II

105TH CONGRESS

2D SESSION S. 1755

To amend the Internal Revenue Code of 1986 to disallow tax deductions

for advertising, promotional, and marketing expenses relating to tobacco

product use unless certain advertising requirements are met.

IN THE SENATE OF THE UNITED STATES

MARCH 13, 1998

Mr. REED (for himself, Mrs. BOXER, and Mr. CHAFEE) 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

tax deductions for advertising, promotional, and marketing expenses relating to tobacco product use unless certain advertising requirements are met.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Children’s Health

5 Preservation and Tobacco Advertising Compliance Act’’.
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1 SEC. 2. DISALLOWANCE OF TAX DEDUCTIONS FOR CERTAIN

2 ADVERTISING, PROMOTION, AND MARKETING

3 EXPENSES RELATING TO TOBACCO PRODUCT

4 USE.

5 (a) IN GENERAL.—Part IX of subchapter B of chap6 ter 1 of subtitle A of the Internal Revenue Code of 1986

7 (relating to items not deductible) is amended by adding

8 at the end the following:

9 ‘‘SEC. 280I. DISALLOWANCE OF DEDUCTION FOR CERTAIN

10 TOBACCO ADVERTISING, PROMOTION, AND

11 MARKETING EXPENSES.

12 ‘‘(a) IN GENERAL.—No deduction shall be allowed

13 under this chapter for any taxable year for any expendi14 ture relating to advertising, promoting, or marketing to15 bacco products if such advertising, promoting, or market16 ing, or such expenditure is prohibited under the following

17 subsections.

18 ‘‘(b) PROHIBITION OF CERTAIN ADVERTISING.—

19 ‘‘(1) PROHIBITION ON OUTDOOR ADVERTIS20 ING.—

21 ‘‘(A) IN GENERAL.—No manufacturer, dis22 tributor, or retailer may use any form of out23 door tobacco product advertising, including bill24 boards, posters, or placards.

25 ‘‘(B) STADIA AND ARENAS.—Except as

26 otherwise provided in this section, a manufac-
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1 turer, distributor, or retailer shall not advertise

2 tobacco products in any arena or stadium where

3 athletic, musical, artistic, or other social or cul4 tural events or activities occur.

5 ‘‘(2) PROHIBITION ON USE OF HUMAN IMAGES

6 AND CARTOONS.—No manufacturer, distributor, or

7 retailer may use a human image or a cartoon char8 acter or cartoon-type character in its advertising, la9 beling, or promotional material with respect to a to10 bacco product.

11 ‘‘(3) PROHIBITION ON ADVERTISING ON THE

12 INTERNET.—No manufacturer, distributor, or re13 tailer may use the Internet to advertise tobacco

14 products unless such an advertisement is inaccessible

15 in or from the United States.

16 ‘‘(4) PROHIBITION ON POINT OF SALE ADVER17 TISING.—

18 ‘‘(A) IN GENERAL.—Except as otherwise

19 provided in this paragraph, no manufacturer,

20 distributor, or retailer may use point of sale ad21 vertising of tobacco products.

22 ‘‘(B) ADULT ONLY STORES AND TOBACCO

23 OUTLETS.—Subparagraph (A) shall not apply

24 to point of sale advertising at adult only stores

25 and tobacco outlets.
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1 ‘‘(C) PERMISSIBLE ADVERTISING.—

2 ‘‘(i) IN GENERAL.—Each manufac3 turer of tobacco products may display not

4 more than 2 separate point of sale adver5 tisements in or at each location at which

6 tobacco products are offered for sale.

7 ‘‘(ii) RETAILERS.—No manufacturer,

8 distributor, or retailer may enter into any

9 arrangement with a retailer to limit the

10 ability of the retailer to display any form

11 of permissible point of sale advertisement

12 or promotional material originating with

13 another manufacturer, distributor, or re14 tailer.

15 ‘‘(D) LIMITATIONS.—

16 ‘‘(i) IN GENERAL.—A point of sale ad17 vertisement permitted under this para18 graph shall be comprised of a display area

19 that is not larger than 576 square inches

20 (either individually or in the aggregate)

21 and shall consist only of black letters on a

22 white background or other recognized typo23 graphical marks. Such advertisement shall

24 not be attached to nor located within 2 feet
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1 of any fixture on which candy is displayed

2 for sale.

3 ‘‘(ii) AUDIO AND VIDEO FORMATS.—

4 Audio and video advertisements otherwise

5 permitted under this section may be dis6 tributed to individuals who are 18 years of

7 age or older at point of sale but may not

8 be played or viewed at such point of sale.

9 ‘‘(iii) DISPLAY FIXTURES.—Display

10 fixtures in the form of signs consisting of

11 brand name and price and not larger than

12 2 inches in height are permitted.

13 ‘‘(c) ADDITIONAL RESTRICTIONS.—

14 ‘‘(1) RESTRICTION ON PRODUCT NAMES.—A

15 manufacturer shall not use a trade or brand name

16 of a nontobacco product as the trade or brand name

17 for a cigarette or smokeless tobacco product, except

18 for a tobacco product whose trade or brand name

19 was on both a tobacco product and a nontobacco

20 product that were sold in the United States on Jan21 uary 1, 1998.

22 ‘‘(2) ADVERTISING LIMIT ACTIONS.—

23 ‘‘(A) IN GENERAL.—A manufacturer, dis24 tributor, or retailer may in accordance with this

25 section, disseminate or cause to be disseminated
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1 advertising or labeling which bears a tobacco

2 product brand name (alone or on conjunction

3 with any other word) or any other indicia of to4 bacco product identification only in newspapers,

5 in magazines, in periodicals or other publica6 tions (whether periodic or limited distribution),

7 on billboards, posters and placards in accord8 ance with subsection (b)(1), in nonpoint of sale

9 promotional material (including direct mail), in

10 point-of-sale promotional material, and in audio

11 or video formats delivered at a point-of-sale.

12 ‘‘(B) LIMITATION.—A manufacturer, dis13 tributor, or retailer that intends to disseminate,

14 or to cause to be disseminated, advertising or

15 labeling for a tobacco product in a medium that

16 is not described in subparagraph (A) shall no17 tify the Secretary of Health and Human Serv18 ices not less than 30 days prior to the date on

19 which such medium is to be used. Such notice

20 shall describe the medium and discuss the ex21 tent to which the advertising or labeling may be

22 seen by individuals who are under 18 years of

23 age.

24 ‘‘(C) ACTION BY SECRETARY.—Not later

25 than 30 days after the date on which the Sec-
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1 retary receives a notice under subparagraph

2 (B), the Secretary shall make a determination

3 with respect to the action to be taken concern4 ing such notice.

5 ‘‘(3) RESTRICTION ON PLACEMENT IN ENTER6 TAINMENT MEDIA.—No payment shall be made by

7 any manufacturer, distributor, or retailer for the

8 placement of any tobacco product or tobacco product

9 package or advertisement—

10 ‘‘(A) as a prop in any television program

11 or motion picture produced for viewing by the

12 general public; or

13 ‘‘(B) in a video or on a video game ma14 chine.

15 ‘‘(4) RESTRICTIONS ON GLAMORIZATION OF TO16 BACCO PRODUCTS.—No direct or indirect payment

17 shall be made, or consideration given, by any manu18 facturer, distributor, or retailer to any entity for the

19 purpose of promoting the image or use of a tobacco

20 product through print, film or broadcast media that

21 appeals to individuals under 18 years of age or

22 through a live performance by an entertainment art23 ist that appeals to such individuals.

24 ‘‘(d) FORMAT AND CONTENT REQUIREMENTS FOR

25 LABELING AND ADVERTISING.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), each manufacturer, distributor,

3 or retailer advertising or causing to be advertised,

4 disseminating or causing to be disseminated, any la5 beling or advertising for a tobacco product shall use

6 only black text on a white background.

7 ‘‘(2) CERTAIN ADVERTISING EXCEPTED.—

8 ‘‘(A) IN GENERAL.—Paragraph (1) shall

9 not apply to advertising—

10 ‘‘(i) in any facility where vending ma11 chines and self-service displays are located

12 if the advertising involved—

13 ‘‘(I) is not visible from outside of

14 the facility; and

15 ‘‘(II) is affixed to a wall or fix16 ture in the facility;

17 ‘‘(ii) that appears in any publication

18 (whether periodic or limited distribution)

19 that is an adult publication.

20 ‘‘(B) ADULT PUBLICATION.—For purposes

21 of subparagraph (A)(ii), the term ‘adult publi22 cation’ means a newspaper, magazine, periodi23 cal, or other publication—

24 ‘‘(i) whose readers under 18 years of

25 age constitute 15 percent or less of the
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1 total readership as measured by competent

2 and reliable survey evidence; and

3 ‘‘(ii) that is read by fewer than

4 2,000,000 individuals who are under 18

5 years of age as measured by competent

6 and reliable survey evidence.

7 ‘‘(3) AUDIO OR VIDEO FORMATS.—Each manu8 facturer, distributor or retailer advertising or caus9 ing to be advertised any advertising for a tobacco

10 product in an audio or video format shall comply

11 with the following:

12 ‘‘(A) With respect to an audio format, the

13 advertising shall be limited to words only with

14 no music or sound effects.

15 ‘‘(B) With respect to a video format, the

16 advertising shall be limited to static black text

17 only on a white background. Any audio with the

18 video advertising shall be limited to words only

19 with no music or sound effects.

20 ‘‘(e) BAN ON NONTOBACCO ITEMS AND SERVICES,

21 CONTESTS AND GAMES OF CHANCE, AND SPONSORSHIP

22 OF EVENTS.—

23 ‘‘(1) BAN ON ALL NON-TOBACCO MERCHAN24 DISE.—No manufacturer, importer, distributor, or

25 retailer shall market, license, distribute, sell or cause
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1 to be marketed, licensed, distributed or sold any

2 item (other than tobacco products) or service, which

3 bears the brand name (alone or in conjunction with

4 any other word), logo, symbol, motto, selling mes5 sage, recognizable color or pattern of colors, or any

6 other indicia of product identification similar or

7 identifiable to those used for any brand of tobacco

8 products.

9 ‘‘(2) GIFTS, CONTESTS, AND LOTTERIES.—No

10 manufacturer, distributor, or retailer shall offer or

11 cause to be offered to any person purchasing tobacco

12 products any gift or item (other than a tobacco

13 product) in consideration of the purchase of such

14 products, or to any person in consideration of fur15 nishing evidence, such as credits, proofs-of-purchase,

16 or coupons, of such a purchase.

17 ‘‘(3) SPONSORSHIP.—

18 ‘‘(A) IN GENERAL.—No manufacturer, dis19 tributor, or retailer shall sponsor or cause to be

20 sponsored any athletic, musical, artistic or

21 other social or cultural event, or any entry or

22 team in any event, in which the brand name

23 (alone or in conjunction with any other word),

24 logo, motto, selling message, recognizable color

25 or pattern of colors, or any other indicia of
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1 product identification similar or identical to

2 those used for tobacco products is used.

3 ‘‘(B) USE OF CORPORATE NAME.—A man4 ufacturer, distributor, or retailer may sponsor

5 or cause to be sponsored any athletic, musical,

6 artistic, or other social or cultural event in the

7 name of the corporation which manufactures

8 the tobacco product if—

9 ‘‘(i) both the corporate name and the

10 corporation were registered and in use in

11 the United States prior to January 1,

12 1995; and

13 ‘‘(ii) the corporate name does not in14 clude any brand name (alone or in con15 junction with any other word), logo, sym16 bol, motto, selling message, recognizable

17 color or pattern of colors, or any other in18 dicia or product identification identical or

19 similar to, or identifiable with, those used

20 for any brand of tobacco products.

21 ‘‘(f) DEFINITIONS.—For purposes of this section—

22 ‘‘(1) IN GENERAL.—Any term used in this sec23 tion which is also used in section 5702 shall have

24 the same meaning given such term by section 5702.
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1 ‘‘(2) BRAND.—The term ‘brand’ means a vari2 ety of a tobacco product distinguished by the tobacco

3 used, tar content, nicotine content, flavoring used,

4 size, filtration, or packaging.

5 ‘‘(3) DISTRIBUTOR.—The term ‘distributor’

6 means any person who furthers the distribution of

7 tobacco products, whether domestic or imported, at

8 any point from the original place of manufacture to

9 the person who sells or distributes the product to in10 dividuals for personal consumption. Such term shall

11 not include common carriers.

12 ‘‘(4) PACKAGE.—The term ‘package’ means a

13 pack, box, carton, or container of any kind in which

14 tobacco products are offered for sale, sold, or other15 wise distributed to consumers.

16 ‘‘(5) POINT OF SALE.—The term ‘point of sale’

17 means any location at which an individual can pur18 chase or otherwise obtain tobacco products for per19 sonal consumption.

20 ‘‘(6) POINT OF SALE ADVERTISING.—The term

21 ‘point of sale advertising’ means all printed or

22 graphical materials bearing the brand name (alone

23 or in conjunction with any other word), logo, motto,

24 selling message, recognizable color or pattern of col25 ors, or any other indicia of product identification
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1 similar or identical to those used for tobacco prod2 ucts, which, when used for its intended purpose, can

3 reasonably be anticipated to be seen by customers at

4 a location at which tobacco products are offered for

5 sale.

6 ‘‘(7) RETAILER.—The term ‘retailer’ means any

7 person who sells tobacco products to individuals for

8 personal consumption, or who operates a facility

9 where vending machines or self-service displays are

10 located.

11 ‘‘(8) VIDEO.—The term ‘video’ means an audio12 visual work produced for viewing by the general pub13 lic, such as a television program, a motion picture,

14 a music video, and the audiovisual display of a video

15 game.

16 ‘‘(9) VIDEO GAME.—The term ‘video game’

17 means any electronic amusement device that utilizes

18 a computer, microprocessor, or similar electronic cir19 cuitry and its own cathode ray tube, or is designed

20 to be used with a television set or a monitor, that

21 interacts with the user of the device.’’.

22 (b) CONFORMING AMENDMENT.—The table of sec23 tions for such part IX is amended by adding after the

24 item relating to section 280H the following:

‘‘Sec. 280I. Disallowance of deduction for certain tobacco advertising, promotion, and marketing expenses.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1998.

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