II

105TH CONGRESS

1ST SESSION S. 1411

To amend the Internal Revenue Code of 1986 to disallow a Federal income

tax deduction for payments to the Federal Government or any State

or local government in connection with any tobacco litigation or settlement and to use any increased Federal revenues to promote public

health.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 7, 1997

Mr. MACK (for himself, Mr. HARKIN, Mr. DEWINE, Mr. SANTORUM, Ms. COLLINS, Ms. SNOWE, Mr. D’AMATO, Mr. SMITH of Oregon, Mrs. BOXER,

Mr. KENNEDY, Ms. FEINSTEIN, Mr. LAUTENBERG, Mr. GRAHAM, Mr.

DODD, Mr. DURBIN, and Mr. WELLSTONE) 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 disallow

a Federal income tax deduction for payments to the

Federal Government or any State or local government

in connection with any tobacco litigation or settlement

and to use any increased Federal revenues to promote

public health.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. DEDUCTION DISALLOWED FOR CERTAIN

2 TOBACCO COMPANY PAYMENTS.

3 (a) IN GENERAL.—Section 162 of the Internal Reve4 nue Code of 1986 (defining trade or business expenses)

5 is amended by redesignating subsection (o) as subsection

6 (p) and by inserting after subsection (n) the following new

7 subsection:

8 ‘‘(o) CERTAIN TOBACCO COMPANY PAYMENTS NOT

9 DEDUCTIBLE.—

10 ‘‘(1) IN GENERAL.—No deduction otherwise al11 lowable shall be allowed under this chapter for any

12 amount paid or incurred to the Federal Government

13 or to any State or local government pursuant to any

14 applicable tobacco judgment or settlement.

15 ‘‘(2) REPORTING OF PAYMENTS.—Any taxpayer

16 to which paragraph (1) applies for any taxable year

17 shall include on its return of tax imposed by this

18 chapter for such taxable year the total amount of

19 payments for which a deduction is not allowed and

20 such other information as the Secretary may pre21 scribe.

22 ‘‘(3) APPLICABLE TOBACCO JUDGMENT OR SET23 TLEMENT.—For purposes of this subsection, the

24 term ‘applicable tobacco judgment or settlement’

25 means—
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1 ‘‘(A) any judgment in any civil action seek2 ing damages in connection with the manufac3 ture or sale of any tobacco product; and

4 ‘‘(B) any settlement agreement arising out

5 of any such civil action, including the tobacco

6 industry settlement agreement of June 20,

7 1997 (and any modification or successor there8 of).

9 Such term shall include any law enacted to imple10 ment any settlement described in subparagraph

11 (B).’’

12 (b) EFFECTIVE DATE.—

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

14 this section shall apply to any payments made on or

15 after November ll, 1997, pursuant to any judg16 ment entered, or settlement agreement entered into,

17 on or after such date.

18 (2) SPECIAL RULE FOR SETTLEMENT AGREE19 MENT.—In the case of the tobacco industry settle20 ment agreement of June 20, 1997, such agreement

21 shall be treated as entered into on the date of the

22 enactment of Federal legislation implementing the

23 agreement.
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1 SEC. 2. NATIONAL INSTITUTES OF HEALTH TRUST FUND.

2 (a) IN GENERAL.—Subchapter A of chapter 98 of the

3 Internal Revenue Code of 1986 (relating to trust fund

4 code) is amended by adding at the end the following new

5 section:

6 ‘‘SEC. 9512. NATIONAL INSTITUTES OF HEALTH TRUST

7 FUND FOR HEALTH RESEARCH.

8 ‘‘(a) CREATION OF TRUST FUND.—There is estab9 lished in the Treasury of the United States a trust fund

10 to be known as the ‘National Institutes of Health Trust

11 Fund for Health Research’ (hereafter referred to in this

12 section as the ‘Trust Fund’), consisting of such amounts

13 as may be appropriated or transferred to the Trust Fund

14 as provided in this section or section 9602(b).

15 ‘‘(b) TRANSFERS TO TRUST FUND.—There is hereby

16 appropriated to the Trust Fund an amount equivalent to

17 the net increase in revenues received in the Treasury at18 tributable to the application of section 162(o) as estimated

19 by the Secretary.

20 ‘‘(c) OBLIGATIONS FROM TRUST FUND.—

21 ‘‘(1) IN GENERAL.—Subject to the provisions of

22 paragraph (4), with respect to the amounts made

23 available in the Trust Fund in a fiscal year, the Sec24 retary of Health and Human Services shall distrib25 ute during any fiscal year—
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1 ‘‘(A) 2 percent of such amounts to the Of2 fice of the Director of the National Institutes of

3 Health to be allocated at the Director’s discre4 tion—

5 ‘‘(i) for carrying out the responsibil6 ities of the Office of the Director, including

7 the Office of Research on Women’s Health

8 and the Office of Research on Minority

9 Health, the Office of Alternative Medicine,

10 the Office of Rare Disease Research, the

11 Office of Behavioral and Social Sciences

12 Research (for use for efforts to reduce to13 bacco use), the Office of Dietary Supple14 ments, and the Office for Disease Preven15 tion; and

16 ‘‘(ii) for construction and acquisition

17 of equipment for or facilities of or used by

18 the National Institutes of Health;

19 ‘‘(B) 2 percent of such amounts for trans20 fer to the National Center for Research Re21 sources to carry out section 1502 of the Na22 tional Institutes of Health Revitalization Act of

23 1993 concerning Biomedical and Behavioral Re24 search Facilities; and
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1 ‘‘(C) the remainder of such amounts to

2 member institutes and centers, including the

3 Office of AIDS Research, of the National Insti4 tutes of Health in the same proportion to the

5 total amount received under this section, as the

6 amount of annual appropriations under appro7 priations Acts for each member institute and

8 Centers for the fiscal year bears to the total

9 amount of appropriations under appropriations

10 Acts for all member institutes and Centers of

11 the National Institutes of Health for the fiscal

12 year.

13 ‘‘(2) PLANS OF ALLOCATION.—The amounts

14 transferred under paragraph (1)(C) shall be allo15 cated by the Director of the National Institutes of

16 Health or the various directors of the institutes and

17 centers, as the case may be, pursuant to allocation

18 plans developed by the various advisory councils to

19 such directors, after consultation with such

20 directors.

21 ‘‘(3) GRANTS AND CONTRACTS FULLY FUNDED

22 IN FIRST YEAR.—With respect to any grant or con23 tract funded by amounts distributed under para24 graph (1), the full amount of the total obligation of

25 such grant or contract shall be funded in the first
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1 year of such grant or contract, and shall remain

2 available until expended.

3 ‘‘(4) TRIGGER AND RELEASE OF MONIES AND

4 PHASE-IN.—

5 ‘‘(A) TRIGGER AND RELEASE.—No ex6 penditure shall be made under paragraph (1)

7 during any fiscal year in which the annual

8 amount appropriated for the National Institutes

9 of Health is less than the amount so appro10 priated for the prior fiscal year.

11 ‘‘(B) PHASE-IN.—The Secretary of Health

12 and Human Services shall phase in the dis13 tributions required under paragraph (1) so

14 that—

15 ‘‘(i) 25 percent of the amount in the

16 Trust Fund is distributed in the first fiscal

17 year for which funds are available;

18 ‘‘(ii) 50 percent of the amount in the

19 Trust Fund is distributed in the second

20 fiscal year for which funds are available;

21 ‘‘(iii) 75 percent of the amount in the

22 Trust Fund is distributed in the third fis23 cal year for which funds are available; and

24 ‘‘(iv) 100 percent of the amount in

25 the Trust Fund is distributed in the fourth
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1 and each succeeding fiscal year for which

2 funds are available.

3 ‘‘(d) BUDGET TREATMENT OF AMOUNTS IN TRUST

4 FUND.—The amounts in the Trust Fund shall be excluded

5 from, and shall not be taken into account, for purposes

6 of any budget enforcement procedure under the Congres7 sional Budget Act of 1974 or the Balanced Budget and

8 Emergency Deficit Control Act of 1985.’’

9 (b) CONFORMING AMENDMENT.—The table of sec10 tions for such subchapter A is amended by adding at the

11 end the following new item:

‘‘Sec. 9512. National Institutes of Health Trust Fund for Health Research.’’

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