II

105TH CONGRESS

2D SESSION S. 1582

To provide market transition assistance for quota holders, active tobacco

producers, and tobacco-growing counties, to authorize a private Tobacco

Production Control Corporation and tobacco loan associations to control

the production and marketing and ensure the quality of tobacco in

the United States, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 28, 1998

Mr. ROBB introduced the following bill; which was read twice and referred to

the Committee on Agriculture, Nutrition, and Forestry

A BILL

To provide market transition assistance for quota holders,

active tobacco producers, and tobacco-growing counties,

to authorize a private Tobacco Production Control Corporation and tobacco loan associations to control the

production and marketing and ensure the quality of tobacco in the United States, 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; TABLE OF CONTENTS.

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

5 ‘‘Tobacco Market Transition Act’’.
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1 (b) TABLE OF CONTENTS.—The table of contents of

2 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definitions.

Sec. 3. Purposes.

TITLE I—TOBACCO COMMUNITY REVITALIZATION TRUST FUND

Sec. 101. Tobacco Community Revitalization Trust Fund.

TITLE II—TOBACCO MARKET TRANSITION ASSISTANCE

Sec. 201. Compensation to quota holders for loss of tobacco quota asset value.

Sec. 202. Transition payments for active tobacco producers.

Sec. 203. Tobacco Loan associations.

Sec. 204. Tobacco community economic development grants.

Sec. 205. Tax treatment of compensation and transition payments.

TITLE III—ESTABLISHMENT OF PRIVATE TOBACCO PRODUCTION

ADJUSTMENT AND QUALITY ASSURANCE PROGRAMS

Sec. 301. Tobacco Production Control Corporation.

Sec. 302. Tobacco loan associations

Sec. 303. Tobacco price support levels.

Sec. 304. Penalties.

Sec. 305. Referenda.

3 SEC. 2. DEFINITIONS.

4 In this Act:

5 (1) ACTIVE TOBACCO PRODUCER.—The term

6 ‘‘active tobacco producer’’ means a person that—

7 (A) is the actual producer, as determined

8 by the Secretary, of tobacco on a farm where

9 tobacco is produced pursuant to a tobacco from

10 marketing quota or farm acreage allotment es11 tablished under the Agricultural Adjustment

12 Act of 1938 (7 U.S.C. 1281 et seq.) for the

13 1997 crop year; and

14 (B) planted the crop, or is considered to

15 have planted the crop under that Act, in 1997.
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1 (2) QUOTA HOLDER.—The term ‘‘quota holder’’

2 means an owner of a farm on January 1, 1998 for

3 which a tobacco farm marketing quota or farm acre4 age allotment was established under the Agricultural

5 Adjustment Act of 1938 (7 U.S.C. 1281 et seq.)

6 (3) SECRETARY.—The term ‘‘Secretary’’ means

7 the Secretary of Agriculture.

8 (4) TOBACCO LOAN ASSOCIATION.—The term

9 ‘‘Association’’ means a producer-owned cooperative

10 marketing association.

11 (5) TOBACCO PRODUCTION CONTROL CORPORA12 TION.—The term ‘‘Corporation’’ means the Tobacco

13 Production Control Corporation established by sec14 tion 301.

15 (6) TRUST FUND.—The term ‘‘Trust Fund’’

16 means the Tobacco Community Revitalization Trust

17 Fund established by section 101.

18 SEC. 3. PURPOSES

19 It is the purpose of this Act to—

20 (1) dismantle the existing federal tobacco pro21 gram and establish a private program to ensure the

22 stability of the price and supply of domestically

23 produce tobacco;
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1 (2) compensate quota holders for the value of

2 assets that may be diminished as a result of this leg3 islation;

4 (3) provide targeted economic development

5 funds to tobacco dependent communities for the cre6 ation of jobs, training of individuals, and long-term

7 economic development of the communities;

8 (4) reduce the operating costs of tobacco pro9 ducers by eliminating expenses associated with buy10 ing or leasing tobacco quota; and

11 (5) make domestically produced tobacco more

12 competitive with tobacco produced in other coun13 tries.

14 TITLE I—TOBACCO COMMUNITY

15 REVITALIZATION TRUST FUND

16 SEC. 101. TOBACCO COMMUNITY REVITALIZATION TRUST

17 FUND.

18 (a) IN GENERAL.—There is established in the Treas19 ury of the United States a trust fund to be known as the

20 ‘‘Tobacco Community Revitalization Trust Fund’’, con21 sisting of such amounts as may be appropriated or cred22 ited to the Trust Fund. The Trust Fund shall be adminis23 tered by the Corporation.

24 (b) TRANSFERS TO TRUST FUND.—There are appro25 priated and transferred to the Trust Fund, from amounts
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1 made available to the Trust Fund out of funds allocated

2 through national tobacco settlement legislation,

3 $3,500,000,000 for each of fiscal years 1999 through

4 2003 and $265,000,000 for each of fiscal years 2004

5 through 2023.

6 (c) REPAYABLE ADVANCES.—

7 (1) AUTHORIZATION.—There are authorized to

8 be appropriated to the Trust Fund, as repayable ad9 vances, such sums as may from time to time be nec10 essary to make expenditures under subsection (d).

11 (2) REPAYMENT WITH INTEREST.—Repayable

12 advances made to the Trust Fund shall be repaid,

13 and interest on the advances shall be paid, to the

14 general fund of the Treasury went the Secretary of

15 the Treasury determines that moneys are available

16 in the Trust Fund to make the payments.

17 (3) RATE OF INTEREST.—Interest on an ad18 vance made under this subsection shall be at a rate

19 determined by the Secretary of Treasury (as of the

20 close of the calendar month preceding the month in

21 which the advance is made) that is equal to the cur22 rent average market yield on outstanding marketable

23 obligations of the United States with remaining pe24 riod to maturity comparable to the anticipated pe25 riod during which the advance will be outstanding.
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1 (d) EXPENDITURES FROM TRUST FUND.—Amounts

2 in the Trust Fund shall be available for making expendi3 tures to defray—

4 (1) the costs of providing compensation to

5 quota holders for the loss of tobacco quota asset

6 value under section 201;

7 (2) the costs of making transition payments to

8 active tobacco producers under section 202;

9 (3) the costs of forgiving loans and transferring

10 title to inventories of tobacco and funds to Associa11 tions under section 203;

12 (4) the costs of making tobacco community eco13 nomic development grants under section 204, but

14 not to exceed $250,000,000 for each of fiscal years

15 1999 through 2003 and an amount determined by

16 the Corporation to be appropriate for each of fiscal

17 years 2004 through 2023;

18 (5) the costs of carrying out the duties of the

19 Corporation and the Associations, including assuring

20 the quality and controlling the production and mar21 keting of domestic tobacco and otherwise carrying

22 out title III;

23 (6) the costs to the Secretary of enforcing title

24 III;
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1 (7) the costs of providing crop insurance to to2 bacco producers; and

3 (8) any other costs incurred by the Department

4 of Agriculture associated with tobacco.

5 TITLE II—TOBACCO MARKET

6 TRANSITION ASSISTANCE

7 SEC. 201. COMPENSATION TO QUOTA HOLDERS FOR LOSS

8 OF TOBACCO QUOTA ASSET VALUE.

9 (a) IN GENERAL.—The Corporation shall make pay10 ments for tobacco quota to eligible quota holders.

11 (b) ELIGIBILITY.—To be eligible to receive payments

12 under this section, a quota holder shall prepare and sub13 mit to the Corporation an application at such time, in such

14 manner, and containing such information as the Corpora15 tion may require, including information sufficient to dem16 onstrate to the satisfaction of the Corporation that the

17 person was a quota holder on January 1, 1998.

18 (c) BASE QUOTA LEVEL.—

19 (1) IN GENERAL.—The Secretary shall deter20 mine, for each quota holder, the base quota level for

21 the 1995 through 1997 marketing years.

22 (2) LEVEL.—The base quota level for a quota

23 holder shall be equal to the average tobacco farm

24 marketing quota established for the 1995 through
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1 1997 marketing years for the farm owned by the

2 quota holder on January 1, 1998.

3 (3) MARKETING QUOTAS OTHER THAN POUND4 AGE QUOTAS.—For each kind of tobacco for which

5 there is a marketing quota or allotment (on an acre6 age basis), the base quota level for each quota holder

7 shall be determined in accordance with this sub8 section (based on a poundage conversion) in an

9 amount equal to the product obtained by multiply10 ing—

11 (A) the average tobacco farm marketing

12 quota or allotment for the 1995 through 1997

13 marketing years; by

14 (B) the average county yield per acre for

15 the county in which the farm is located for the

16 kind of tobacco for the marketing years.

17 (d) PAYMENTS.—The Corporation shall make pay18 ments to each quota holder that is eligible under sub19 section (b) in 5 equal installments, 1 for each of the 1999

20 through 2003 crops of tobacco, in an aggregate amount

21 that is equal to the product obtained by multiplying—

22 (1) $8 per pound; by

23 (2) the base quota level established for the

24 quota holder under subsection (c).
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1 SEC. 202. TRANSITION PAYMENTS FOR ACTIVE TOBACCO

2 PRODUCERS.

3 (a) IN GENERAL.—The Corporation shall make tran4 sition payments to eligible active tobacco producers.

5 (b) ELIGIBILITY.—To be eligible to receive payments

6 under this section, an active tobacco producer shall—

7 (1) prepare and submit to the Corporation an

8 application at such time, in such manner, and con9 taining such information as the Corporation may re10 quire, including information sufficient to make the

11 demonstration required under paragraph (2); and

12 (2) demonstrate to the satisfaction of the Cor13 poration that, the person planted, or is considered to

14 have planted, a 1997 crop of tobacco.

15 (c) PAYMENT QUANTITY.—

16 (1) IN GENERAL.—The Secretary shall deter17 mine and provide to the Corporation, for each active

18 tobacco producer, the production quantity eligible for

19 payment for the 1995 through 1997 marketing

20 years.

21 (2) ELIGIBLE PRODUCTION QUANTITY.—The

22 production quantity eligible for payment for an ac23 tive tobacco producer shall be equal to the average

24 number of pounds of tobacco quota established for

25 a farm for the 1995 through 1997 marketing years
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1 for which the producer was the actual producer of

2 the tobacco on the farm.

3 (3) MARKETING QUOTAS OTHER THAN POUND4 AGE QUOTAS.—For each kind of tobacco for which

5 there is a marketing quota or allotment (on an acre6 age basis), the production quantity eligible for pay7 ment for each active tobacco producer shall be deter8 mined in accordance with this subsection (based on

9 a poundage conversion) in an amount equal to the

10 product obtained by multiplying—

11 (A) the average tobacco farm marketing

12 quota or allotment for the 1995 through 1997

13 marketing years; by

14 (B) the average county yield per acre for

15 the county in which the farm is located for the

16 kind of tobacco for the marketing years.

17 (d) PAYMENTS.—The Corporation shall make pay18 ments for each of the 1999 through 2003 crops of tobacco

19 to each active tobacco producer that is eligible under sub20 section (b) in an amount that is equal to the product ob21 tained by multiplying—

22 (1) $0.40 per pound; by

23 (2) the payment quantity established for the

24 producer under subsection (c).
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1 (e) DEATH OF ACTIVE TOBACCO PRODUCER.—If an

2 active tobacco producer who is entitled to payments under

3 this section dies and is survived by a spouse or 1 or more

4 dependents, the right to receive the payments shall trans5 fer to the surviving spouse or, if there is no surviving

6 spouse, to the estate of the producer.

7 SEC. 203. TOBACCO LOAN ASSOCIATIONS.

8 (a) PRIOR LOANS.—The Secretary shall forgive each

9 loan made to an Association under section 106A or 106B

10 of the Agricultural Act of 1949 (7 U.S.C. 1445 1, 1445

11 2) that is outstanding on the date of enactment of this

12 Act.

13 (b) TRANSFER OF TITLE FOR LOAN INVENTORIES.—

14 The Secretary shall transfer to each Association described

15 in subsection (a) the title to all inventories of tobacco held

16 by the Secretary to secure loans made to the Association

17 under section 106A or 106B of the Agricultural Act of

18 1949 (7 U.S.C. 1445 1, 1445 2).

19 (c) NO NET COST TOBACCO FUNDS.—Notwithstand20 ing sections 106A(f) and 106B(g) of the Agricultural Act

21 of 1949 (7 U.S.C. 1445–1(f) and 1445–2(g)), all funds

22 held in a No Net Cost Tobacco Fund or No Net Cost To23 bacco Account on behalf of an Association under section

24 106A or 106B of that Act (7 U.S.C. 1445–1, 1445–2)
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1 on the date of enactment of this Act shall be the property

2 of the Association.

3 SEC. 204. TOBACCO COMMUNITY ECONOMIC DEVELOP4 MENT GRANTS.

5 (a) AUTHORITY.—The Corporation shall make grants

6 to eligible tobacco-growing political subdivisions in accord7 ance with this section to enable the political subdivisions

8 to carry out economic development activities.

9 (b) ELIGIBILITY.—To be eligible to receive payments

10 under this section, a political subdivisions in a State

11 shall—

12 (1) have in excess of $100,000 in gross income

13 from sales of tobacco produced within the political

14 subdivision during 1 or more of the 1995 through

15 1997 marketing years, as determined by the Cor16 poration;

17 (2) prepare and submit to the Corporation an

18 application at such time, in such manner, and con19 taining such information as the Corporation may re20 quire, including—

21 (A) a description of the activities that the

22 political subdivision will carry out using

23 amounts received under the grant;
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1 (B) a designation of an appropriate politi2 cal subdivision agency to administer amounts

3 received under the grant;

4 (C) a description of the steps to be taken

5 to ensure that the funds are distributed in ac6 cordance with subsection (e); and

7 (D) an economic development plan, ap8 proved by a regional authority authorized to co9 ordinate economic development efforts in the re10 gion where the political subdivision is located,

11 or approved by the State if no such regional au12 thority exists, that describes the activities that

13 the political subdivision will carry out using

14 amounts received under the grant. Where a po15 litical subdivision ineligible to receive payments

16 under subsection (b)(1) is surrounded within

17 the State by a political subdivision eligible to

18 receive payments under subsection (b)(1), an

19 economic development plan shall not be ap20 proved unless submitted jointly by both jurisdic21 tions.

22 (c) AMOUNT OF GRANT.—

23 (1) IN GENERAL.—From the amounts available

24 to carry out this section for a fiscal year, the Cor25 poration shall allot to each eligible tobacco-growing
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1 political subdivision an amount that bears the same

2 ratio to the total funds available as the total income

3 of the tobacco-growing political subdivision derived

4 from the production of tobacco within the political

5 subdivision during the 1995 and through 1997 mar6 keting years (as determined under paragraph (2))

7 bears to the total income of all tobacco-growing po8 litical subdivisions derived from the production of to9 bacco during the 1995 through 1997 marketing

10 years.

11 (2) TOBACCO INCOME.—For the 1995 through

12 1997 marketing years, the Secretary shall determine

13 and provide to the Corporation the amount of in14 come derived from the production of tobacco in each

15 tobacco-growing political subdivision and in all to16 bacco-growing political subdivisions.

17 (d) PAYMENTS.—

18 (1) IN GENERAL.—A tobacco-growing political

19 subdivision that has an application approved by the

20 Corporation under subsection (b) shall be entitled to

21 a payment under this section in an amount that is

22 equal to its allotment under subsection (c).

23 (2) FORM OF PAYMENTS.—The Corporation

24 may make payments under this section to a tobacco25 growing political subdivision in installments, and in
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1 advance or by way of reimbursement, with necessary

2 adjustments on account of overpayments or under3 payments, as the Corporation may determine.

4 (3) REALLOTMENTS.—Any portion of the allot5 ment of a political subdivision under subsection (c)

6 that the Corporation determines will not be used to

7 carry out this section in accordance with an ap8 proved political subdivision application required

9 under subsection (b), shall be reallotted by the Cor10 poration to other tobacco-growing political subdivi11 sions in proportion to the original allotments to the

12 other tobacco-growing political subdivisions.

13 (3) USE AND DISTRIBUTION OF FUNDS.—

14 (1) IN GENERAL.—Amounts received by a to15 bacco-growing political subdivision under this section

16 shall be used to carry out economic development ac17 tivities, including—

18 (A) activities designed to help create pro19 ductive farm or off-farm employment in rural

20 areas to provide a more viable economic base

21 and enhance opportunities for improved in22 comes, living standards, and contributions by

23 rural individuals to the economic and social de24 velopment of tobacco communities;
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1 (B) activities designed to provide training

2 and transition assistance to quota holders and

3 active tobacco producers to enable the holders

4 and producers to produce alternative agricul5 tural commodities or obtain alternative employ6 ment;

7 (C) activities to improve the quality of edu8 cation in tobacco communities;

9 (D) activities to promote tourism in to10 bacco communities through natural resource

11 protection;

12 (E) activities to construct advanced manu13 facturing centers, industrial parks, water and

14 sewer facilities, and transportation improve15 ments in tobacco communities;

16 (F) activities to establish small business

17 incubators in tobacco communities;

18 (G) activities to install high technology in19 frastructure improvements in tobacco commu20 nities;

21 (H) rural business enterprise activities de22 scribed in subsections (c) and (e) of section

23 310B of the Consolidated Farm and Rural De24 velopment Act (7 U.S.C 1932);
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1 (I) downpayment loan assistance programs

2 that are similar to the program described in

3 section 310E of the Consolidated Farm and

4 Rural Development Act (7 U.S.C 1935);

5 (J) activities that expand existing infra6 structure, facilities, and services to capitalize on

7 opportunities to diversify economies in tobacco

8 communities and that support the development

9 of new industries or commercial ventures;

10 (K) activities by agricultural organizations

11 that provide assistance directly to quota holders

12 and active tobacco producers to assist in devel13 oping other agricultural activities that supple14 ment tobacco-producing activities;

15 (L) initiatives designed to create or expand

16 locally owned value-added processing and mar17 keting operations in tobacco communities; and

18 (M) technical assistance activities by per19 sons to support farmer-owned enterprises, or

20 agriculture-based rural development enterprises,

21 of the type described in section 252 or 253 of

22 the Trade Act of 1974 (19 U.S.C 2342, 2343).

23 (2) MAINTENANCE OF EFFORT.—The political

24 subdivision and the State shall provide assurances to

25 the Corporation that funds provided to the political
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1 subdivision under this section will be used only to

2 supplement, not to supplant, the amount of Federal,

3 State, and local funds otherwise expended for eco4 nomic development activities in the political subdivi5 sion.

6 SEC. 205. TAX TREATMENT OF TOBACCO QUOTA HOLDER

7 COMPENSATION AND TRANSITION PAY8 MENTS.

9 (a) IN GENERAL.—Part II of subchapter B of chap10 ter 1 of the Internal Revenue Code of 1986 (relating to

11 items specifically included in gross income) is amended by

12 adding at the end the following:

13 ‘‘SEC. 91. CERTAIN TOBACCO PROGRAM PAYMENTS.

14 ‘‘(a) GENERAL RULE.—Gross income includes

15 amounts received under section 201 or 202 of the Tobacco

16 Market Transition Act.

17 ‘‘(b) EXCEPTION FOR AMOUNTS TRANSFERRED

18 DURING REINVESTMENT PERIOD.—

19 ‘‘(1) IN GENERAL.—Subsection (a) shall not

20 apply to any amount if during reinvestment period

21 such amount is—

22 ‘‘(A) used to make a qualified debt repay23 ment, or
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1 ‘‘(B) transferred to a tobacco farmer indi2 vidual retirement account established under sec3 tion 522.

4 ‘‘(2) QUALIFIED DEBT REPAYMENT.—For pur5 poses of paragraph (1), the term ‘qualified debt re6 payment’ means the payment of debt incurred di7 rectly by the taxpayer to produce tobacco prior to

8 January 1, 1998.

9 ‘‘(c) CHARACTER OF INCOME.—For purposes of this

10 subtitle—

11 ‘‘(1) any amount received under section 201 of

12 the Tobacco Market Assistance Act and included in

13 gross income under this section shall be treated as

14 long-term capital gain, and

15 ‘‘(2) any amount received under section 202 of

16 such Act and so included in gross income shall be

17 treated as ordinary income.’’.

18 (b) TOBACCO FARMER INDIVIDUAL RETIREMENT AC19 COUNTS.—Part IV of subchapter F of chapter 1 of the

20 Internal Revenue Code of 1986 (relating to farmers’ co21 operatives) is amended by adding at the end the following:

22 ‘‘SEC. 522. TOBACCO FARMER INDIVIDUAL RETIREMENT

23 ACCOUNTS.

24 ‘‘(a) GENERAL RULE.—Except as provided in this

25 section, a tobacco farmer individual retirement account
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1 shall be treated for purposes of this title in the same man2 ner as an individual retirement plan.

3 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur4 poses of this title—

5 ‘‘(1) TOBACCO FARMER INDIVIDUAL RETIRE6 MENT ACCOUNT.—The term ‘tobacco farmer individ7 ual retirement account’ means an individual retire8 ment plan (as defined in section 7701(a)(37)) other

9 than a Roth IRA which is designated (in such man10 ner as the Corporation may prescribe) at the time

11 of establishment of the plan as a tobacco farmer in12 dividual retirement account.

13 ‘‘(2) TREATMENT OF CONTRIBUTIONS.—

14 ‘‘(A) CASH ONLY.—No contribution will be

15 accepted unless it is in cash.

16 ‘‘(B) SOURCE OF CONTRIBUTIONS.—The

17 only contributions which will be accepted are—

18 ‘‘(i) payments under section 201 or

19 202 of the Tobacco Market Transition Act,

20 and

21 ‘‘(ii) trustee-to-trustee transfers to

22 such trust from another tobacco farmer in23 dividual retirement account of the account

24 beneficiary.
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1 ‘‘(C) NO DEDUCTION ALLOWED.—No de2 duction shall be allowed under section 219 for

3 a contribution to a tobacco farmer individual

4 retirement account.

5 ‘‘(D) NO ROLLOVER CONTRIBUTIONS AL6 LOWED.—No rollover contribution may be made

7 to or from a tobacco farmer individual retire8 ment account.

9 ‘‘(3) TAX TREATMENT OF DISTRIBUTIONS.—

10 Any amount distributed from a tobacco farmer indi11 vidual retirement account attributable to payments

12 made under section 201 or 202 of the Tobacco Mar13 ket Transition Act (including earnings thereon) shall

14 be includible in the gross income of the distributee

15 under the rules described in section 91(c). Any such

16 distribution shall be made first from amounts in

17 such account (if any) attributable to payments under

18 such section 202 (and earnings thereon).

19 ‘‘(4) COORDINATION WITH INDIVIDUAL RETIRE20 MENT ACCOUNTS.—Section 408(d)(2) shall be ap21 plied separately with respect to tobacco farmer indi22 vidual retirement accounts and other individual re23 tirement plans.’’.

24 (c) CONFORMING AMENDMENTS.—
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1 (1) The table of sections for part II of sub2 chapter B of chapter 1 of the Internal Revenue Code

3 of 1986 is amended by adding at the end the follow4 ing:

‘‘Sec. 91. Certain tobacco program payments.’’.

5 (2) The table of sections for part IV of sub6 chapter F of chapter 1 of such Code is amended by

7 adding at the end the following:

‘‘Sec. 522. Tobacco farmer individual retirement accounts.’’.

8 (3) The heading for part IV of subchapter F of

9 chapter 1 of such code is amended by striking

10 ‘‘FARMERS’ COOPERATIVES’’ and inserting

11 ‘‘CERTAIN FARMER ENTITIES’’.

12 (4) The table of parts for subchapter F of

13 chapter 1 of such Code is amended by striking

14 ‘‘FARMERS’ COOPERATIVES’’ and inserting ‘‘CERTAIN

15 FARMER ENTITIES’’.

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

17 this section shall apply to taxable years beginning after

18 December 31, 1997.
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1 TITLE III—ESTABLISHMENT OF

2 PRIVATE TOBACCO PRODUC3 TION ADJUSTMENT AND

4 QUALITY ASSURANCE PRO5 GRAM

6 SEC. 301. TOBACCO PRODUCTION CONTROL CORPORATION.

7 (a) ESTABLISHMENT.—There is established a cor8 poration to be known as the ‘‘Tobacco Production Control

9 Corporation’’, which shall be a federally chartered instru10 mentality of the United States.

11 (b) DUTIES.—Effective for the 1999 and each subse12 quent crop of each kind of tobacco, on at least a two-thirds

13 vote of the Board of Directors of the Corporation, the Cor14 poration shall—

15 (1) promulgate rules that govern the produc16 tion, marketing, importation, exportation, and con17 sumer quality assurances for each kind of tobacco;

18 (2) establish a licensing system that provides

19 for the orderly production and marketing of tobacco

20 in the United States under which—

21 (A) the Corporation shall issue a license to

22 each active tobacco producer, or other person

23 that meets requirements established by the Cor24 poration, initially based upon the eligible pro-
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1 duction quantity determined for each producer

2 under section 202(c)(1);

3 (B) the licensee shall surrender the license

4 to the Corporation if the licensee fails to ac5 tively engage in the production of tobacco;

6 (C) the sale or marketing of a type of to7 bacco which prior to the date of enactment was

8 produced pursuant to a tobacco farm marketing

9 quota or farm acreage allotment issued under

10 the Agricultural Act of 1938 is prohibited with11 out a license;

12 (D) the sale, lease, or other transfer of a

13 license shall be prohibited except pursuant to

14 subsection (c); and

15 (E) the Corporation shall issue marketing

16 licenses to tobacco marketing facilities and to17 bacco purchasing entities;

18 (3) ensure compliance, through whatever means

19 is available, of all persons with any license, regula20 tion, rule, limitation, or guideline issued under, or in

21 order to carry out, this Act;

22 (4) offer crop insurance for tobacco producers;

23 (5) establish a system that will provide assur24 ance to consumers of the quality of all tobacco mar-
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1 keted in the United States and that, at a mini2 mum—

3 (A) provides for the inspection and grading

4 of domestically produced tobacco and imported

5 tobacco;

6 (B) determines and describes the physical

7 characteristics of domestically produced tobacco

8 and imported tobacco;

9 (C) ensures the physical and chemical in10 tegrity of domestically produced tobacco and

11 imported tobacco;

12 (6) carry out its duties, functions, and deter13 minations through loan associations and local com14 mittees, to the extent practicable and appropriate;

15 and

16 (7) continue to maintain and carry out a to17 bacco program in accordance with the rules and reg18 ulations contained in chapter 7 of the Code of Fed19 eral Regulations unless and until rules are promul20 gated under subsection (c).

21 (c) TRANSFER OF LICENSE.—

22 (1) RIGHT OF SURVIVORSHIP.—

23 (A) IN GENERAL.—In the case of the

24 death of a person to whom a license has been

25 issued under this section, the license shall
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1 transfer to the surviving spouse of the person

2 or, if there is no surviving spouse, to surviving

3 direct descendants of the persons.

4 (B) HARDSHIP.—In the case of the death

5 of a person to whom a license has been issued

6 under this section and whose descendants are

7 temporarily unable to produce a crop of to8 bacco, the Corporation may hold the license in

9 the name of the descendants for a period of not

10 more than 18 months, at the discretion of the

11 Corporation.

12 (2) LIFETIME TRANSFER.—A person that is eli13 gible to obtain a license under this section may at

14 any time transfer all or part of the license to the

15 person’s spouse or direct descendants that are ac16 tively engaged in the production of tobacco.

17 (d) BOARD OF DIRECTORS.—

18 (1) IN GENERAL.—The powers of the Corpora19 tion shall be vested in a Board of Directors.

20 (2) MEMBERS.—The Board of Directors shall

21 consist of 25 members as follows:

22 (A) The Secretary of Agriculture.

23 (B) The Secretary of Health and Human

24 Services.
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1 (C) The Administrator of the Environ2 mental Protection Agency.

3 (D) The United States Trade Representa4 tive.

5 (E) 1 member from each state that pro6 duces more than 50,000,000 pounds of tobacco.

7 All members appointed under this subpara8 graph shall be actively engaged in the produc9 tion of tobacco and shall be elected by the to10 bacco producers from each respective state.

11 (F) 3 members appointed by the flue-cured

12 tobacco association and 2 members appointed

13 by the burley tobacco associations, all such

14 members to be licensees under this Act.

15 (G) 1 member appointed by tobacco asso16 ciations other than those specified in subpara17 graph (F), on a rotating basis.

18 (H) 3 members representing public health

19 interests, appointed by the Secretary of Health

20 and Human Services.

21 (I) 1 member representing domestic ciga22 rette manufacturers.

23 (J) 1 member representing domestic export

24 leaf dealers, appointed by the Leaf Tobacco Ex25 porters Association (LTEA).
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1 (K) 2 members representing tobacco mar2 keting facilities, 1 each appointed by the Bright

3 Belt Warehouse Association (BBWA) and the

4 Burley Auction Warehouse Association

5 (BAWA).

6 (L) 1 member that is the person respon7 sible for operating the quality assurance system

8 of the Corporation described in subsection

9 (b)(4).

10 (M) 1 member who is a Dean of Agri11 culture of a Land Grant University from a to12 bacco producing state.

13 (3) MEMBERSHIP QUALIFICATIONS.—A member

14 of the Board shall not hold any Federal, State, or

15 local elected office.

16 (4) CHAIRPERSONS.—The Secretary of Agri17 culture shall serve as chairperson of the Board.

18 (5) EXECUTIVE DIRECTOR.—

19 (A) APPOINTMENT.—The Board shall ap20 point an Executive Director.

21 (B) DUTIES.—The Executive Director

22 shall be the chief executive officer of the Cor23 poration, with such power and authority as may

24 be conferred by the Board.
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1 (C) COMPENSATION.—The Executive Di2 rector shall receive basic pay at the rate pro3 vided for level IV of the Executive Schedule

4 under section 5315 of title 5, United States

5 Code.

6 (6) OFFICERS.—The Board shall establish the

7 offices and appoint the officers of the Corporation,

8 including a Secretary, and define the duties of the

9 officers in a manner consistent with this section.

10 (7) MEETINGS.—

11 (A) IN GENERAL.—The Board shall meet

12 at least 3 times each fiscal year at the call of

13 a Chairperson or at the request of the Execu14 tive Director.

15 (B) LOCATION.—The location of a meeting

16 shall be subject to approval of the Executive Di17 rector.

18 (C) QUORUM.—A quorum of the Board

19 shall consist of a majority of the members.

20 (8) TERM; VACANCIES.—

21 (A) TERM.—The term of office of a mem22 ber of the Board appointed under any of sub23 paragraphs (E) through (K) of paragraph (2)

24 shall be 4 years.
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1 (B) VACANCIES.—A vacancy on the Board

2 shall be filled in the same manner as the origi3 nal appointment was made.

4 (9) COMPENSATION.—

5 (A) FEDERAL MEMBERS.—A member of

6 the Board who is an officer or employee of the

7 United States shall not receive any additional

8 compensation by reason of service on the

9 Board.

10 (B) NON-FEDERAL MEMBERS.—Any other

11 member shall receive compensation, for each

12 day (including travel time) that the member is

13 engaged in the performance of the functions of

14 the Board, at a rate determined appropriate by

15 the Board.

16 (C) EXPENSES.—A member of the Board

17 shall be reimbursed for travel, subsistence, and

18 other necessary expenses incurred by the mem19 ber in the performance of the duties of the

20 member.

21 (10) CONFLICT OF INTEREST; FINANCIAL DIS22 CLOSURE.—

23 (A) CONFLICT OF INTEREST.—Except as

24 provided in subparagraph (C), a member of the

25 Board shall not vote on any matter concerning
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1 any application, contract, or claim, or other

2 particular matter pending before the Corpora3 tion, in which, to the knowledge of the member,

4 the member, spouse, or child of the member,

5 partner of the member, or organization in

6 which the member is serving as officer, director,

7 trustee, partner, or employee, or any person or

8 organization with which the member is nego9 tiating or has any arrangement concerning pro10 spective employment, has a financial interest.

11 (B) VIOLATIONS.—Violation of subpara12 graph (A) by a member of the Board shall be

13 cause for removal of the member, but shall not

14 impair or otherwise affect the validity of any

15 otherwise lawful action by the Corporation in

16 which the member participated.

17 (C) EXCEPTIONS.—The prohibitions con18 tained in subparagraph (A) shall not apply to

19 a member of the Board that is a tobacco pro20 ducer if the member advises the Board of the

21 nature of the particular matter in which the

22 member proposes to participate, and if the

23 member makes a full disclosure of the financial

24 interest, prior to any participation.
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1 (D) FINANCIAL DISCLOSURE.—A Board

2 member shall be subject to the financial disclo3 sure requirements of subchapter B of chapter

4 XVI of title 5, Code of Federal Regulations (or

5 any corresponding or similar regulation or rul6 ing), applicable to a special Government em7 ployee (as defined in section 202(a) of title 18,

8 United States Code).

9 (E) REPRESENTATION.—No member of

10 the Board shall receive compensation from more

11 than one interest represented on the Board.

12 (11) BYLAWS.—The Board shall adopt, and

13 may from time to time amend, any bylaw that is

14 necessary for the proper management and function15 ing of the Corporation.

16 (12) PERSONNEL.—The Corporation may select

17 and appoint officers, attorneys, employees, and

18 agents, who shall be vested with such powers and

19 duties as the Corporation may determine.

20 (e) GENERAL POWERS.—In addition to any other

21 powers granted to the Corporation under this title, the

22 Corporation—

23 (1) shall have succession in its corporate name;
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1 (2) may adopt, alter, and rescind any bylaw and

2 adopt and alter a corporate seal, which shall be judi3 cially noticed;

4 (3) may enter into any agreement or contract

5 with a person or private or governmental agency;

6 (4) may lease, purchase, accept a gift or dona7 tion of, or otherwise acquire, use, own, hold, im8 prove, or otherwise deal in or with, and sell, convey,

9 mortgage, pledge, lease, exchange, or otherwise dis10 pose of, any property or interest in property, as the

11 Corporation considers necessary in the transaction

12 of the business of the Corporation;

13 (5) may sue and be sued in the corporate name

14 of the Corporation, except that—

15 (A) no attachment, injunction, garnish16 ment, or similar process shall be issued against

17 the Corporation or property of the Corporation;

18 and

19 (B) exclusive original jurisdiction shall re20 side in the district courts of the United States,

21 and the Corporation may intervene in any court

22 in any suite, action, or proceeding in which the

23 Corporation has an interest;

24 (6) may independently retain legal representa25 tion;
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1 (7) may provide for and designate such commit2 tees, and the functions of the committees, as the

3 Board considers necessary or desirable;

4 (8) may indemnify officers of the Corporation,

5 as the Board considers necessary and desirable, ex6 cept that the officers shall not be indemnified for an

7 act outside the scope of employment;

8 (9) may, with the consent of any board, com9 mission, independent establishment, or executive de10 partment of the Federal Government, including any

11 field service, use information, services, facilities, offi12 cials, and employees in carrying out this section, and

13 pay for the use, which payments shall be transferred

14 to the applicable appropriation account that incurred

15 the expense;

16 (10) may obtain the services and fix the com17 pensation of any consultant and otherwise procure

18 temporary and intermittent services under section

19 3109(b) of title 5, United States Code;

20 (11) shall have the rights, privileges, and immu21 nities of the United States with respect to the right

22 to priority of payment with respect to debts due

23 from bankrupt, insolvent, or deceased creditors;

24 (12) may collect or compromise any obligations

25 assigned to or held by the Corporation, including
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1 any legal or equitable rights accruing to the Cor2 poration;

3 (13) shall determine the character of, and ne4 cessity for, obligations and expenditures of the Cor5 poration and the manner in which the obligations

6 and expenditures shall be incurred, allowed, and

7 paid, subject to provisions of law specifically applica8 ble to Government corporations;

9 (14) may make final and conclusive settlement

10 and adjustment of any claim by or against the Cor11 poration or a fiscal officer of the Corporation;

12 (15) may sell assets, loans, and equity interests

13 acquired in connection with the financing of projects

14 funded by the Corporation; and

15 (16) may exercise all other lawful powers nec16 essarily or reasonably related to the establishment of

17 the Corporation to carry out this title and the pow18 ers, purposes, functions, duties, and authorized ac19 tivities of the Corporation.

20 SEC. 302. TOBACCO LOAN ASSOCIATIONS.

21 The Corporation shall enter into an agreement with

22 producer-owned cooperative marketing loan associations

23 for each kind of tobacco to—

24 (1) make price support available to producers of

25 the kind of tobacco;
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1 (2) carry out the licensing system established

2 under subsection (b)(2);

3 (3) arrange for financing and the administra4 tion of price supports for the kind of tobacco; and

5 (4) receive, process, store, and sell any domesti6 cally produced tobacco received as collateral for a

7 price support loan.

8 SEC. 303. TOBACCO PRICE SUPPORT LEVELS.

9 (a) INITIAL LEVEL.—Effective for the 1999 crop of

10 each kind of tobacco, the support level in cents per pound

11 established under this title shall be equal to—

12 (1) the simple average price received by produc13 ers of the kind of tobacco, as determined by the Cor14 poration, during the marketing years for the imme15 diately preceding 5 crops of the kind of tobacco; less

16 (2) the average return to quota for 1994

17 through 1998 crops of the kind of tobacco, as deter18 mined by the Corporation.

19 (b) SUBSEQUENT ADJUSTMENT.—The Corporation,

20 in consultation with the Associations, shall adjust and es21 tablish the support level for each kind of tobacco at an

22 appropriate level for each year after 1999.

23 SEC. 304. PENALTIES.

24 (a) IN GENERAL.—The violation of any provision of

25 this Act, or any rule or regulation issued to carry out this
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1 Act, or the terms of any license issued under this Act,

2 by a person (including the marketing of any kind of to3 bacco without a license issued under this title or in excess

4 of the quantity permitted under such a license) shall sub5 ject the person to revocation or suspension of the person’s

6 license, a penalty of 75 percent of the average market

7 price (calculated to the nearest whole cent) for the kind

8 of tobacco for the immediately preceding marketing year,

9 or both, in the discretion of the Secretary.

10 (b) PAYOR.—

11 (1) IN GENERAL.—Except as otherwise pro12 vided in this subsection, the penalty shall be paid by

13 the person who acquired the tobacco from the pro14 ducer.

15 (2) DEDUCTION FROM PRICE.—An amount

16 equivalent to the penalty may be deducted by the

17 buyer from the price paid to the producer in any

18 case in which the tobacco is marketed by sale.

19 (3) WAREHOUSEMAN OR AGENT.—If the to20 bacco is marketed by the producer through a ware21 houseman or other agent, the penalty shall be paid

22 by the warehouseman or agent who may deduct an

23 amount equivalent to the penalty from the price paid

24 to the producer.
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1 (4) DIRECT MARKETING OUTSIDE UNITED

2 STATES.—In any case in which tobacco is marketed

3 directly to any person outside the United States, the

4 penalty shall be paid and remitted by the producer.

5 (c) FALSE STATEMENT OR OMISSION.—If any pro6 ducer falsely identifies or fails to account for the disposi7 tion of any tobacco—

8 (1) an amount of tobacco equal to the normal

9 yield of the number of acres harvested in excess of

10 the quantity permitted under a license issued under

11 this title shall be considered to have been marketed

12 in excess of the license for the farm; and

13 (2) the penalty for the excess marketing shall

14 be paid and remitted by the producer.

15 (d) CARRYOVER.—Tobacco carried over by the pro16 ducer of the tobacco from 1 marketing year to another

17 marketing year may be marketed without payment of the

18 penalty imposed by this section if—

19 (1) the total quantity of tobacco available for

20 marketing from the farm in the marketing year from

21 which the tobacco is carried over does not exceed the

22 quantity that may be marketed under a license

23 issued for the farm for the marketing year; or

24 (2) the quantity of tobacco carried over does

25 not exceed the normal production of that number of
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1 acres by which the harvested acreage of tobacco in

2 the calendar year in which the marketing year be3 gins is less than the quantity that may be marketed

4 under the license.

5 (e) TOBACCO MARKETED PRIOR TO MARKETING

6 YEAR.—Tobacco produced in a calendar year for the mar7 keting year beginning during the calendar year shall be

8 subject to licenses issued for the marketing year even

9 though the tobacco is marketed prior to the date on which

10 the marketing year begins.

11 (f) PROPORTIONAL PAYMENTS.—The Secretary shall

12 require collection of the penalty on a proportion of each

13 lot of tobacco marketed from the farm equal to the propor14 tion that the tobacco available for marketing from the

15 farm in excess of the quantity that may be marketed under

16 a license is of the total quantity of tobacco available for

17 marketing from the farm if satisfactory proof is not fur18 nished as to the disposition to be made of the excess to19 bacco prior to the marketing of any tobacco from the farm.

20 (g) LIEN.—Until the amount of the penalty provided

21 by this section is paid, a lien on the tobacco with respect

22 to which the penalty is incurred, and on any subsequent

23 tobacco subject to licenses issued under this title in which

24 the person liable for payment of the penalty has an inter-
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1 est, shall be in effect in favor of the Corporation for the

2 amount of the penalty.

3 SEC. 305. PROGRAM REFERENDA.

4 (a) INITIAL REFERENDUM.—Not later than 3 years

5 after the date of enactment of this Act, the Corporation

6 shall conduct a referendum among licensees engaged in

7 the production of each kind of tobacco to determine wheth8 er such producers are in favor of continuing the operation

9 of the program established under this Act with respect to

10 that kind of tobacco. If more than one half of the licensees

11 voting oppose the continuation of the program, the Cor12 poration shall announce the result and shall conduct a sec13 ond referendum one year later. If more than one half of

14 the licensees voting in the second referendum also oppose

15 the continuation of the program, the Corporation shall an16 nounce the result and the program shall cease to be in

17 effect for that kind of tobacco.

18 (b) SUBSEQUENT REFERENDA.—The Corporation

19 may conduct subsequent referenda from time to time as

20 the Corporation deems appropriate to determine whether

21 producers are in favor of continuing the program estab22 lished under this Act, the use of marketing allotments and

23 quotas, limitations on transfer of quota, or any other as24 pect of the program.
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1 (c) EFFECTIVE DATE.—This section shall be effective

2 1 year after the date of enactment of this Act.

Æ