$26.04'';
                    (B) in paragraph (2), by striking ``50.33 cents'' 
                and inserting ``$10.42''; and
                    (C) by adding at the end the following:
            ``(3) Smokeless tobacco sold in discrete single-use 
        units.--On discrete single-use units, $97.65 per each 1,000 
        single-use units.''.
            (2) Discrete single-use unit.--Section 5702(m) of such Code 
        is amended--
                    (A) in paragraph (1), by striking ``or chewing 
                tobacco'' and inserting ``chewing tobacco, discrete 
                single-use unit'';
                    (B) in paragraphs (2) and (3), by inserting ``that 
                is not a discrete single-use unit'' before the period 
                in each such paragraph; and
                    (C) by adding at the end the following:
            ``(4) Discrete single-use unit.--The term `discrete single-
        use unit' means any product containing tobacco that--
                    ``(A) is not intended to be smoked, and
                    ``(B) is in the form of a lozenge, tablet, pill, 
                pouch, dissolvable strip, or other discrete single-use 
                or single-dose unit.''.
    (f) Other Tobacco Products.--
            (1) In general.--Section 5701 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following new 
        subsection:
    ``(i) Other Tobacco Products.--Any product not otherwise described 
under this section that has been determined to be a tobacco product by 
the Food and Drug Administration through its authorities under the 
Family Smoking Prevention and Tobacco Control Act shall be taxed at a 
level of tax equivalent to the tax rate for cigarettes on an estimated 
per use basis as determined by the Secretary.''.
            (2) Establishing per use basis.--For purposes of section 
        5701(i) of the Internal Revenue Code of 1986, not later than 12 
        months after the date that a product has been determined to be 
        a tobacco product by the Food and Drug Administration, the 
        Secretary of the Treasury (or the Secretary of the Treasury's 
        delegate) shall issue final regulations establishing the level 
        of tax for such product that is equivalent to the tax rate for 
        cigarettes on an estimated per use basis.
    (g) Clarifying Definition of Tobacco Products.--
            (1) In general.--Subsection (c) of section 5702 of the 
        Internal Revenue Code of 1986 is amended to read as follows:
    ``(c) Tobacco Products.--The term `tobacco products' means--
            ``(1) cigars, cigarettes, smokeless tobacco, pipe tobacco, 
        and roll-your-own tobacco, and
            ``(2) any other product subject to tax pursuant to section 
        5701(i).''.
            (2) Conforming amendments.--Subsection (d) of section 5702 
        of such Code is amended by striking ``cigars, cigarettes, 
        smokeless tobacco, pipe tobacco, or roll-your-own tobacco'' 
        each place it appears and inserting ``tobacco products''.
    (h) Inflation Adjustment.--Section 5701 of the Internal Revenue 
Code of 1986, as amended by subsection (f), is amended by adding at the 
end the following new subsection:
    ``(j) Inflation Adjustment.--
            ``(1) In general.--In the case of any calendar year after 
        2015, each amount set forth in this section shall be increased 
        by an amount equal to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 2014' for `calendar year 
                1992' in subparagraph (B) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $0.01, such amount shall be rounded to 
        the next highest multiple of $0.01.''.
    (i) Floor Stocks Taxes.--
            (1) Imposition of tax.--On tobacco products manufactured in 
        or imported into the United States which are removed before any 
        tax increase date 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 of such Code on such article.
            (2) 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 such date for which such person is 
        liable.
            (3) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding tobacco 
                products on any tax increase date 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 the date that is 120 
                days after the effective date of the tax rate increase.
            (4) Articles in foreign trade zones.--Notwithstanding the 
        Act of June 18, 1934 (commonly known as the Foreign Trade Zone 
        Act, 48 Stat. 998, 19 U.S.C. 81a et seq.), or any other 
        provision of law, any article which is located in a foreign 
        trade zone on any tax increase date 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 an officer of the United States Customs 
                and Border Protection of the Department of Homeland 
                Security pursuant to the 2d proviso of such section 
                3(a).
            (5) Definitions.--For purposes of this subsection--
                    (A) In general.--Any term used in this subsection 
                which is also used in section 5702 of such Code shall 
                have the same meaning as such term has in such section.
                    (B) Tax increase date.--The term ``tax increase 
                date'' means the effective date of any increase in any 
                tobacco product excise tax rate pursuant to the 
                amendments made by this section (other than subsection 
                (g) thereof).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
            (6) Controlled groups.--Rules similar to the rules of 
        section 5061(e)(3) of such Code shall apply for purposes of 
        this subsection.
            (7) 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.
    (j) Effective Date.--
            (1) In general.--Except as provided in paragraphs (2) 
        through (4), the amendments made by this section shall apply to 
        articles removed (as defined in section 5702(j) of the Internal 
        Revenue Code of 1986) after the last day of the month which 
        includes the date of the enactment of this Act.
            (2) Discrete single-use units and processed tobacco.--The 
        amendments made by subsections (d), (e)(1)(C), and (e)(2) shall 
        apply to articles removed (as defined in section 5702(j) of the 
        Internal Revenue Code of 1986) after the date that is 6 months 
        after the date of the enactment of this Act.
            (3) Large cigars.--The amendments made by subsection (c) 
        shall apply to articles removed after December 31, 2015.
            (4) Other tobacco products.--The amendments made by 
        subsection (f)(1) shall apply to products removed after the 
        last day of the month which includes the date that the 
        Secretary of the Treasury (or the Secretary of the Treasury's 
        delegate) issues final regulations establishing the level of 
        tax for such product.

         TITLE II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

SEC. 201. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title 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. 202. MACHINES USED TO MANUFACTURE OR PACKAGE TOBACCO PRODUCTS OR 
              PROCESSED TOBACCO.

    (a) In General.--Section 5762 is amended--
            (1) by redesignating subsection (b) as subsection (c), and
            (2) by inserting after subsection (a) the following new 
        subsection:
    ``(b) Machines Used To Manufacture or Package Tobacco Products or 
Processed Tobacco.--
            ``(1) Transfer of manufacturing machines to licensed 
        persons.--Any tobacco production machine may be sold, leased, 
        imported, exported, delivered, or otherwise made available only 
        to persons--
                    ``(A) lawfully engaged in--
                            ``(i) the sale, lease, importation, 
                        exportation, or delivery of such machines,
                            ``(ii) the manufacture or packaging of 
                        tobacco products or processed tobacco, or
                            ``(iii) the application of unique 
                        identification markings onto tobacco product or 
                        processed tobacco packages pursuant to section 
                        5723, and
                    ``(B) that have all Federal, State, local, and 
                Indian tribal government permits, registrations, and 
                licenses required to engage in such activities.
            ``(2) Transfer of machines to persons engaged in illegal 
        manufacture of contraband.--No tobacco production machine shall 
        knowingly be manufactured for or be (directly or indirectly) 
        sold, leased, imported, exported, delivered, or otherwise made 
        available to any person engaged in the illegal manufacture, 
        distribution, or sale of counterfeit or contraband tobacco 
        products or processed tobacco, unique identification markings, 
        or other tax-payment indicia.
            ``(3) Registration of machines.--
                    ``(A) In general.--Every person having possession 
                or custody of, or having control over, the installation 
                of any tobacco production machine shall register such 
                machine with the Secretary immediately on its being 
                installed, by subscribing and filing with the Secretary 
                a statement, in writing, setting forth the particular 
                place where such machine is installed, the kind of 
                machine and its capacity, the owner thereof, the 
                owner's place of residence, and the purpose for which 
                the machine has been or is intended to be used.
                    ``(B) Exception.--Under regulations prescribed by 
                the Secretary, this paragraph shall not apply to any 
                tobacco production machine not used or intended to be 
                used--
                            ``(i) for the manufacture or production of 
                        cigarette or cigars, or to manufacture any 
                        other tobacco product or processed tobacco,
                            ``(ii) to package any tobacco product or 
                        processed tobacco, or
                            ``(iii) to apply unique identification 
                        markings to any package.
            ``(4) Records.--
                    ``(A) In general.--Any person selling, leasing, 
                importing, exporting, delivering, or otherwise making 
                available a tobacco production machine shall maintain 
                and keep records, as the Secretary prescribes by 
                regulation, relating to any transfers of the machine, 
                including the name, address, other contact information, 
                and any permit, registration, or license number of the 
                person receiving delivery of the machine, or to whom 
                the machine is otherwise transferred, as the case may 
                be.
                    ``(B) 5-year holding period for records.--Any 
                record required to be maintained and kept under 
                subparagraph (A) shall be kept for the 5-year period 
                beginning on the first date such record is required to 
                be so maintained and kept.
                    ``(C) Availability of records.--Such records shall 
                be available for inspection by any internal revenue 
                officer during business hours.
                    ``(D) Safe harbor.--An ordinary commercial record 
                or invoice shall satisfy the requirements of this 
                paragraph if such record or invoice contains all of the 
                information required under subparagraph (A).
            ``(5) Violations.--
                    ``(A) In general.--Whoever knowingly violates 
                paragraph (1), (2), or (3) shall, for each offense, be 
                fined not more than $10,000 or an amount equal to 3 
                times the fair market value of the tobacco product 
                machine involved (whichever is greater), or imprisoned 
                not more than five years, or both.
                    ``(B) Recordkeeping.--Whoever knowingly violates 
                paragraph (4) shall, for each offense, be fined not 
                more than $10,000.''.
    (b) Tobacco Production Machine.--Section 5702 is amended by adding 
at the end the following new subsection:
    ``(q) Tobacco Production Machine.--The term `tobacco production 
machine' means any machine (or component integral to the operation of 
such a machine) used to manufacture or package tobacco products or 
processed tobacco or to apply unique identification markings or other 
tax-payment indicia to packages of tobacco products or processed 
tobacco. Such term includes any machine used to produce tobacco 
products for compensation, lease, or hire, or otherwise used in a 
commercial setting.''.
    (c) Conforming Amendment.--Subsection (c) of section 5762 (as so 
redesignated) is amended by striking ``subsection (a)'' and inserting 
``subsections (a) and (b)''.
    (d) Effective Date.--The amendment made by this section shall apply 
to transfers more than 6 months after the date of the enactment of this 
Act.

SEC. 203. IMPROVED MARKING AND LABELING.

    (a) In General.--Subsection (b) of section 5723 is amended to read 
as follows:
    ``(b) Marks, Labels, and Notices.--
            ``(1) In general.--Subject to paragraphs (2), (3), and (4), 
        every package of tobacco products, processed tobacco, or 
        cigarette papers or tubes shall, before removal, bear the 
        marks, labels, and notices that the Secretary by regulation 
        prescribes.
            ``(2) Marking requirements for domestic market.--
                    ``(A) In general.--Each person who is a 
                manufacturer or importer of tobacco products or 
                processed tobacco shall (in accordance with regulations 
                prescribed by the Secretary) ensure that, before any 
                product intended for sale or distribution within the 
                United States is removed, a unique identification 
                marking is affixed to or forms part of each package of 
                tobacco product or processed tobacco manufactured or 
                imported by such person for sale or distribution.
                    ``(B) Markings on individual packages.--Any 
                markings required to be placed on a tobacco product or 
                processed tobacco package by this subsection shall be 
                placed on the innermost sealed container visible from 
                the outside of the individual package. For any tobacco 
                product or processed tobacco package that contains 
                multiple smaller packages of tobacco products or 
                processed tobacco, any markings required to be so 
                placed on tobacco product or processed tobacco packages 
                shall be placed on all the individual tobacco product 
                or processed tobacco packages.
                    ``(C) Markings on aggregate packing modes.--To 
                facilitate efficient tracking and tracing of tobacco 
                products or processed tobacco through the distribution 
                system, all manufacturers or importers of tobacco 
                products or processed tobacco shall, in addition to 
                such unique identification marking, also, in accordance 
                with regulations prescribed by the Secretary, ensure 
                that unique identification markings are affixed to or 
                form part of aggregate packing modes (such as cartons, 
                cases, and master cases for cigarettes). The Secretary 
                shall determine the size, location, and methods for 
                such markings. The Secretary shall establish 
                regulations requiring that all persons within the 
                distribution chain, up to but not including the 
                ultimate retailer, utilize the unique identification 
                markings on aggregate packing modes to facilitate the 
                tracking and tracing of tobacco products or processed 
                tobacco through the distribution system.
            ``(3) Marking requirements for exports.--A unique 
        identification marking shall be affixed to or form part of each 
        package of tobacco product or processed tobacco that is 
        exported, or sold for export, that distinguishes it from those 
        products or processed tobacco intended for sale or distribution 
        within the United States. The Secretary shall by regulation 
        prescribe the size, location, and other characteristics of such 
        marking, and it may contain a serial number that is assigned to 
        the country of export, except that no such serial number shall 
        be required on tobacco products or processed tobacco sold at 
        retail to consumers by duty free stores for consumption beyond 
        the jurisdiction of the internal revenue laws of the United 
        States. Such tobacco products or processed tobacco shall 
        instead bear markings indicating the tobacco product or 
        processed tobacco is only for duty-free sale to consumers, as 
        prescribed through regulation by the Secretary, before the 
        product or processed tobacco is removed.
            ``(4) Authorization of federal unique identification 
        marking.--Not later than 3 years after the date of the 
        enactment of the Tobacco Tax and Enforcement Reform Act, the 
        Secretary shall by regulation require the use of a unique 
        identification marking on all products subject to tax under 
        this chapter.''.
    (b) Unique Identification Marking.--Section 5723 is amended by 
adding at the end the following new subsection:
    ``(f) Unique Identification Marking.--
            ``(1) In general.--No tobacco product or processed tobacco 
        may be sold, offered for sale, distributed, mailed, or 
        otherwise delivered for final sale to any consumer in the 
        United States unless the unique identification marking that 
        meets the requirements of this section (and any regulations 
        prescribed thereunder) is affixed to or forms part of the 
        package in which it is contained.
            ``(2) System specifications.--
                    ``(A) The Secretary shall design such system to 
                coordinate and avoid interference with State, local, 
                and Indian tribal tax stamps and markings, facilitate 
                collection of the tax imposed by this chapter, impede 
                contraband tobacco trafficking, minimize counterfeit 
                marking, allow for more effective tracking and tracing 
                of tobacco products and processed tobacco, facilitate 
                the enforcement of related Federal laws, and utilize 
                such available technology as may promote the purposes 
                of this chapter.
                    ``(B) The Secretary shall prescribe the method and 
                manner in which such unique identification markings are 
                to be distributed, purchased, and applied to or made 
                part of tobacco product and processed tobacco packages, 
                and may provide for the cancellation of such markings.
                    ``(C) The unique identification marking must 
                provide (through the marking or record associated with 
                the marking) such information as the Secretary by 
                regulation prescribes, including:
                            ``(i) A unique serial number or tracking 
                        code for each tobacco product or processed 
                        tobacco package or aggregate package.
                            ``(ii) The name and address of the person 
                        purchasing the marking (and, if different, of 
                        the person ensuring the marking is affixed to 
                        or made part of the package).
                            ``(iii) The name and address of the first 
                        unrelated person purchasing or otherwise 
                        receiving the tobacco product or processed 
                        tobacco from the person who ensures the marking 
                        is affixed to or made part of the package and 
                        the date of such purchase or receipt.
                    ``(D) The information described in subparagraph (C) 
                may be required to, to the extent practicable--
                            ``(i) be cryptographically encrypted, and
                            ``(ii)(I) be readable by a portable 
                        scanning device (or similar device) to be 
                        utilized by regulatory and law enforcement 
                        officials at the time and place of inspection, 
                        or
                            ``(II) be otherwise accessible remotely at 
                        such time and place.
            ``(3) Unrelated person.--For purposes of this subsection, 
        the term `unrelated person' means a person other than a related 
        person within the meaning of section 267(b) or 707(b)(1).''.
    (c) Definitions.--Section 5723, as amended by subsection (b), is 
amended by adding at the end the following new subsections:
    ``(g) Package Defined.--For purposes of this section, the term 
`package' means a pack, box, carton, or container of any kind or, if no 
other container, any wrapping (including cellophane), in which a 
tobacco product or processed tobacco is sold, offered for sale, 
distributed, or otherwise delivered for final sale to any consumer.
    ``(h) Unique Identification Marking Defined.--For purposes of this 
section, the term `unique identification marking' means a device in 
such design and denomination as the Secretary authorizes by regulation 
that is affixed to or made part of a package of a tobacco product or 
processed tobacco. Such markings shall contain overt security features 
for public authentication and covert security features embedding a 
unique, secure, encrypted identifier onto the marking, enabling law 
enforcement authentication, production control, and tracking and 
tracing of the product or processed tobacco bearing the marking.''.
    (d) Regulations.--The Secretary of the Treasury shall consult with 
the Secretary of Health and Human Services as may be appropriate to 
carry out the purposes of subsection (f), and paragraphs (2), (3), and 
(4) of subsection (b), of section 5723 of the Internal Revenue Code of 
1986 (as added by this section).

SEC. 204. WHOLESALERS AND MANUFACTURERS, IMPORTERS, AND SELLERS OF 
              TOBACCO PRODUCTION MACHINES REQUIRED TO HAVE PERMIT.

    (a) Wholesalers.--Section 5712 is amended by inserting ``, as a 
wholesaler,'' after ``or processed tobacco''.
    (b) Manufacturers, Importers, and Sellers of Tobacco Production 
Machines.--Section 5712 is amended by striking ``or as an export 
warehouse proprietor'' and inserting ``, as an export warehouse 
proprietor, or as a manufacturer, seller, or importer of tobacco 
production machines''.

SEC. 205. CONDITIONS OF PERMIT.

    (a) Issuance.--Subsection (a) of section 5713 is amended to read as 
follows:
    ``(a) Issuance.--
            ``(1) In general.--A person shall not engage in business as 
        a manufacturer or importer of tobacco products or processed 
        tobacco, as a wholesaler, as an export warehouse proprietor, or 
        as a manufacturer, seller, lessor, or importer of tobacco 
        production machines without a permit to engage in such 
        business. Such permit, conditioned upon compliance with this 
        chapter and regulations issued thereunder, shall be issued in 
        such form and in such manner as the Secretary shall by 
        regulation prescribe, to every person properly qualified under 
        sections 5711 and 5712. Any entity granted such a permit is not 
        eligible to provide any services the Secretary may elect to 
        procure to facilitate the purposes of section 5723. Permit 
        holders shall automatically count output and register, record, 
        and transmit the quantities measured, in the form, conditions, 
        and time limits established by the Secretary. A new permit may 
        be required at such other time as the Secretary shall by 
        regulation prescribe.
            ``(2) Conditions.--The Secretary shall not issue a permit 
        under this section unless--
                    ``(A) the applicant is in compliance with the 
                requirements of--
                            ``(i) this chapter,
                            ``(ii) chapter 114 of title 18, United 
                        States Code,
                            ``(iii) the Act of October 19, 1949 (15 
                        U.S.C. 375 et seq.; commonly referred to as the 
                        `Jenkins Act'),
                            ``(iv) the Fair and Equitable Tobacco 
                        Reform Act of 2004, and any amendments made 
                        thereby,
                            ``(v) the Family Smoking Prevention and 
                        Tobacco Control Act, and any amendments made 
                        thereby,
                            ``(vi) the Prevent All Cigarette 
                        Trafficking Act of 2009, and any amendments 
                        made thereby, and
                            ``(vii) any related regulations thereunder,
                as in effect on the date of the issuance of the permit,
                    ``(B) the applicant certifies that the applicant is 
                in compliance with all other Federal, State, local, and 
                Indian tribal laws relating to the taxation, 
                manufacture, importation, exportation, distribution, 
                marketing, sale, or transportation of tobacco products, 
                processed tobacco, or tobacco production machines, as 
                in effect on the date of the issuance of the permit, 
                and
                    ``(C) the applicant identifies in the application 
                any violation of a law described in subparagraph (A) or 
                (B) by the applicant resulting in a penalty under any 
                such law during the 5-year period ending on the date of 
                the application.''.
    (b) Suspension or Revocation.--Subparagraph (A) of section 
5713(b)(1) is amended by inserting ``or any other law described in 
subparagraph (A) or (B) of subsection (a)(2)'' after ``this chapter''.

SEC. 206. RECORDS TO BE MAINTAINED.

    (a) In General.--Section 5741 is amended--
            (1) by inserting ``(a) In General.--'' before ``Every 
        manufacturer'',
            (2) by inserting ``every wholesaler,'' after ``every 
        importer,'',
            (3) by striking ``such records'' and inserting ``records 
        concerning the chain of custody of the tobacco products and 
        processed tobacco (including the foreign country of final 
        destination for packages marked for export) and the serial 
        numbers, marks, labels, and notices required under section 
        5723, and such other records'', and
            (4) by adding at the end the following new subsections:
    ``(b) Retailers.--Retailers shall maintain records of receipt, and 
any non-retail sale or delivery, of tobacco products and processed 
tobacco. Such records shall be available to the Secretary for 
inspection and audit. An ordinary commercial record or invoice shall 
satisfy the requirements of this subsection if such record shows the 
date of receipt, from whom tobacco products or processed tobacco were 
received, and the quantity of tobacco products or processed tobacco 
received (or, in the case of non-retail sale or delivery, the date of 
sale or delivery, to whom the tobacco products or processed tobacco 
were sold or delivered, and the quantity of the tobacco products or 
processed tobacco sold or delivered). To the extent the Secretary 
determines that the records maintained by retail entities licensed 
pursuant to section 555(b) of the Tariff Act of 1930 (19 U.S.C. 
1555(b)) satisfy the recordkeeping requirements of this section, no 
additional records shall be required for such entities under this 
section. The preceding provisions of this subsection shall not be 
construed to limit or preclude other recordkeeping requirements imposed 
on any retailer.
    ``(c) Records Concerning Marks and Chain of Custody.--Records 
concerning the chain of custody and the marks, labels, and notices 
required under section 5723 shall be available for inspection by any 
internal revenue officer during business hours.''.
    (b) Consultation With Health and Human Services.--The Secretary of 
the Treasury shall consult with the Secretary of Health and Human 
Services as may be appropriate to carry out the purposes of section 
5741 of the Internal Revenue Code of 1986.

SEC. 207. REPORTS.

    Section 5722 is amended--
            (1) by inserting ``(a) In General.--'' before ``Every 
        manufacturer'', and
            (2) by adding at the end the following new subsection:
    ``(b) Reports by Export Warehouse Proprietors.--Prior to 
exportation of tobacco products or processed tobacco from the United 
States, the export warehouse proprietor shall submit a report (in such 
manner and form as the Secretary may by regulation prescribe) to enable 
the Secretary to identify the shipment and assure that it reaches its 
intended destination.''.

SEC. 208. FRAUDULENT OFFENSES.

    (a) In General.--Subsection (a) of section 5762 is amended--
            (1) by striking paragraph (1) and redesignating paragraphs 
        (2) through (6) as paragraphs (1) through (5), respectively, 
        and
            (2) by striking ``not more than $10,000'' and inserting 
        ``not more than $10,000 or an amount equal to 3 times the 
        amount of the tax imposed under this chapter on the tobacco 
        product involved (whichever is greater)''.
    (b) Offenses Relating to Distribution of Tobacco Products, etc.--
            (1) In general.--Section 5762 (as amended by section 202 of 
        this Act) is amended--
                    (A) by redesignating subsection (c) as subsection 
                (d), and
                    (B) by inserting after subsection (b) the following 
                new subsection:
    ``(c) Offenses Relating to Distribution of Tobacco Products, etc.--
It shall be unlawful--
            ``(1) for any person to engage in business as a 
        manufacturer or importer of tobacco products, processed 
        tobacco, or cigarette papers and tubes, as a wholesaler, or an 
        export warehouse proprietor, or as a manufacturer, seller, or 
        importer of tobacco production machines without filing the bond 
        and obtaining the permit where required by this chapter or 
        regulations thereunder,
            ``(2) for a manufacturer or importer of tobacco products, 
        or wholesaler to knowingly ship, transport, deliver, or receive 
        any tobacco products from or to any person other than a person 
        who has obtained the permit required by this chapter, a 
        retailer, or a person handling such products solely for 
        purposes of shipment or delivery; except that an importer who 
        has obtained the permit required by this chapter may receive, 
        from a foreign manufacturer or a foreign distributor, foreign 
        tobacco products that have not previously entered the United 
        States,
            ``(3) for a manufacturer or importer of processed tobacco 
        or a wholesaler to knowingly ship, transport, deliver, or 
        receive any tobacco products or processed tobacco from or to 
        any person other than a person who has obtained the permit 
        required by this chapter,
            ``(4) for a manufacturer or importer of processed tobacco 
        to knowingly ship, transport, sell, or deliver processed 
        tobacco to any person other than a manufacturer of processed 
        tobacco, a manufacturer of tobacco products, or an export 
        warehouse proprietor,
            ``(5) for any person (other than the original manufacturer 
        of such tobacco products or processed tobacco or an export 
        warehouse proprietor authorized to receive any tobacco products 
        or processed tobacco that have previously been exported and 
        returned to the United States) to knowingly receive any tobacco 
        products or processed tobacco that have previously been 
        exported and returned to the United States,
            ``(6) for any export warehouse proprietor to knowingly 
        ship, transport, sell, or deliver for sale any tobacco products 
        or processed tobacco to any person other than the original 
        manufacturer of such tobacco products or processed tobacco, 
        another export warehouse proprietor, a duty free store, or a 
        foreign purchaser,
            ``(7) for any person (other than a manufacturer, 
        wholesaler, or an export warehouse proprietor permitted under 
        this chapter) to knowingly ship, transport, receive, or 
        possess, for purposes of resale, any tobacco product or 
        processed tobacco not in packages marked pursuant to 
        regulations issued under section 5723, other than for direct 
        return to a manufacturer for repacking or for re-exportation or 
        to an export warehouse proprietor for re-exportation,
            ``(8) for any manufacturer, importer, export warehouse 
        proprietor, or wholesaler permitted under this chapter to make 
        any false entry in, to fail to make an entry in, or to 
        knowingly fail to maintain properly any record or report 
        required by this chapter or the regulations promulgated 
        thereunder with the intent to defraud the United States,
            ``(9) for any person, with the intent to defraud the United 
        States, to alter, mutilate, destroy, obliterate, or remove any 
        mark or label required under this chapter upon a tobacco 
        product or processed tobacco held for sale, or to create, 
        possess, or apply on any tobacco product or processed tobacco 
        or its packaging any counterfeit versions of any such marks or 
        labels, and
            ``(10) for any person to sell at retail more than 3,000 
        cigarettes in any single transaction (or series of related 
        transactions), or, in the case of other tobacco products, an 
        equivalent quantity as determined by regulation.
Any person violating any of the provisions of this subsection shall, 
upon conviction, be fined as provided in section 3571 of title 18, 
United States Code, or imprisoned for not more than 5 years, or 
both.''.
            (2) Conforming amendment.--Section 5762(d) (as so 
        redesignated) is amended by striking ``and (b)'' inserting ``, 
        (b), and (c)''.
    (c) Other Offenses.--Subsection (d) of section 5762 (as so 
redesignated) is amended by striking ``not more than $1,000'' and 
inserting ``not more than $2,500 or an amount equal to the tax imposed 
under this chapter on the tobacco product or processed tobacco involved 
(whichever is greater)''.

SEC. 209. PENALTIES.

    (a) In General.--
            (1) Subsection (a) of section 5761 is amended--
                    (A) by striking ``willfully'' and inserting 
                ``knowingly'', and
                    (B) by striking ``$1,000'' and inserting 
                ``$10,000''.
            (2) Subsection (b) of section 5761 is amended by striking 
        ``5 percent'' and inserting ``10 percent''.
    (b) Penalty Amounts Adjusted for Inflation.--Section 5761 is 
amended by redesignating subsection (f) as subsection (g) and inserting 
after subsection (e) the following new subsection:
    ``(f) Inflation Adjustment.--
            ``(1) In general.--In the case of a calendar year beginning 
        after 2015, the penalty dollar amounts provided under this 
        chapter shall each be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year, determined 
                by substituting `calendar year 2014' for `calendar year 
                1992' in subparagraph (B) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $10, such amount shall be rounded to 
        the next highest multiple of $10.''.

SEC. 210. COORDINATION WITH OTHER GOVERNMENT OFFICIALS.

    (a) In General.--Subchapter F of chapter 52 is amended by adding at 
the end the following new section:

``SEC. 5755. COORDINATION WITH OTHER GOVERNMENT OFFICIALS.

    ``The Secretary shall make reasonable efforts to coordinate with 
other Federal agencies and with officials of foreign, State, local, 
Indian tribal, and other governments to promote the purposes of this 
chapter, to prevent and reduce tobacco tax evasion and contraband 
trafficking in tobacco products and processed tobacco, to enforce 
settlement agreements between tobacco companies and State or other 
governments and related laws, or for other law enforcement or 
administration purposes.''.
    (b) Information Sharing.--
            (1) In general.--Paragraph (1) of section 6103(o) is 
        amended by adding at the end the following new subparagraph:
                    ``(C) Information sharing for tobacco product law 
                administration and enforcement purposes.--
                            ``(i) Federal, state, local, and tribal 
                        governments.--Returns and return information 
                        with respect to taxes imposed by chapter 52 may 
                        be open to inspection by or disclosure to 
                        officers and employees of any Federal agency, 
                        the State Tax Administrators, or any other 
                        agency of any State, local, or Indian tribal 
                        government responsible for the administration 
                        and enforcement of laws and regulations 
                        relating to tobacco products and processed 
                        tobacco, or their legal representative, solely 
                        for use in such administration and enforcement, 
                        unless the Secretary determines that such 
                        disclosure would seriously impair Federal tax 
                        administration.
                            ``(ii) Foreign governments and 
                        organizations.--The Secretary shall, upon 
                        written request, disclose returns and return 
                        information with respect to taxes imposed by 
                        chapter 52 to officers and employees of any 
                        agency of any foreign government, OLAF 
                        (European Anti-Fraud Office), EUROPOL, 
                        INTERPOL, or the World Customs Organization 
                        responsible for the administration and 
                        enforcement of laws and regulations relating to 
                        tobacco products and processed tobacco, or 
                        their legal representative, solely for use in 
                        such administration and enforcement, if the 
                        Secretary obtains written assurances from such 
                        government or organization that the information 
                        will be held in confidence and used only for 
                        such use. No return or return information shall 
                        be disclosed under this clause if the Secretary 
                        determines that such disclosure would seriously 
                        impair Federal tax administration.
                            ``(iii) Public information.--The identity 
                        and business address of those persons that have 
                        a valid permit, pursuant to chapter 52, to 
                        engage in business as a manufacturer, 
                        wholesaler, or importer of tobacco products or 
                        processed tobacco, as an export warehouse 
                        proprietor, or as a manufacturer, seller, or 
                        importer of tobacco production machines (as 
                        defined in section 5702(q)) shall be made 
                        publicly available at such time and in such 
                        manner as the Secretary may prescribe.''.
            (2) Conforming amendments.--
                    (A) Subsection (a) of section 6103 is amended--
                            (i) by striking ``or any local'' in 
                        paragraph (2) and inserting ``any local'',
                            (ii) by inserting ``, or any agency 
                        described in subsection (o)(1)(C)(i)'' after 
                        ``subsection (l)(7)(D)'' in paragraph (2),
                            (iii) by striking ``or subsection (n)'' in 
                        paragraph (3) and inserting ``subsection (n), 
                        or subsection (o)(1)(C)(i)''.
                    (B) Paragraph (4) of section 6103(p) is amended--
                            (i) by striking ``(o)(1)(A)'' both places 
                        it appears and inserting ``(o)(1)(A) or 
                        (C)(i)'', and
                            (ii) by striking ``(15), or (16),'' and 
                        inserting ``(15), or (16), or (o)(1)(C)(i),''.
                    (C) Paragraph (2) of section 7213(a) is amended--
                            (i) by striking ``(21) or'' and inserting 
                        ``(21),'', and
                            (ii) by striking ``or (7)'' and inserting 
                        ``or (7), or (o)(1)(C)(i)''.
    (c) Clerical Amendment.--The table of sections for subchapter F of 
chapter 52 is amended by adding at the end the following new item:

``Sec. 5755. Coordination with other government officials.''.

SEC. 211. DEFINITIONS.

    (a) Export Warehouse Proprietor.--Subsection (i) of section 5702 is 
amended by inserting before the period the following: ``or any person 
engaged in the business of exporting tobacco products from the United 
States for purposes of sale or distribution. Any duty free store that 
sells, offers for sale, or otherwise distributes to any person in any 
single transaction (or series of related transactions) more than 3,000 
cigarettes, or an equivalent quantity of other tobacco products as the 
Secretary shall by regulation prescribe, shall be deemed an export 
warehouse proprietor under this chapter''.
    (b) Retailer; Wholesaler.--Section 5702, as amended by this Act, is 
amended by adding at the end the following new subsections:
    ``(r) Retailer.--The term `retailer' means any person who sells, or 
offers for sale, any tobacco product at retail. The term `retailer' 
includes any duty free store that sells, offers for sale, or otherwise 
distributes at retail in any single transaction (or series of related 
transactions) not more than 3,000 cigarettes, or not more than an 
equivalent quantity of other tobacco products as the Secretary shall by 
regulation prescribe.
    ``(s) Wholesaler.--The term `wholesaler' means any person engaged 
in the business of purchasing tobacco products for resale at wholesale, 
or any person acting as an agent or broker for any person engaged in 
the business of purchasing tobacco products for resale at wholesale.''.

SEC. 212. CONFORMING AMENDMENTS.

    (a) Paragraph (2)(C) of section 2341 of title 18, United States 
Code is amended by inserting ``in regard to State, local, or Indian 
tribal government taxes,'' before ``a person''.
    (b) Sections 2314 and 2315 of title 18, United States Code, are 
each amended--
            (1) by striking ``state'' in the heading thereof; and
            (2) by striking ``tax stamps'' each place it appears and 
        inserting ``tax stamps or markings''.
    (c) The headings for subchapters B, C, and E of chapter 52 are each 
amended by inserting ``, Processed Tobacco,'' after ``Products''.
    (d) The items relating to subchapters B, C, and E in the table of 
subchapters for chapter 52 are each amended by inserting ``, processed 
tobacco,'' after ``products''.
    (e) The heading for chapter 52 is amended by inserting ``, 
PROCESSED TOBACCO,'' after ``PRODUCTS''.
    (f) The item relating to chapter 52 in the table of chapters for 
subtitle E is amended by inserting ``, processed tobacco,'' after 
``products''.

SEC. 213. EFFECTIVE DATE.

    Except as otherwise provided in this title, the amendments made by 
this title shall take effect 1 year after the date of the enactment of 
this Act.

                        TITLE III--IMPORT FRAUD

SEC. 301. MAXIMUM PENALTY FOR IMPORTATION OF TOBACCO PRODUCTS AND 
              CIGARETTE PAPERS AND TUBES BY FRAUDULENT MEANS.

    (a) Maximum Penalty.--Section 592(c)(1) of the Tariff Act of 1930 
(19 U.S.C. 1592(c)(1)) is amended--
            (1) by striking ``A fraudulent violation of subsection 
        (a)'' and inserting the following:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a fraudulent violation of subsection 
                (a)''; and
            (2) by adding at the end the following:
                    ``(B) Tobacco products and cigarette papers and 
                tubes.--In the case of importation of tobacco products 
                and cigarette papers and tubes subject to tax under 
                chapter 52 of the Internal Revenue Code of 1986, a 
                fraudulent violation of subsection (a) is punishable by 
                a civil penalty in an amount not to exceed the sum of--
                            ``(i) the domestic value of the 
                        merchandise, and
                            ``(ii) four times the amount of Federal 
                        excise tax that could be imposed on the 
                        merchandise, if applicable.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on the date which is 90 days after the date of the 
enactment of this Act, and shall apply with respect to violations of 
section 592 of the Tariff Act of 1930 (as so amended) that occur on or 
after that date.

    TITLE IV--EXCLUSIONS REGARDING INDIAN TRIBES AND TRIBAL MATTERS

SEC. 401. EXCLUSIONS REGARDING INDIAN TRIBES AND TRIBAL MATTERS.

    (a) In General.--Nothing in this Act or the amendments made by this 
Act shall be construed to amend, modify, or otherwise affect--
            (1) any agreements, compacts, or other intergovernmental 
        arrangements between any State or local government and any 
        government of an Indian tribe relating to the collection of 
        taxes on tobacco products sold in Indian country;
            (2) any State laws that authorize or otherwise pertain to 
        any such intergovernmental arrangements or create special rules 
        or procedures for the collection of State, local, or tribal 
        taxes on tobacco products sold in Indian country;
            (3) any limitations under Federal or State law, including 
        Federal common law and treaties, on State, local, and tribal 
        tax and regulatory authority with respect to the sale, use, or 
        distribution of tobacco products or processed tobacco by or to 
        Indian tribes, tribal members, tribal enterprises, or in Indian 
        country;
            (4) any Federal law, including Federal common law and 
        treaties, regarding State jurisdiction, or lack thereof, over 
        any Indian tribe, tribal member, tribal enterprise, Indian 
        reservations, or other land held by the United States in trust 
        for one or more Indian tribes; or
            (5) any State or local government authority to bring 
        enforcement actions against persons located in Indian country.
    (b) Coordination of Law Enforcement.--Nothing in this Act or the 
amendments made by this Act (other than the amendments relating to 
section 6103 of the Internal Revenue Code of 1986) shall be construed 
to inhibit or otherwise affect any coordinated law enforcement effort 
by one or more States or other jurisdictions, including Indian tribes, 
through interstate compact or otherwise, that--
            (1) provides for the administration of tobacco product laws 
        or laws pertaining to interstate sales or other sales of 
        tobacco products or processed tobacco;
            (2) provides for the seizure of tobacco products, processed 
        tobacco, or other property related to a violation of such laws; 
        or
            (3) establishes cooperative programs for the administration 
        of such laws.
    (c) Treatment of State and Local Governments.--Nothing in this Act 
or the amendments made by this Act shall be construed to authorize, 
deputize, or commission States or local governments as 
instrumentalities of the United States.
    (d) Enforcement Within Indian Country.--Nothing in this Act or the 
amendments made by this Act shall prohibit, limit, or restrict 
enforcement by the Attorney General of the United States of this Act or 
an amendment made by this Act within Indian country.
    (e) Ambiguity.--Any ambiguity between the language of this section 
or its application and any other provision of this Act shall be 
resolved in favor of this section.
    (f) Definitions.--In this section--
            (1) the term ``Indian country'' has the meaning given that 
        term in section 1151 of title 18, United States Code;
            (2) the term ``tribal enterprise'' means any business 
        enterprise, regardless of whether incorporated or 
        unincorporated under Federal or tribal law, of an Indian tribe 
        or group of Indian tribes;
            (3) the term ``Indian reservation'' has the meaning given 
        that term in section 168(j)(6) of the Internal Revenue Code of 
        1986;
            (4) the term ``Indian tribe'' has the meaning given that 
        term in section 4(e) of the Indian Self-Determination and 
        Education Assistance Act (25 U.S.C. 450b(e)); and
            (5) the terms ``tobacco products'' and ``processed 
        tobacco'' have the meanings given such terms by section 5702 of 
        the Internal Revenue Code of 1986.
                                 <all>
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