II 

108TH CONGRESS 

2D SESSION S. 2558 

To improve the health of Americans and reduce health care costs by reorienting the Nation’s health care system towards prevention, wellness, 

and self care. 

IN THE SENATE OF THE UNITED STATES 

JUNE 22, 2004 

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

to the Committee on Finance 

A BILL 

To improve the health of Americans and reduce health care 

costs by reorienting the Nation’s health care system towards prevention, wellness, and self care. 

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 ‘‘Healthy Lifestyles and Prevention America Act’’ or the 

6 ‘‘HeLP America Act’’. 

7 (b) TABLE OF CONTENTS.—The table of contents of 

8 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 
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TITLE I—HEALTHIER KIDS AND SCHOOLS 

Sec. 101. Fruit and vegetable program.

Sec. 102. School wellness policy; competitive foods. 

Sec. 103. Healthy school nutrition environment incentive grants.

Sec. 104. Grants for the integration of schools and mental health systems.

TITLE II—HEALTHIER COMMUNITIES AND WORKPLACES 

Subtitle A—Incentives for a Healthy Workforce 

Sec. 201. Short title. 

Sec. 202. Tax credit to employers for costs of implementing wellness programs. 

Sec. 203. Income exclusion for employer-provided off-premises health club services. 

Sec. 204. CDC and employer-based wellness programs. 

Subtitle B—Healthy Communities 

Sec. 211. Healthy community grants. 

Sec. 212. Living well with a disability and working well with a disability programs. 

Sec. 213. Enhanced standards for roads and intersection controls.

Sec. 214. Mental health surveillance.

Subtitle C—Family Smoking Prevention and Control 

Sec. 221. Short title. 

Sec. 222. Findings. 

Sec. 223. Purpose. 

Sec. 224. Scope and effect. 

Sec. 225. Severability. 

CHAPTER 1—AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

Sec. 231. Amendment of Federal Food, Drug, and Cosmetic Act. 

Sec. 232. Interim final rule. 

Sec. 233. Conforming and other amendments to general provisions. 

CHAPTER 2—TOBACCO PRODUCT WARNINGS; CONSTITUENT AND SMOKE

CONSTITUENT DISCLOSURE

Sec. 241. Cigarette label and advertising warnings. 

Sec. 242. Authority to revise cigarette warning label Statements. 

Sec. 243. State regulation of cigarette advertising and promotion. 

Sec. 244. Smokeless tobacco labels and advertising warnings. 

Sec. 245. Authority to revise smokeless tobacco product warning label Statements. 

Sec. 246. Tar, nicotine, and other smoke constituent disclosure to the public. 

CHAPTER 3—PREVENTION OF ILLICIT TRADE IN TOBACCO PRODUCTS

Sec. 251. Labeling, recordkeeping, records inspection. 

Sec. 252. Study and report. 

TITLE III—RESPONSIBLE MARKETING AND CONSUMER 

AWARENESS 

Subtitle A—General Provisions 
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Sec. 301. Nutrition labeling of restaurant foods.

Sec. 302. Rulemaking authority for advertising to children.

Sec. 303. Food advertising in schools.

Sec. 304. Disallowance of deductions for advertising and marketing expenses 

relating to tobacco product use. 

Sec. 305. Federal-State tobacco counter-advertising programs. 

Subtitle B—Penalties for Failure to Reduce Teen Smoking 

Sec. 311. Child cigarette use surveys. 

Sec. 312. Cigarette use reduction goal and noncompliance. 

Sec. 313. Enforcement. 

TITLE IV—REIMBURSEMENT AND COVERAGE OF PREVENTIVE 

SERVICES 

Sec. 401. Coverage of substance use (other than tobacco), diet, exercise, injury 

prevention, and dental health counseling. 

Sec. 402. Preventive mental health screenings. 

Sec. 403. Encouragement of cessation of tobacco use. 

Sec. 404. Preventive health services for women.

TITLE V—HELP (HEALTHY LIFESTYLES AND PREVENTION) 

AMERICA TRUST FUND 

Sec. 501. HELP (healthy lifestyles and prevention) America Trust Fund. 

TITLE VI—RESEARCH 

Sec. 601. Expansion of research regarding obesity.

TITLE VII—PROVISIONS DESIGNED TO CURTAIL TAX SHELTERS 

Sec. 700. Amendment of 1986 Code. 

Sec. 701. Clarification of economic substance doctrine. 

Sec. 702. Penalty for failing to disclose reportable transaction. 

Sec. 703. Accuracy-related penalty for listed transactions and other reportable 

transactions having a significant tax avoidance purpose. 

Sec. 704. Penalty for understatements attributable to transactions lacking economic substance, etc. 

Sec. 705. Modifications of substantial understatement penalty for nonreportable 

transactions. 

Sec. 706. Tax shelter exception to confidentiality privileges relating to taxpayer 

communications. 

Sec. 707. Disclosure of reportable transactions. 

Sec. 708. Modifications to penalty for failure to register tax shelters. 

Sec. 709. Modification of penalty for failure to maintain lists of investors. 

Sec. 710. Modification of actions to enjoin certain conduct related to tax shelters and reportable transactions. 

Sec. 711. Penalty for promoting abusive tax shelters. 

Sec. 712. Statute of limitations for taxable years for which required listed 

transactions not reported. 

Sec. 713. Denial of deduction for interest on underpayments attributable to 

nondisclosed reportable and noneconomic substance transactions. 

Sec. 714. Penalty for aiding and abetting the understatement of tax liability. 
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1 SEC. 2. FINDINGS. 

2 Congress makes the following findings: 

3 (1) Health care costs in the United States are 

4 rising rapidly. On a per capita basis, the United 

5 States spends 40 percent more than any other coun6 try on health care as a proportion of our gross do7 mestic product. 

8 (2) The United States spends over 

9 $1,800,000,000,000 annually on health care, 75 per10 cent of which is spent on the treatment of chronic 

11 disease. 

12 (3) However, only 2 percent of annual health 

13 care spending in the United States goes toward the 

14 prevention of chronic diseases. 

15 (4) The high cost of chronic disease manage16 ment and treatment is a major contributing factor 

17 to these exploding health care costs. 

18 (5) Reducing and preventing the incidence of 

19 chronic disease is one means by which to reduce 

20 health care costs in the United States. 

21 (6) More than 1,700,000 Americans die of a 

22 chronic disease each year, accounting for nearly 70 

23 percent of all United States deaths. 

24 (7) In 2000, 38.2 percent of all deaths were 

25 due to tobacco use, poor nutrition and physical inac26 tivity, and alcohol consumption. 
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1 (8) The economic impact of chronic disease can 

2 be seen in the annual costs associated with cardio3 vascular disease $352,000,000,000 obesity 

4 $117,000,000,000, tobacco use $75,000,000,000 

5 and mental illness $150,000,000,000. 

6 (9) In 2001 obesity related health conditions 

7 carried a $13,000,000,000 price tag to employers 

8 (as determined by the Department of Health and 

9 Human Services). 

10 (10) Health promotion investments by employ11 ers on average yield a return $3 for every $1 in12 vested in a program. 

13 (11) Being overweight or obese increase the 

14 risk of diabetes, heart disease, stroke, several types 

15 of cancer and other health problems. 

16 (12) An estimated 65 percent of adults and 15 

17 percent of children and adolescents in the United 

18 States are overweight or obese. 

19 (13) The rates of obesity have doubled in chil20 dren and tripled in teens since the 1980’s. 

21 (14) An estimated 400,000 deaths a year are 

22 associated with being overweight or obese. 

23 (15) Almost 40 percent of Americans are sed24 entary. More than a third of young people in grades 
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1 9 through 12 do not regularly engage in vigorous2 intensity physical activity. 

3 (16) Only 1 in 5 young people eat the rec4 ommended 5 daily servings of fruits and vegetables. 

5 (17) More than $12,000,000,000 a year is 

6 spent on advertising and marketing, mostly 

7 unhealthy food to children through television, the in8 sert Internet, movies, magazines, in-school mar9 keting, kids clubs, toys, coupons, product placement 

10 in movies and books. 

11 (18) Approximately one-quarter of walking trips 

12 take place on roads without sidewalks or shoulders 

13 and bike lanes are available for only about 5 percent 

14 of bike trips. 

15 (19) Virtually all-new users of tobacco products 

16 are under the minimum legal age to purchase such 

17 products. Every day in America, more than 4,000 

18 kids try their first cigarette. Another 2,000 children 

19 become new daily smokers. 

20 (20) In 2002, 61,000,000 Americans, 26 per21 cent of our population smoked cigarettes. 

22 (21) Research consistently shows that smoking 

23 cessation services offered as a combination of to24 bacco medication therapy and counseling can be one 
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1 of the most cost-effective health interventions and 

2 can reduce smoking-related health care costs. 

3 (22) Physical and mental health are inter4 connected. Physical conditions often result in mental 

5 health complications, likewise, depression can mani6 fest itself through physical symptoms. 

7 (23) The Surgeon General reported that mental 

8 disorders collectively account for 15 percent of the 

9 overall burden of disease from all causes, and slight10 ly more than the burden associated with all forms of 

11 cancer. 

12 (24) Major depression is the leading cause of 

13 disability in the United States. 

14 (25) One of every 2 people who need mental 

15 health treatment in the United States does not re16 ceive it and 30,000 Americans die by suicide each 

17 year. 

18 (26) Early screening and prevention programs 

19 in the schools can detect high risk children that are 

20 vulnerable to developing mental illness and assist in 

21 accessing appropriate services. 

22 (27) People with disabilities report substantial 

23 disparities in health compared with people without 

24 disabilities. These disparities are caused by a num25 ber of factors, including less access to health care 
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1 than individuals without disabilities. People with dis2 abilities report more days of pain, depression, and 

3 anxiety and they have higher rates of obesity. 

4 (28) Evidence shows that health promotion pro5 grams with exercise, nutrition, and wellness compo6 nents targeting people with disabilities can signifi7 cantly reduce the incidence of these conditions and 

8 lead to healthy outcomes for people with disabilities, 

9 as well as save money by reducing the frequency of 

10 medical visits. 

11 TITLE I—HEALTHIER KIDS AND 

12 SCHOOLS 

13 SEC. 101. FRUIT AND VEGETABLE PROGRAM. 

14 Section 18 of the Richard B. Russell National School 

15 Lunch Act (42 U.S.C. 1769) is amended by striking sub16 section (g) and inserting the following: 

17 ‘‘(g) FRUIT AND VEGETABLE PROGRAM.— 

18 ‘‘(1) IN GENERAL.—For the school year begin19 ning July 2005 and each subsequent school year, the 

20 Secretary shall carry out a program to make free 

21 fresh fruits and vegetables available to each school 

22 that submits a certification of support for participa23 tion in the program that is signed by the school food 

24 manager, the school principal, and the district su-
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1 perintendent (or equivalent positions, as determined 

2 by the school). 

3 ‘‘(2) PROGRAM.—A school participating in the 

4 program shall make fresh fruits and vegetables 

5 available to students throughout the school day in 1 

6 or more areas designated by the school. 

7 ‘‘(3) NOTICE OF AVAILABILITY.—To be eligible 

8 to participate in the fresh fruit and vegetable pro9 gram under this subsection, a school shall widely 

10 publicize within the school the availability of free 

11 fresh fruits and vegetables under the program. 

12 ‘‘(4) PER STUDENT GRANT.— 

13 ‘‘(A) IN GENERAL.—For each school year 

14 during which a school participates in the pro15 gram under this subsection, the Secretary shall 

16 provide to the school an amount equal to $75 

17 per student, as adjusted under subparagraph 

18 (B), to be used to carry out the program in the 

19 school. 

20 ‘‘(B) ADJUSTMENT.—The amount of the 

21 grant for each student under subparagraph (A) 

22 shall be adjusted on July 1, 2006, and each 

23 subsequent July 1, to reflect changes in the 

24 Consumer Price Index of the Bureau of Labor 
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1 Statistics for fresh fruits and vegetables, with 

2 the adjustment— 

3 ‘‘(i) rounded down to the nearest dol4 lar increment; and 

5 ‘‘(ii) based on the unrounded amounts 

6 for the preceding 12-month period. 

7 ‘‘(5) EVALUATION.— 

8 ‘‘(A) IN GENERAL.—The Secretary, acting 

9 through the Administrator of the Food and Nu10 trition Service, shall conduct an evaluation of 

11 schools participating in the program under this 

12 subsection. 

13 ‘‘(B) CONTENT.—The evaluation shall 

14 measure, at a minimum, the impact of partici15 pation in the program and any changes in the 

16 school nutrition environment relating to— 

17 ‘‘(i) overweight and obesity among 

18 children; 

19 ‘‘(ii) dietary intake; 

20 ‘‘(iii) nutrition education and behav21 ior; 

22 ‘‘(iv) rates of physical activity among 

23 children; and 

24 ‘‘(v) parental and student attitudes 

25 about— 
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1 ‘‘(I) participation in the program; 

2 and 

3 ‘‘(II) general nutrition, physical 

4 activity, and wellness. 

5 ‘‘(6) HEALTHY COOKING PILOT PROGRAM.— 

6 ‘‘(A) IN GENERAL.—As part of the pro7 gram conducted under this subsection, the Sec8 retary shall carry out a pilot program under 

9 which the Secretary shall make competitive 

10 grants to selected elementary and secondary 

11 schools to teach children— 

12 ‘‘(i) how to eat a nutritious diet; 

13 ‘‘(ii) how to select foods to make a 

14 healthy meal; and 

15 ‘‘(iii) how to prepare healthy meals. 

16 ‘‘(B) SELECTION OF SCHOOL.—In select17 ing schools to participate in the pilot program, 

18 the Secretary shall ensure that— 

19 ‘‘(i) only schools participating in the 

20 fruit and vegetable program under this 

21 subsection are eligible to receive funds 

22 under this paragraph; 

23 ‘‘(ii) to the maximum extent prac24 ticable, at least 75 percent of schools se25 lected are schools in which at least 50 per-
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1 cent of the students enrolled are eligible 

2 for free or reduced price meals under this 

3 Act; and 

4 ‘‘(iii) there is appropriate representa5 tion, as determined by the Secretary, of— 

6 ‘‘(I) rural, urban, and suburban 

7 schools; and 

8 ‘‘(II) elementary, middle, and 

9 secondary schools. 

10 ‘‘(C) PRIORITY CONSIDERATION.—In 

11 awarding competitive grants under this para12 graph, the Secretary shall give priority consid13 eration to schools that submit an application 

14 that includes the participation of the parents or 

15 families of the children enrolled in the school. 

16 ‘‘(7) AUTHORIZATION OF APPROPRIATIONS.— 

17 ‘‘(A) IN GENERAL.—There are authorized 

18 to be appropriated such sums as are necessary 

19 to carry out this subsection, to remain available 

20 until expended. 

21 ‘‘(B) INSUFFICIENT FUNDS.—If the funds 

22 appropriated under subparagraph (A) are insuf23 ficient to carry out the program under this sub24 section in all schools that meet the require25 ments of paragraph (1), the Secretary shall give 
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1 priority to schools that have the highest per2 centage of students enrolled that are eligible for 

3 free or reduced price meals under this Act.’’. 

4 SEC. 102. SCHOOL WELLNESS POLICY; COMPETITIVE 

5 FOODS. 

6 (a) SCHOOL WELLNESS POLICIES.— 

7 (1) IN GENERAL.—Not later than the first day 

8 of the school year beginning July 2006, each local 

9 educational agency participating in the programs au10 thorized under the Richard B. Russell National 

11 School Lunch Act (42 U.S.C. 1751 et seq.) and the 

12 Child Nutrition Act of 1966 (42 U.S.C. 1771 et 

13 seq.) shall establish a local school wellness policy 

14 that, at a minimum— 

15 (A) includes goals for nutrition education, 

16 physical activity, and such other school-based 

17 activities designed to promote student wellness 

18 as the local educational agency determines to be 

19 appropriate; 

20 (B) includes nutrition guidelines that— 

21 (i) are developed in consultation with 

22 representatives described in subparagraph 

23 (E); 

24 (ii) are applicable to all foods avail25 able during the school day; and 
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1 (iii) have as objectives— 

2 (I) promotion of sound nutrition; 

3 (II) improvement of student 

4 health; and 

5 (III) reduction in childhood obe6 sity; 

7 (C) ensures that meals and supplements 

8 provided in accordance with the Richard B. 

9 Russell National School Lunch Act (42 U.S.C. 

10 1751 et seq.) and the Child Nutrition Act of 

11 1966 (42 U.S.C. 1771 et seq.) conform with 

12 nutritional guidelines contained in regulations 

13 promulgated by the Secretary of Agriculture 

14 (referred to in this section as the ‘‘Secretary’’) 

15 in accordance with the programs authorized 

16 under those Acts; 

17 (D) establishes a plan for ensuring imple18 mentation of the local wellness policy, including 

19 designation of 1 or more individuals within the 

20 local educational agency charged with oper21 ational responsibility for ensuring that the re22 quirements of the school wellness plan are car23 ried out; and 

24 (E) involves representatives of the school 

25 food authority, parents, students, the school 
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1 board, school administrators, physical activity 

2 professionals, medical and nutrition profes3 sionals, and the public in the development of the 

4 school wellness policy. 

5 (2) TECHNICAL ASSISTANCE AND BEST PRAC6 TICES TO SCHOOLS AND STATES.— 

7 (A) IN GENERAL.—The Secretary shall 

8 make available to local educational agencies, 

9 school food authorities, and State school food 

10 authorities guidance and technical assistance 

11 for use in— 

12 (i) carrying out paragraph (1); and 

13 (ii) otherwise— 

14 (I) establishing healthy school 

15 food environments; 

16 (II) reducing childhood obesity; 

17 and 

18 (III) preventing diet-related 

19 chronic diseases. 

20 (B) CONTENT.—The guidance and tech21 nical assistance shall include, at a minimum— 

22 (i) case studies of schools and school 

23 districts that have taken steps to provide 

24 healthy options in foods sold and served at 

25 school, particularly schools and school dis-
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1 tricts that have done so without experi2 encing adverse effects on revenue from 

3 sales of competitive foods; 

4 (ii) recommended nutritional guide5 lines regarding appropriate standards for 

6 the availability, sale, and service of foods 

7 of any kind throughout the school day, as 

8 provided by the Institute of Medicine 

9 under subsection (b)(3) of section 10 of 

10 the Child Nutrition Act of 1966 (42 

11 U.S.C. 1779) (as amended by subsection 

12 (b)); and 

13 (iii) such other technical assistance as 

14 is required to carry out the goals of pro15 moting sound nutrition and establishing 

16 healthy school food environments. 

17 (C) GUIDANCE ONLY.—The recommenda18 tions of the Institute of Medicine under sub19 section (b)(3) of section 10 of the Child Nutri20 tion Act of 1966 (42 U.S.C. 1779) (as amended 

21 by subsection (b))— 

22 (i) are solely for the purpose of pro23 viding guidance to schools to develop 

24 school wellness policies in accordance with 

25 paragraph (1); and 
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1 (ii) shall not be construed as a man2 date to local educational agencies, school 

3 food authorities, or schools. 

4 (b) COMPETITIVE FOODS IN SCHOOLS.—Section 10 

5 of the Child Nutrition Act of 1966 (42 U.S.C. 1779) is 

6 amended— 

7 (1) in subsection (a), by striking ‘‘, including’’ 

8 and all that follows through ‘‘Lunch Act’’; and 

9 (2) by striking subsection (b) and inserting the 

10 following: 

11 ‘‘(b) COMPETITIVE FOODS IN SCHOOLS.— 

12 ‘‘(1) IN GENERAL.—The regulations under sub13 section (a) may include provisions that regulate the 

14 service of food in participating schools and service 

15 institutions in competition with the programs au16 thorized under this Act and the Richard B. Russell 

17 National School Lunch Act (42 U.S.C. 1751 et seq.) 

18 (referred to in this subsection as ‘competitive 

19 foods’). 

20 ‘‘(2) REGULATIONS.—The regulations promul21 gated under paragraph (1)— 

22 ‘‘(A) shall apply to all school grounds dur23 ing the duration of the school day; 

24 ‘‘(B) shall not supersede or otherwise af25 fect State and local regulations on competitive 
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1 foods that, as determined by the Secretary, con2 form to the nutritional goals of the regulations 

3 promulgated by the Secretary; 

4 ‘‘(C) shall require that the proceeds from 

5 the sale of competitive foods in schools be used 

6 for the benefit of the schools or of organizations 

7 of students approved by the schools, if those 

8 sales are allowed by the regulations; 

9 ‘‘(D) shall take into account the differing 

10 needs of— 

11 ‘‘(i) elementary schools; 

12 ‘‘(ii) middle schools and junior high 

13 schools; and 

14 ‘‘(iii) high schools; and 

15 ‘‘(E) shall implement the recommendations 

16 of the Institute of Medicine made under para17 graph (3). 

18 ‘‘(3) INSTITUTE OF MEDICINE RECOMMENDA19 TIONS.— 

20 ‘‘(A) IN GENERAL.—The Secretary shall 

21 offer to enter into an agreement with the Insti22 tute of Medicine of the National Academy of 

23 Sciences under which the Institute of Medicine, 

24 based on sound nutritional science, shall make 

25 recommendations to the Secretary regarding— 
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1 ‘‘(i) the regulation of competitive 

2 foods; and 

3 ‘‘(ii) appropriate nutritional guidelines 

4 for competitive foods offered in schools. 

5 ‘‘(B) REGULATIONS.—Not later than 1 

6 year after the date of receipt of final rec7 ommendations from the Institute of Medicine, 

8 the Secretary shall promulgate regulations to 

9 carry out this subsection in accordance with the 

10 recommendations of the Institute of Medicine. 

11 ‘‘(C) REPORT.—Not later than 1 year 

12 after the date of receipt of final recommenda13 tions from the Institute of Medicine, the Sec14 retary shall submit to the Committee on Edu15 cation and the Workforce of the House of Rep16 resentatives and the Committee on Agriculture, 

17 Nutrition, and Forestry of the Senate a report 

18 that describes the actions of the Secretary 

19 under subparagraph (B).’’. 

20 (c) APPLICABILITY.—This section and the amend21 ments made by this section apply only to schools partici22 pating in a program authorized under the Richard B. Rus23 sell National School Lunch Act (42 U.S.C. 1751 et seq.) 

24 or the Child Nutrition Act of 1966 (42 U.S.C. 1771 et 

25 seq.). 
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1 SEC. 103. HEALTHY SCHOOL NUTRITION ENVIRONMENT IN2 CENTIVE GRANTS. 

3 Section 18 of the Richard B. Russell National School 

4 Lunch Act (42 U.S.C. 1769) is amended by adding at the 

5 end the following: 

6 ‘‘(h) HEALTHY SCHOOL NUTRITION ENVIRONMENT

7 INCENTIVE GRANTS.— 

8 ‘‘(1) IN GENERAL.—The Secretary shall estab9 lish a program under which the Secretary shall make 

10 competitive grants to selected elementary and sec11 ondary schools— 

12 ‘‘(A) to create healthy school nutrition en13 vironments; and 

14 ‘‘(B) to assess the impact of the environ15 ments on the health and well-being of children 

16 enrolled in the schools. 

17 ‘‘(2) SELECTION OF SCHOOLS.—In selecting 

18 schools to receive incentive grants under this sub19 section, the Secretary shall— 

20 ‘‘(A) ensure that not less than 75 percent 

21 of schools selected to participate in the program 

22 established under this subsection are schools in 

23 which not less than 50 percent of the students 

24 enrolled in each school are eligible for free or 

25 reduced price meals under this Act; 
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1 ‘‘(B) ensure that, of the schools selected to 

2 participate in the program, there is appropriate 

3 representation of rural, urban, and suburban 

4 schools, as determined by the Secretary; 

5 ‘‘(C) ensure that, of the schools selected to 

6 participate in the program, there is appropriate 

7 representation of elementary, middle, and sec8 ondary schools, as determined by the Secretary; 

9 ‘‘(D) ensure that schools selected to receive 

10 a grant under this subsection meet the require11 ments of paragraph (3); 

12 ‘‘(E) give priority to schools that develop 

13 comprehensive plans that include the involve14 ment of a broad range of community stake15 holders in achieving healthy school nutrition en16 vironments; and 

17 ‘‘(F) give priority to schools that develop 

18 comprehensive plans that include a strategy for 

19 maintaining healthy school nutrition environ20 ments in the years following the fiscal years for 

21 which the schools receive grants under this sub22 section. 

23 ‘‘(3) REQUIREMENTS.— 

24 ‘‘(A) INPUT.—Prior to the solicitation of 

25 proposals for grants under this subsection, the 
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1 Secretary shall solicit input from appropriate 

2 nutrition, health, and education organizations 

3 regarding the appropriate criteria for a healthy 

4 school environment. 

5 ‘‘(B) CRITERIA FOR HEALTHY SCHOOL EN6 VIRONMENTS.—The Secretary shall, taking into 

7 account input received under subparagraph (A), 

8 establish criteria for defining a healthy school 

9 environment, including criteria that— 

10 ‘‘(i) provide program meals that meet 

11 nutritional standards for breakfasts and 

12 lunches established by the Secretary; 

13 ‘‘(ii) ensure that all food served (in14 cluding food served in participating schools 

15 and service institutions in competition with 

16 the programs authorized under this Act 

17 and the Child Nutrition Act of 1966 (42 

18 U.S.C. 1771 et seq.)) on school grounds 

19 during regular school hours is consistent 

20 with the nutritional standards for break21 fasts and lunches established by the Sec22 retary; 

23 ‘‘(iii) promote the consumption of 

24 fruits and vegetables; 
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1 ‘‘(iv) promote physical education and 

2 provide nutrition education to students and 

3 staff; 

4 ‘‘(v) ensure that all children are in5 cluded in physical education and nutrition 

6 activities, including children with disabil7 ities and children with limited English pro8 ficiency; 

9 ‘‘(vi) ban foods of minimal nutritional 

10 value, as that term is defined in section 

11 210.11 of title 7, Code of Federal Regula12 tions (or any successor regulation), and the 

13 marketing and advertising in schools of 

14 foods of minimal nutritional value; 

15 ‘‘(vii) integrate general wellness goals 

16 into the school curriculum; and 

17 ‘‘(viii) meet other criteria established 

18 by the Secretary. 

19 ‘‘(C) PLANS.—To be eligible to receive a 

20 grant under this subsection, a school shall— 

21 ‘‘(i) submit to the Secretary a healthy 

22 school nutrition environment plan that de23 scribes the actions the school will take to 

24 meet the criteria established under sub25 paragraph (B); and 
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1 ‘‘(ii) take the actions described in the 

2 plan. 

3 ‘‘(4) GRANTS.—For each of fiscal years 2006 

4 through 2010, the Secretary shall make a grant to 

5 each school selected under paragraph (2). 

6 ‘‘(5) EVALUATIONS.— 

7 ‘‘(A) IN GENERAL.—The Secretary, acting 

8 through the Administrator of the Food and Nu9 trition Service, shall conduct an evaluation of a 

10 representative sample of schools that receive 

11 grants under this subsection. 

12 ‘‘(B) CONTENT.—The evaluation shall 

13 measure, at a minimum, the effects of a healthy 

14 school nutrition environment on— 

15 ‘‘(i) overweight children and obesity; 

16 ‘‘(ii) dietary intake; 

17 ‘‘(iii) nutrition education and behav18 ior; 

19 ‘‘(iv) the adequacy of time to eat; 

20 ‘‘(v) physical activities; 

21 ‘‘(vi) parental and student attitudes 

22 and participation; and 

23 ‘‘(vii) related funding issues, including 

24 the cost of maintaining a healthy school 

25 nutrition environment. 
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1 ‘‘(C) REPORTS.—The Secretary shall sub2 mit to the Committee on Education and the 

3 Workforce of the House of Representatives and 

4 the Committee on Agriculture, Nutrition, and 

5 Forestry of the Senate— 

6 ‘‘(i) an interim report on the activities 

7 of schools evaluated under this subsection; 

8 and 

9 ‘‘(ii) a final report on the activities of 

10 schools evaluated under this subsection. 

11 ‘‘(6) FUNDING.— 

12 ‘‘(A) IN GENERAL.—On October 1, 2004, 

13 and each October 1 thereafter on which this 

14 program is authorized, out of any funds in the 

15 Treasury not otherwise appropriated, the Sec16 retary of the Treasury shall transfer to the Sec17 retary of Agriculture to carry out this sub18 section $100,000,000. 

19 ‘‘(B) RECEIPT AND ACCEPTANCE.—The 

20 Secretary shall be entitled to receive, shall ac21 cept, and shall use to carry out this section the 

22 funds transferred under subparagraph (A), 

23 without further appropriation. 
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1 ‘‘(C) AVAILABILITY OF FUNDS.—Funds 

2 transferred under subparagraph (A) shall re3 main available until expended. 

4 ‘‘(D) EVALUATIONS.—Of the funds made 

5 available under this paragraph, the Secretary 

6 shall use not more than $5,000,000 to conduct 

7 evaluations under paragraph (5).’’. 

8 SEC. 104. GRANTS FOR THE INTEGRATION OF SCHOOLS 

9 AND MENTAL HEALTH SYSTEMS. 

10 Section 5541 of the Elementary and Secondary Edu11 cation Act of 1965 (20 U.S.C. 7269) is amended— 

12 (1) in subsection (c), by adding at the end the 

13 following: 

14 ‘‘(7) To support schools that work with families 

15 and appropriate community partners to implement 

16 school-wide prevention strategies, based on mental 

17 health research, that will support early and intensive 

18 interventions. 

19 ‘‘(8) To provide necessary training and support 

20 to school personnel on how to recognize and seek 

21 needed support for children exhibiting early warning 

22 signs of behavioral and academic problems.’’; and 

23 (2) in subsection (d)— 

24 (A) in paragraph (4)— 
27 

•S 2558 IS 

1 (i) in subparagraph (C), by striking 

2 ‘‘and’’ after the semicolon; 

3 (ii) in subparagraph (D), by striking 

4 the period and inserting ‘‘; and’’; and 

5 (iii) by adding at the end the fol6 lowing: 

7 ‘‘(E) mental health services provided under 

8 this section by schools will be evidence-based or 

9 promising early interventions.’’; and 

10 (B) by adding at the end the following: 

11 ‘‘(7) An explanation of how the applicant will 

12 carry out public education programs in support of 

13 mental health promotion and prevention by collabo14 rating with— 

15 ‘‘(A) an institution of higher education (in16 cluding a graduate program in psychology, so17 cial work, or education at an institution of 

18 higher education); and 

19 ‘‘(B) private nonprofit community-based 

20 organizations that have experience in public 

21 education programs relating to mental health 

22 promotion and prevention.’’. 
28 

•S 2558 IS 

1 TITLE II—HEALTHIER COMMU2 NITIES AND WORKPLACES 

3 Subtitle A—Incentives for a 

4 Healthy Workforce 

5 SEC. 201. SHORT TITLE. 

6 This subtitle may be cited as the ‘‘Healthy Workforce 

7 Act of 2004’’. 

8 SEC. 202. TAX CREDIT TO EMPLOYERS FOR COSTS OF IM9 PLEMENTING WELLNESS PROGRAMS. 

10 (a) IN GENERAL.—Subpart D of part IV of sub11 chapter A of chapter 1 of the Internal Revenue Code of 

12 1986 (relating to business related credits) is amended by 

13 adding at the end the following: 

14 ‘‘SEC. 45G. WELLNESS PROGRAM CREDIT. 

15 ‘‘(a) ALLOWANCE OF CREDIT.— 

16 ‘‘(1) IN GENERAL.—For purposes of section 38, 

17 the wellness program credit determined under this 

18 section for any taxable year is— 

19 ‘‘(A) in the case of a small business em20 ployer, an amount equal to 50 percent of the 

21 costs paid or incurred by the small business em22 ployer in connection with a qualified small busi23 ness wellness program during the taxable year, 

24 and 
29 

•S 2558 IS 

1 ‘‘(B) in the case of any other employer, an 

2 amount equal to 50 percent of the costs paid or 

3 incurred by the employer in connection with a 

4 qualified wellness program during the taxable 

5 year. 

6 ‘‘(2) LIMITATION.—The amount of credit al7 lowed under paragraph (1) for any taxable year shall 

8 not exceed the product of $200 and the number of 

9 employees of the employer or small business em10 ployer, as the case may be. 

11 ‘‘(b) QUALIFIED WELLNESS PROGRAM; QUALIFIED

12 SMALL BUSINESS WELLNESS PROGRAM.—For purposes 

13 of this section— 

14 ‘‘(1) QUALIFIED WELLNESS PROGRAM.—The 

15 term ‘qualified wellness program’ means a program 

16 which consists of all of the wellness program compo17 nents described in subsection (c) and which is cer18 tified by the Secretary of Health and Human Serv19 ices, in consultation with persons who have expertise 

20 in employer health promotion and wellness pro21 grams, as a qualified wellness program under this 

22 section. 

23 ‘‘(2) QUALIFIED SMALL BUSINESS WELLNESS

24 PROGRAM.—The term ‘qualified small business 

25 wellness program’ means a program which consists 
30 

•S 2558 IS 

1 of any 2 of the components described in subsection 

2 (c) and which is certified by the Secretary of Health 

3 and Human Services, in consultation with persons 

4 who have expertise in employer health promotion and 

5 wellness programs, as a qualified small business 

6 wellness program under this section. 

7 ‘‘(c) WELLNESS PROGRAM COMPONENTS.—For pur8 poses of this section, the wellness program components de9 scribed in this subsection are the following: 

10 ‘‘(1) HEALTH AWARENESS COMPONENT.—A 

11 health awareness component which provides for the 

12 following: 

13 ‘‘(A) HEALTH EDUCATION.—The dissemi14 nation of health information which addresses 

15 the specific needs and health risks of employees. 

16 ‘‘(B) HEALTH SCREENINGS.—The oppor17 tunity for periodic screenings for health prob18 lems and referrals for appropriate follow up 

19 measures. 

20 ‘‘(2) BEHAVIORAL CHANGE COMPONENT.—A 

21 behavioral change component which provides for al22 tering employee lifestyles to encourage healthy living 

23 through counseling, seminars, on-line programs, or 

24 self-help materials. Such component shall include 

25 programs relating to— 
31 

•S 2558 IS 

1 ‘‘(A) smoking, 

2 ‘‘(B) obesity, 

3 ‘‘(C) stress management, 

4 ‘‘(D) physical fitness, 

5 ‘‘(E) nutrition, 

6 ‘‘(F) substance abuse, and 

7 ‘‘(G) depression. 

8 ‘‘(3) SUPPORTIVE ENVIRONMENT COMPO9 NENT.—A supportive environment component which 

10 includes the following: 

11 ‘‘(A) ON-SITE POLICIES.—Policies and 

12 services at the worksite which promote a 

13 healthy lifestyle, including policies relating to— 

14 ‘‘(i) smoking at the worksite, 

15 ‘‘(ii) the nutrition of food available at 

16 the worksite through cafeterias and vend17 ing options, 

18 ‘‘(iii) minimizing stress in the work19 place, 

20 ‘‘(iv) where applicable, accessible and 

21 attractive stairs, and 

22 ‘‘(v) the encouragement of physical 

23 activity during work hours. 

24 ‘‘(B) PARTICIPATION INCENTIVES.— 
32 

•S 2558 IS 

1 ‘‘(i) IN GENERAL.—Qualified incentive 

2 benefits for each employee who participates 

3 in the health screenings described in para4 graph (1)(B) or the behavioral change pro5 grams described in paragraph (2). 

6 ‘‘(ii) QUALIFIED INCENTIVE BEN7 EFIT.—For purposes of clause (i), the 

8 term ‘qualified incentive benefit’ means 

9 any benefit which is approved by the Sec10 retary of Health and Human Services. 

11 Such benefit may include an adjustment in 

12 health insurance premiums or co-pays. 

13 ‘‘(C) EMPLOYEE INPUT.—The opportunity 

14 for employees to participate in the management 

15 of any qualified wellness program or qualified 

16 small business wellness program to which this 

17 section applies. 

18 ‘‘(d) PARTICIPATION REQUIREMENT.— 

19 ‘‘(1) IN GENERAL.—No credit shall be allowed 

20 under subsection (a) unless the Secretary of Health 

21 and Human Services certifies, as a part of any cer22 tification described in subsection (b), that each 

23 wellness program component of the qualified 

24 wellness program or qualified small business 
33 

•S 2558 IS 

1 wellness program applies to all qualified employees 

2 of the employer. 

3 ‘‘(2) QUALIFIED EMPLOYEE.—For purposes of 

4 paragraph (1), the term ‘qualified employee’ means 

5 an employee who works an average of not less than 

6 25 hours per week during the taxable year. 

7 ‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.— 

8 For purposes of this section— 

9 ‘‘(1) EMPLOYEE AND EMPLOYER.— 

10 ‘‘(A) PARTNERS AND PARTNERSHIPS.— 

11 The term ‘employee’ includes a partner and the 

12 term ‘employer’ includes a partnership. 

13 ‘‘(B) CERTAIN RULES TO APPLY.—Rules 

14 similar to the rules of section 52 shall apply. 

15 ‘‘(2) SMALL BUSINESS EMPLOYER.— 

16 ‘‘(A) IN GENERAL.—The term ‘small busi17 ness employer’ means, with respect to any tax18 able year, an employer who employed an aver19 age of 200 or fewer employees on business days 

20 during such taxable year. 

21 ‘‘(B) CONTROLLED GROUPS.—For pur22 poses of subparagraph (A), all persons treated 

23 as a single employer under subsection (b), (c), 

24 (m), or (o) of section 414 shall be treated as a 

25 single employer. 
34 

•S 2558 IS 

1 ‘‘(3) CERTAIN COSTS NOT INCLUDED.—Costs 

2 paid or incurred by an employer or small business 

3 employer for food or health insurance shall not be 

4 taken into account under subsection (a). 

5 ‘‘(4) NO CREDIT WHERE GRANT AWARDED.— 

6 No credit shall be allowable under subsection (a) to 

7 any person who receives a grant under section 201 

8 of the Health Workforce Act of 2004. 

9 ‘‘(f) TERMINATION.—This section shall not apply to 

10 any amount paid or incurred after December 31, 2014.’’. 

11 (b) TREATMENT AS GENERAL BUSINESS CREDIT.— 

12 (1) IN GENERAL.—Subsection (b) of section 38 

13 of the Internal Revenue Code of 1986 (relating to 

14 general business credit) is amended by striking 

15 ‘‘plus’’ at the end of paragraph (14), by striking the 

16 period at the end of paragraph (15) and inserting ‘‘, 

17 plus’’, and by adding at the end the following: 

18 ‘‘(16) the wellness program credit determined 

19 under section 45G.’’. 

20 (2) TRANSITIONAL RULE FOR CARRYBACKS.— 

21 Subsection (d) of section 39 of such Code (relating 

22 to transitional rules) is amended by adding at the 

23 end the following: 

24 ‘‘(11) NO CARRYBACK OF SECTION 45G CREDIT

25 BEFORE EFFECTIVE DATE.—No portion of the un-
35 

•S 2558 IS 

1 used business credit for any taxable year which is 

2 attributable to the wellness program credit deter3 mined under section 45G may be carried back to a 

4 taxable year beginning before January 1, 2005.’’. 

5 (c) DENIAL OF DOUBLE BENEFIT.—Section 280C of 

6 the Internal Revenue Code of 1986 (relating to certain 

7 expenses for which credits are allowable) is amended by 

8 adding at the end the following new subsection: 

9 ‘‘(d) WELLNESS PROGRAM CREDIT.— 

10 ‘‘(1) IN GENERAL.—No deduction shall be al11 lowed for that portion of the costs paid or incurred 

12 for a qualified wellness program (within the meaning 

13 of section 45G) or a qualified small business 

14 wellness program (within the meaning of such sec15 tion) allowable as a deduction for the taxable year 

16 which is equal to the amount of the credit allowable 

17 for the taxable year under section 45G. 

18 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP19 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 

20 ‘‘(A) the amount of the credit determined 

21 for the taxable year under section 45G, exceeds 

22 ‘‘(B) the amount allowable as a deduction 

23 for such taxable year for a qualified wellness 

24 program or a qualified small business wellness 

25 program, 
36 

•S 2558 IS 

1 the amount chargeable to capital account for the 

2 taxable year for such expenses shall be reduced by 

3 the amount of such excess. 

4 ‘‘(3) CONTROLLED GROUPS.—In the case of a 

5 corporation which is a member of a controlled group 

6 of corporations (within the meaning of section 

7 41(f)(5)) or a trade or business which is treated as 

8 being under common control with other trades or 

9 business (within the meaning of section 

10 41(f)(1)(B)), this subsection shall be applied under 

11 rules prescribed by the Secretary similar to the rules 

12 applicable under subparagraphs (A) and (B) of sec13 tion 41(f)(1).’’. 

14 (d) CLERICAL AMENDMENT.—The table of sections 

15 for subpart D of part IV of subchapter A of chapter 1 

16 of the Internal Revenue Code of 1986 is amended by add17 ing at the end the following: 

‘‘Sec. 45G. Wellness program credit.’’. 

18 (e) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years beginning after 

20 December 31, 2004. 

21 (f) OUTREACH.— 

22 (1) IN GENERAL.—The Secretary of the Treas23 ury, in conjunction with the Director of the Centers 

24 for Disease Control and members of the business 

25 community, shall institute an outreach program to 
37 

•S 2558 IS 

1 inform businesses about the availability of the 

2 wellness program credit under section 45G of the In3 ternal Revenue Code of 1986. 

4 (2) AUTHORIZATION OF APPROPRIATIONS.— 

5 There are authorized to be appropriated such sums 

6 as are necessary to carry out the outreach program 

7 described in paragraph (1). 

8 SEC. 203. INCOME EXCLUSION FOR EMPLOYER-PROVIDED 

9 OFF-PREMISES HEALTH CLUB SERVICES. 

10 (a) TREATMENT AS FRINGE BENEFIT.—Subpara11 graph (A) of section 132(j)(4) of the Internal Revenue 

12 Code of 1986 (relating to on-premises gyms and other ath13 letic facilities) is amended to read as follows: 

14 ‘‘(A) IN GENERAL.—Gross income shall 

15 not include— 

16 ‘‘(i) the value of any on-premises ath17 letic facility provided by an employer to its 

18 employees, and 

19 ‘‘(ii) fees or membership expenses 

20 paid by an employer to an athletic or fit21 ness facility described in subparagraph (C) 

22 on behalf of its employees, but only to the 

23 extent that such fees or expenses do not 

24 exceed $900. 
38 

•S 2558 IS 

1 The preceding sentence shall apply with respect 

2 to any highly compensated employee only if ac3 cess to the facility is available on substantially 

4 the same terms to each member of a group of 

5 employees which is defined under a reasonable 

6 classification set up by the employer which does 

7 not discriminate in favor of highly compensated 

8 employees.’’. 

9 (b) ATHLETIC FACILITIES DESCRIBED.—Paragraph 

10 (4) of section 132(j) of such Code is amended by adding 

11 at the end the following new subparagraph: 

12 ‘‘(C) CERTAIN ATHLETIC OR FITNESS FA13 CILITIES DESCRIBED.—For purposes of sub14 paragraph (A)(ii), an athletic or fitness facility 

15 described in this subparagraph is a facility— 

16 ‘‘(i) providing instruction in a pro17 gram of physical exercise or offering facili18 ties for the preservation, maintenance, en19 couragement, or development of physical 

20 fitness, 

21 ‘‘(ii) which is not a private club owned 

22 and operated by its members, 

23 ‘‘(iii) which does not offer golf, hunt24 ing, sailing, or riding facilities, 
39 

•S 2558 IS 

1 ‘‘(iv) whose health or fitness facility is 

2 not incidental to its overall function and 

3 purpose, and 

4 ‘‘(v) which is fully compliant with the 

5 State of jurisdiction and Federal anti-dis6 criminations laws.’’. 

7 (c) EMPLOYER DEDUCTION FOR DUES TO CERTAIN

8 ATHLETIC FACILITIES.— 

9 (1) IN GENERAL.—Paragraph (3) of section 

10 274(a) of such Code (relating to denial of deduction 

11 for club dues) is amended— 

12 (A) by striking ‘‘Notwithstanding’’ and in13 serting the following: 

14 ‘‘(A) IN GENERAL.—Notwithstanding’’, 

15 and 

16 (B) by adding at the end the following new 

17 subparagraph: 

18 ‘‘(B) EXCEPTION FOR ATHLETIC FACILI19 TIES.—This paragraph shall not apply to fees 

20 or dues paid to athletic or fitness facilities 

21 (within the meaning of section 132(j)(4)(C)) to 

22 the extent that such fees or dues do not exceed 

23 $900 for any membership.’’. 

24 (2) CONFORMING AMENDMENT.—Section 

25 274(e)(4) of such Code is amended by striking ‘‘sub-
40 

•S 2558 IS 

1 section (a)(3)’’ and by inserting ‘‘subsection 

2 (a)(3)(A)’’. 

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

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 SEC. 204. CDC AND EMPLOYER-BASED WELLNESS PRO7 GRAMS. 

8 (a) AMENDMENT TO PUBLIC HEALTH SERVICE

9 ACT.—Title III of the Public Health Service Act (42 

10 U.S.C. 241 et seq.) is amended by adding at the end the 

11 following: 

12 ‘‘PART R—CDC AND EMPLOYER-BASED 

13 WELLNESS PROGRAMS 

14 ‘‘SEC. 399Z–1. EMPLOYER-BASED WELLNESS BEST PRAC15 TICES. 

16 ‘‘(a) IN GENERAL.—The Director of the Centers for 

17 Disease Control and Prevention shall conduct a study that 

18 analyzes employer-based wellness programs and deter19 mines— 

20 ‘‘(1) best practices of such programs that im21 pact and sustain behavior change in employees; 

22 ‘‘(2) the impact that such programs have on re23 ducing health risk prevalence and improving absen24 teeism of employees; and 
41 

•S 2558 IS 

1 ‘‘(3) the return to employers on the investment 

2 made by such employers in such programs. 

3 ‘‘(b) REPORT.—After completing the study under 

4 subsection (a), the Director of the Centers for Disease 

5 Control and Prevention shall submit to Congress not later 

6 than 1 year after the date of enactment of this part— 

7 ‘‘(1) a report that includes recommendations of 

8 effective employer-based wellness programs; and 

9 ‘‘(2) an Employer Wellness Model that is sup10 ported by the Centers for Disease Control and Pre11 vention. 

12 ‘‘SEC. 399Z–2. WORKPLACE WELLNESS EDUCATION CAM13 PAIGN FOR EMPLOYERS. 

14 ‘‘The Director of the Centers for Disease Control and 

15 Prevention, in coordination with relevant worksite health 

16 promotion organizations, shall conduct an educational 

17 campaign to make employers, employer groups, and other 

18 interested parties aware of the benefits of employer-based 

19 wellness programs. Such campaign shall include informa20 tion about the Employer Wellness Model described in sec21 tion 399Z–1(b)(2) and information on developing, imple22 menting, and maintaining a program based on such model. 
42 

•S 2558 IS 

1 ‘‘SEC. 399Z–3. EVALUATION OF EMPLOYER-BASED 

2 WELLNESS PROGRAMS. 

3 ‘‘The Director of the Centers for Disease Control and 

4 Prevention shall enter into contracts with entities to— 

5 ‘‘(1) provide employers with technical assistance 

6 in evaluating such employers’ employer-based 

7 wellness programs; and 

8 ‘‘(2) train employers on how to evaluate such 

9 employers’ employer-based wellness programs. 

10 ‘‘SEC. 399Z–4. REQUIREMENTS BASED ON APPROPRIATED 

11 FUNDS. 

12 ‘‘The Director of the Centers for Disease Control and 

13 Prevention shall be required to carry out the activities in 

14 sections 399Z–1, 399Z–2, and 399Z–3 only if funds are 

15 appropriated to carry out such sections.’’. 

16 (b) GRANTS TO HELP SMALL BUSINESSES.— 

17 (1) WELLNESS PROGRAMS.— 

18 (A) IN GENERAL.—The Director of the 

19 Centers for Disease Control and Prevention 

20 shall award grants, on a competitive basis, to 

21 hospitals, community wellness providers, and 

22 other qualifying entities, as determined by the 

23 Director of the Centers for Disease Control and 

24 Prevention, to implement wellness programs at 

25 qualifying employers. 
43 

•S 2558 IS 

1 (B) CRITERIA FOR PROGRAMS.—The 

2 wellness programs implemented pursuant to 

3 subparagraph (A) shall be certified by the Sec4 retary of Human Services, in the same manner 

5 as required under section 45G of the Internal 

6 Revenue Code of 1986, as a qualified wellness 

7 program (within the meaning of such section) 

8 or as a qualified small business wellness pro9 gram (within the meaning of such section). 

10 (2) QUALIFYING EMPLOYER.—In this sub11 section, the term ‘‘qualifying employer’’ means a 

12 business— 

13 (A) that does not have a comprehensive 

14 employer-based wellness program; and 

15 (B)(i) with less than 200 employees; 

16 (ii) that is located in an underserved area; 

17 or 

18 (iii) that is exempt from tax under section 

19 501 of the Internal Revenue Code of 1986. 

20 (3) REQUIREMENTS BASED ON APPROPRIATED

21 FUNDS.—The Director of the Centers for Disease 

22 Control and Prevention shall be required to award 

23 grants under this subsection only if funds are appro24 priated to carry out this subsection. 
44 

•S 2558 IS 

1 Subtitle B—Healthy Communities 

2 SEC. 211. HEALTHY COMMUNITY GRANTS. 

3 Part P of title III of the Public Health Service Act 

4 (42 U.S.C. 280g et seq.) is amended by adding at the end 

5 the following: 

6 ‘‘SEC. 399P. HEALTHY COMMUNITY GRANTS. 

7 ‘‘(a) ESTABLISHMENT.—The Secretary, acting 

8 through the Director of the Centers for Disease Control 

9 and Prevention and in coordination with the Directors of 

10 other appropriate Federal agencies, shall award competi11 tive grants to eligible entities for the purpose of planning 

12 and implementing programs that seek to promote indi13 vidual and community health and to prevent the incidence 

14 of chronic disease. 

15 ‘‘(b) ELIGIBILITY.— 

16 ‘‘(1) IN GENERAL.—To be eligible to receive a 

17 grant under this section an entity shall— 

18 ‘‘(A) be— 

19 ‘‘(i) a city, county, or Indian tribe; 

20 ‘‘(ii) a local or tribal educational 

21 agency; 

22 ‘‘(iii) an accredited university, college, 

23 or community college; 

24 ‘‘(iv) a federally qualified health cen25 ter; 
45 

•S 2558 IS 

1 ‘‘(v) a local health department; 

2 ‘‘(vi) a health care provider; 

3 ‘‘(vii) a community-based organiza4 tion; or 

5 ‘‘(viii) any other entity determined ap6 propriate by the Secretary, including a 

7 consortia or partnership of entities de8 scribed in any of clauses (i) through (vii); 

9 ‘‘(B) prepare and submit an application in 

10 accordance with paragraph (2); and 

11 ‘‘(C) provide assurances that the entity will 

12 contribute the non-Federal share as required 

13 under paragraph (3) to the cost of the activities 

14 carried out under the grant. 

15 ‘‘(2) APPLICATION.— 

16 ‘‘(A) IN GENERAL.—An entity desiring a 

17 grant under this section shall submit an appli18 cation to the Secretary at such time, in such 

19 manner, and containing such information as the 

20 Secretary may require, including a plan that 

21 meets the requirements of subparagraph (B). 

22 ‘‘(B) PLAN.—A plan meets the require23 ments of this subparagraph if such plan, at a 

24 minimum, includes information regarding— 
46 

•S 2558 IS 

1 ‘‘(i)(I) programs or community-based 

2 activities that the applicant proposes to 

3 carry out with funds received under this 

4 section and which seek to prevent and re5 duce the incidence of— 

6 ‘‘(aa) overweight and obesity, or 

7 chronic diseases associated with over8 weight and obesity; 

9 ‘‘(bb) tobacco use; or 

10 ‘‘(cc) mental illness; or 

11 ‘‘(II) other such activities, as deter12 mined appropriate by the Secretary, that 

13 are consistent with the goals of promoting 

14 individual and community health and pre15 venting chronic disease; and 

16 ‘‘(ii) the manner in which the appli17 cant will evaluate the effectiveness of the 

18 program or activities carried out under this 

19 section. 

20 ‘‘(3) NON-FEDERAL SHARE.—To be eligible to 

21 receive a grant under this section, an entity shall 

22 provide a non-Federal contribution, in cash or in 

23 kind, to the costs of activities under the grant in an 

24 amount that is equal to not less than 25 percent of 

25 the costs of such activities. 
47 

•S 2558 IS 

1 ‘‘(c) USE OF FUNDS.—An entity that receives a grant 

2 under this section shall use the amount made available 

3 under the grant to carry out community-based activities, 

4 including— 

5 ‘‘(1) activities that seek to promote individual 

6 health and community wellness and to prevent and 

7 reduce the incidence of health problems and chronic 

8 diseases associated with— 

9 ‘‘(A) being overweight or obese; 

10 ‘‘(B) tobacco use; or 

11 ‘‘(C) mental illness; or 

12 ‘‘(2) other activities undertaken with the goals 

13 of health promotion and chronic disease prevention, 

14 as determined appropriate by the Secretary. 

15 ‘‘(d) PRIORITY.—In awarding grants under sub16 section (a), the Secretary shall give priority to— 

17 ‘‘(1) entities that demonstrate that they have 

18 previously applied successfully for funds to carry out 

19 activities that seek to promote individual and com20 munity health and to prevent the incidence of chron21 ic disease and that can cite published and peer-re22 viewed research demonstrating that the activities 

23 that the entity proposes to carry out under this sub24 section are effective; 
48 

•S 2558 IS 

1 ‘‘(2) entities that will carry out programs or ac2 tivities that seek to accomplish a goal or goals set 

3 by the State in the Healthy People 2010 plan of the 

4 State; 

5 ‘‘(3) entities that provide non-Federal contribu6 tions, either in cash or in kind, to the costs of fund7 ing activities under the grant; 

8 ‘‘(4) entities that develop comprehensive plans 

9 that include a strategy for extending program activi10 ties developed under this section in the years fol11 lowing the fiscal years for which they receive grants 

12 under this section; 

13 ‘‘(5) entities located in communities that are 

14 medically underserved, as determined by the Sec15 retary; 

16 ‘‘(6) entities located in areas where the average 

17 poverty rate is 150 or higher than the average pov18 erty rate in the State involved, as determined by the 

19 Secretary; and 

20 ‘‘(7) entities that submit plans that exhibit 

21 multisectoral, cooperative conduct that includes the 

22 involvement of a broad range of stakeholders, includ23 ing— 

24 ‘‘(A) community-based organizations; 

25 ‘‘(B) local governments; 
49 

•S 2558 IS 

1 ‘‘(C) local educational agencies; 

2 ‘‘(D) the private sector; 

3 ‘‘(E) State or local departments of health; 

4 ‘‘(F) accredited colleges, universities, and 

5 community colleges; 

6 ‘‘(G) health care providers; 

7 ‘‘(H) State and local departments of trans8 portation and city planning; and 

9 ‘‘(I) other entities determined appropriate 

10 by the Secretary. 

11 ‘‘(e) TECHNICAL ASSISTANCE.—From amounts ap12 propriated to carry out this section, the Secretary may re13 serve not more than 10 percent for each fiscal year to pro14 vide entities receiving grants under this section with tech15 nical assistance in the implementation of the plans re16 quired under subsection (b)(2)(B). 

17 ‘‘(f) EVALUATION.—From amounts appropriated to 

18 carry out this section, the Secretary may reserve not to 

19 exceed 5 percent for each fiscal year for the purpose of 

20 carrying out evaluations of the activities carried out under 

21 this section. Not later than 90 days after the completion 

22 of any such evaluation, the results of such evaluation shall 

23 be submitted to the relevant authorizing committees of 

24 Congress and to the Committee on Appropriations of the 
50 

•S 2558 IS 

1 Senate and the Committee on Appropriations of the House 

2 of Representatives. 

3 ‘‘(g) LIMITATION ON ADMINISTRATIVE COSTS.—An 

4 entity may not use more than 10 percent of amounts re5 ceived under a grant under this section for administrative 

6 expenses. 

7 ‘‘(h) SUPPLEMENT NOT SUPPLANT.—Amounts pro8 vided under a grant under this section shall be used to 

9 supplement, and not supplant, other amounts provided for 

10 activities of the type to be carried out under this section. 

11 ‘‘(i) AUTHORIZATION OF APPROPRIATIONS.—There is 

12 authorized to be appropriated such sums as may be nec13 essary to carry out this section.’’. 

14 SEC. 212. LIVING WELL WITH A DISABILITY AND WORKING 

15 WELL WITH A DISABILITY PROGRAMS. 

16 Part P of title III of the Public Health Service Act 

17 (42 U.S.C. 280g et seq.), as amended by section 211, is 

18 further amended by adding at the end the following: 

19 ‘‘SEC. 399Q. LIVING WELL WITH A DISABILITY PROGRAMS. 

20 ‘‘(a) DEFINITIONS.—In this section: 

21 ‘‘(1) CENTER FOR INDEPENDENT LIVING.—The 

22 term ‘center for independent living’ means a center 

23 described in part C of title VII of the Rehabilitation 

24 Act of 1973 (29 U.S.C. 796f et seq.). 
51 

•S 2558 IS 

1 ‘‘(2) DISABILITY.—The term ‘disability’ has the 

2 meaning given the term in section 3 of the Ameri3 cans with Disabilities Act of 1990 (42 U.S.C. 

4 12102). 

5 ‘‘(3) INDEPENDENT LIVING SERVICES.—The 

6 term ‘independent living services’ has the meaning 

7 given the term in section 7 of the Rehabilitation Act 

8 of 1973 (29 U.S.C. 705). 

9 ‘‘(b) GRANTS.—The Secretary, acting through the 

10 Director of the Centers for Disease Control and Preven11 tion, may make grants to eligible entities on a competitive 

12 basis, to assist the entities in implementing Living Well 

13 With a Disability Programs, designed— 

14 ‘‘(1) to increase health-promoting behavior, 

15 such as engaging in exercise, eating nutritious food, 

16 and using stress management techniques, among in17 dividuals with disabilities; and 

18 ‘‘(2) to reduce the limitations of secondary con19 ditions for such individuals. 

20 ‘‘(c) ELIGIBILITY.—To be eligible to receive a grant 

21 under this section, an entity— 

22 ‘‘(1) shall be a nonprofit organization that 

23 serves individuals with disabilities; 
52 

•S 2558 IS 

1 ‘‘(2) shall be a community-based organization 

2 that has experience in providing consumer-directed 

3 independent living services; and 

4 ‘‘(3) may be a center for independent living. 

5 ‘‘(d) APPLICATION.—To be eligible to receive a grant 

6 under this section for a program, an entity shall submit 

7 an application to the Secretary at such time, in such man8 ner, and containing such information as the Secretary may 

9 require, including information on— 

10 ‘‘(1) the number of individuals with disabilities 

11 who will be trained in the program; 

12 ‘‘(2) the entity’s capacity to collect data and in13 formation on outcomes of the program; and 

14 ‘‘(3) the entity’s experience implementing simi15 lar training programs. 

16 ‘‘(e) PREFERENCE AND DISTRIBUTION.— 

17 ‘‘(1) PREFERENCE.—In making grants under 

18 this section, the Secretary shall give preference to el19 igible entities who— 

20 ‘‘(A) are currently (as of the date of sub21 mission of the application) serving individuals 

22 with disabilities and implementing training and 

23 peer support programs; 
53 

•S 2558 IS 

1 ‘‘(B) indicate a commitment and ability to 

2 continue to train participants over several 

3 years; and 

4 ‘‘(C) have not previously provided training 

5 through a Living Well With a Disability Pro6 gram. 

7 ‘‘(2) DISTRIBUTION.—In making grants under 

8 this section, the Secretary shall, to the extent prac9 ticable, ensure an equitable geographic distribution 

10 of the grants. 

11 ‘‘(f) CURRICULUM, TRAINING, AND TECHNICAL AS12 SISTANCE.—An entity that receives a grant under this sec13 tion may use funds made available through the grant to 

14 acquire a curriculum, training, or technical assistance for 

15 the program carried out through the grant from an entity 

16 qualified to implement, and train participants in, a Living 

17 Well With a Disability program. 

18 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There 

19 are authorized to be appropriated to carry out this section 

20 $2,000,000 for each of fiscal years 2005 through 2009. 

21 ‘‘SEC. 399R. WORKING WELL WITH A DISABILITY PRO22 GRAMS. 

23 ‘‘(a) DEFINITIONS.—In this section, the terms ‘cen24 ter for independent living’, ‘disability’, and ‘independent 
54 

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1 living services’ have the meanings given the terms in sec2 tion 399O. 

3 ‘‘(b) AUTHORIZATION.—The Secretary, acting 

4 through the Director of the Centers for Disease Control 

5 and Prevention, may establish a demonstration program 

6 promoting the health and wellness of individuals with dis7 abilities in the workplace. 

8 ‘‘(c) GRANTS.—In carrying out the program, the Sec9 retary shall make grants to an eligible entity, to assist the 

10 entity in preparing for the implementation of, or imple11 menting, Working Well With a Disability Programs, which 

12 may include— 

13 ‘‘(1) gathering data on the positive effects of 

14 healthy behaviors on retention and productivity of 

15 individuals with disabilities who are employees or po16 tential employees; 

17 ‘‘(2) building relationships between vocational 

18 rehabilitation programs and health promotion pro19 grams; 

20 ‘‘(3) adapting a Living Well With a Disability 

21 program to meet the needs of individuals seeking or 

22 entering employment; 

23 ‘‘(4) training individuals in methods of imple24 menting the program; 

25 ‘‘(5) implementing the program; and 
55 

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1 ‘‘(6) measuring the impact of the program on 

2 health and employment outcomes. 

3 ‘‘(d) ELIGIBILITY.—To be eligible to receive a grant 

4 under this section, an entity shall— 

5 ‘‘(1) have experience in implementing a Living 

6 Well With a Disability Program; and 

7 ‘‘(2) demonstrate that the entity is qualified 

8 and able to adapt the program to establish a Work9 ing Well With a Disability Program, and implement 

10 the program. 

11 ‘‘(e) PARTNERSHIP.—An entity that receives a grant 

12 under this section shall carry out the activities funded 

13 through the grant through a partnership with 1 or more 

14 entities that— 

15 ‘‘(1) shall be nonprofit organizations that serve 

16 individuals with disabilities; 

17 ‘‘(2) shall be community-based organizations 

18 that have experience in providing consumer-directed 

19 independent living services; and 

20 ‘‘(3) may be centers for independent living. 

21 ‘‘(f) APPLICATION.—To be eligible to receive a grant 

22 under this section for a program, an entity shall submit 

23 an application to the Secretary at such time, in such man24 ner, and containing such information as the Secretary may 

25 require. 
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1 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There 

2 are authorized to be appropriated to carry out this section 

3 $1,000,000 for the period of fiscal years 2005 through 

4 2007.’’. 

5 SEC. 213. ENHANCED STANDARDS FOR ROADS AND INTER6 SECTION CONTROLS. 

7 Section 133 of title 23, United States Code, is 

8 amended by adding at the end the following: 

9 ‘‘(g) ENHANCED STANDARDS FOR ROADS AND

10 INTERSECTION CONTROLS.— 

11 ‘‘(1) IN GENERAL.—Not later than 18 months 

12 after the date of enactment of this subsection, the 

13 Secretary, in coordination with the American Asso14 ciation of State Highway and Transportation Offi15 cials and the Institute of Transportation Engineers, 

16 shall develop recommended enhanced standards for 

17 the design of roads and intersection controls (includ18 ing associated bicycle paths, bicycle lanes, and walk19 ways) to improve pedestrian and bicycle safety. 

20 ‘‘(2) ACCOMMODATION OF BICYCLES AND PE21 DESTRIANS.—The standards under paragraph (1) 

22 shall— 

23 ‘‘(A) cover all common types of facilities 

24 where pedestrians or bicycles are allowed on a 
57 

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1 road or on associated walkways and bicycle 

2 paths or lanes; and 

3 ‘‘(B) specify that generally, when the in4 creased cost is not excessive, as an element of 

5 good highway design for new construction or re6 construction facilities on which bicycles or pe7 destrians are permitted, the design shall include 

8 appropriate provisions to accommodate bicycles 

9 or pedestrians. 

10 ‘‘(3) INCREASED APPORTIONMENT.— 

11 ‘‘(A) IN GENERAL.—Beginning with the 

12 first fiscal year that begins after the date that 

13 is 2 years after the date of enactment of this 

14 subsection, if a State accepts the recommended 

15 enhanced standards for the State and local 

16 units of government to meet, the State shall re17 ceive a 4 percent increase in the amount of 

18 funds made available to the State under this 

19 section for each fiscal year, if, at least 10 days 

20 before the beginning of the fiscal year, the 

21 State— 

22 ‘‘(i) agrees to follow the enhanced 

23 standards; or 
58 

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1 ‘‘(ii) establishes an alternative en2 hanced standard that the Secretary ap3 proves. 

4 ‘‘(B) SIGNIFICANT COMMITMENT.—In de5 termining the significance of the required com6 mitment of funds under subparagraph (A), the 

7 Secretary shall take into consideration the ef8 fectiveness of the criteria required and an esti9 mation of increased costs. 

10 ‘‘(4) CONSTRUCTION REQUIREMENTS.—The 

11 Secretary and a State may establish differing re12 quirements for the construction of new facilities, for 

13 the rehabilitation of facilities, and for modifications 

14 specifically to improve safety and for facilities based 

15 on the level of expected pedestrian and bicycle traf16 fic.’’. 

17 SEC. 214. MENTAL HEALTH SURVEILLANCE. 

18 Title V of the Public Health Service Act (42 U.S.C. 

19 290aa et seq.) is amended by inserting after section 506B 

20 (42 U.S.C. 290aa-5b) the following: 

21 ‘‘SEC. 506C. MENTAL HEALTH SURVEILLANCE. 

22 ‘‘(a) IN GENERAL.—The Secretary, acting through 

23 the Administrator, and in consultation with the Centers 

24 for Disease Control and Prevention and the Director of 

25 the National Institutes of Health, shall establish and im-
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1 plement public health surveillance measures to address the 

2 mental and behavioral health needs of the population of 

3 the United States and other populations served by the Ad4 ministration, that include— 

5 ‘‘(1) monitoring the mental health status of the 

6 population; 

7 ‘‘(2) monitoring mental and behavioral health 

8 risks; 

9 ‘‘(3) enhancing existing public health surveil10 lance systems to include data on mental and behav11 ioral health status and risks; and 

12 ‘‘(4) monitoring the immediate and long-term 

13 impact of emergencies on population mental health 

14 and behavior. 

15 ‘‘(b) REPORT.—Not later than 1 year after the date 

16 of enactment of this section, the Secretary shall submit 

17 a report to Congress that describes the progress on the 

18 implementation of the surveillance measures described in 

19 subsection (a). 

20 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—There 

21 is authorized to be appropriated $5,000,000 for fiscal year 

22 2005 and $15,000,000 for each of the following fiscal 

23 years.’’. 
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1 Subtitle C—Family Smoking 

2 Prevention and Control 

3 SEC. 221. SHORT TITLE. 

4 This subtitle may be cited as the ‘‘Family Smoking 

5 Prevention and Tobacco Control Act’’. 

6 SEC. 222. FINDINGS. 

7 The Congress finds the following: 

8 (1) The use of tobacco products by the Nation’s 

9 children is a pediatric disease of considerable pro10 portions that results in new generations of tobacco11 dependent children and adults. 

12 (2) A consensus exists within the scientific and 

13 medical communities that tobacco products are in14 herently dangerous and cause cancer, heart disease, 

15 and other serious adverse health effects. 

16 (3) Nicotine is an addictive drug. 

17 (4) Virtually all new users of tobacco products 

18 are under the minimum legal age to purchase such 

19 products. 

20 (5) Tobacco advertising and marketing con21 tribute significantly to the use of nicotine-containing 

22 tobacco products by adolescents. 

23 (6) Because past efforts to restrict advertising 

24 and marketing of tobacco products have failed ade25 quately to curb tobacco use by adolescents, com-
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1 prehensive restrictions on the sale, promotion, and 

2 distribution of such products are needed. 

3 (7) Federal and State governments have lacked 

4 the legal and regulatory authority and resources 

5 they need to address comprehensively the public 

6 health and societal problems caused by the use of to7 bacco products. 

8 (8) Federal and State public health officials, 

9 the public health community, and the public at large 

10 recognize that the tobacco industry should be subject 

11 to ongoing oversight. 

12 (9) Under article I, section 8 of the Constitu13 tion, the Congress is vested with the responsibility 

14 for regulating interstate commerce and commerce 

15 with Indian tribes. 

16 (10) The sale, distribution, marketing, adver17 tising, and use of tobacco products are activities in 

18 and substantially affecting interstate commerce be19 cause they are sold, marketed, advertised, and dis20 tributed in interstate commerce on a nationwide 

21 basis, and have a substantial effect on the Nation’s 

22 economy. 

23 (11) The sale, distribution, marketing, adver24 tising, and use of such products substantially affect 

25 interstate commerce through the health care and 
62 

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1 other costs attributable to the use of tobacco prod2 ucts. 

3 (12) It is in the public interest for Congress to 

4 enact legislation that provides the Food and Drug 

5 Administration with the authority to regulate to6 bacco products and the advertising and promotion of 

7 such products. The benefits to the American people 

8 from enacting such legislation would be significant 

9 in human and economic terms. 

10 (13) Tobacco use is the foremost preventable 

11 cause of premature death in America. It causes over 

12 400,000 deaths in the United States each year and 

13 approximately 8,600,000 Americans have chronic ill14 nesses related to smoking. 

15 (14) Reducing the use of tobacco by minors by 

16 50 percent would prevent well over 6,500,000 of to17 day’s children from becoming regular, daily smokers, 

18 saving over 2,000,000 of them from premature 

19 death due to tobacco induced disease. Such a reduc20 tion in youth smoking would also result in approxi21 mately $75,000,000,000 in savings attributable to 

22 reduced health care costs. 

23 (15) Advertising, marketing, and promotion of 

24 tobacco products have been especially directed to at25 tract young persons to use tobacco products and 
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1 these efforts have resulted in increased use of such 

2 products by youth. Past efforts to oversee these ac3 tivities have not been successful in adequately pre4 venting such increased use. 

5 (16) In 2001, the tobacco industry spent more 

6 than $11,000,000,000 to attract new users, retain 

7 current users, increase current consumption, and 

8 generate favorable long-term attitudes toward smok9 ing and tobacco use. 

10 (17) Tobacco product advertising often 

11 misleadingly portrays the use of tobacco as socially 

12 acceptable and healthful to minors. 

13 (18) Tobacco product advertising is regularly 

14 seen by persons under the age of 18, and persons 

15 under the age of 18 are regularly exposed to tobacco 

16 product promotional efforts. 

17 (19) Through advertisements during and spon18 sorship of sporting events, tobacco has become 

19 strongly associated with sports and has become por20 trayed as an integral part of sports and the healthy 

21 lifestyle associated with rigorous sporting activity. 

22 (20) Children are exposed to substantial and 

23 unavoidable tobacco advertising that leads to favor24 able beliefs about tobacco use, plays a role in leading 

25 young people to overestimate the prevalence of to-
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1 bacco use, and increases the number of young people 

2 who begin to use tobacco. 

3 (21) The use of tobacco products in motion pic4 tures and other mass media glamorizes its use for 

5 young people and encourages them to use tobacco 

6 products. 

7 (22) Tobacco advertising expands the size of 

8 the tobacco market by increasing consumption of to9 bacco products including tobacco use by young peo10 ple. 

11 (23) Children are more influenced by tobacco 

12 advertising than adults, they smoke the most adver13 tised brands. 

14 (24) Tobacco company documents indicate that 

15 young people are an important and often crucial seg16 ment of the tobacco market. Children, who tend to 

17 be more price-sensitive than adults, are influenced 

18 by advertising and promotion practices that result in 

19 drastically reduced cigarette prices. 

20 (25) Comprehensive advertising restrictions will 

21 have a positive effect on the smoking rates of young 

22 people. 

23 (26) Restrictions on advertising are necessary 

24 to prevent unrestricted tobacco advertising from un25 dermining legislation prohibiting access to young 
65 

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1 people and providing for education about tobacco 

2 use. 

3 (27) International experience shows that adver4 tising regulations that are stringent and comprehen5 sive have a greater impact on overall tobacco use 

6 and young people’s use than weaker or less com7 prehensive ones. 

8 (28) Text only requirements, although not as 

9 stringent as a ban, will help reduce underage use of 

10 tobacco products while preserving the informational 

11 function of advertising. 

12 (29) It is in the public interest for Congress to 

13 adopt legislation to address the public health crisis 

14 created by actions of the tobacco industry. 

15 (30) The final regulations promulgated by the 

16 Secretary of Health and Human Services in the Au17 gust 28, 1996, issue of the Federal Register (61 

18 Fed. Reg. 44615–44618) for inclusion as part 897 

19 of title 21, Code of Federal Regulations, are con20 sistent with the First Amendment to the United 

21 States Constitution and with the standards set forth 

22 in the amendments made by this subtitle for the reg23 ulation of tobacco products by the Food and Drug 

24 Administration and the restriction on the sale and 

25 distribution, including access to and the advertising 
66 

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1 and promotion of, tobacco products contained in 

2 such regulations are substantially related to accom3 plishing the public health goals of this subtitle. 

4 (31) The regulations described in paragraph 

5 (30) will directly and materially advance the Federal 

6 Government’s substantial interest in reducing the 

7 number of children and adolescents who use ciga8 rettes and smokeless tobacco and in preventing the 

9 life-threatening health consequences associated with 

10 tobacco use. An overwhelming majority of Americans 

11 who use tobacco products begin using such products 

12 while they are minors and become addicted to the 

13 nicotine in those products before reaching the age of 

14 18. Tobacco advertising and promotion plays a cru15 cial role in the decision of these minors to begin 

16 using tobacco products. Less restrictive and less 

17 comprehensive approaches have not and will not be 

18 effective in reducing the problems addressed by such 

19 regulations. The reasonable restrictions on the ad20 vertising and promotion of tobacco products con21 tained in such regulations will lead to a significant 

22 decrease in the number of minors using and becom23 ing addicted to those products. 

24 (32) The regulations described in paragraph 

25 (30) impose no more extensive restrictions on com-
67 

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1 munication by tobacco manufacturers and sellers 

2 than are necessary to reduce the number of children 

3 and adolescents who use cigarettes and smokeless to4 bacco and to prevent the life-threatening health con5 sequences associated with tobacco use. Such regula6 tions are narrowly tailored to restrict those adver7 tising and promotional practices which are most like8 ly to be seen or heard by youth and most likely to 

9 entice them into tobacco use, while affording tobacco 

10 manufacturers and sellers ample opportunity to con11 vey information about their products to adult con12 sumers. 

13 (33) Tobacco dependence is a chronic disease, 

14 one that typically requires repeated interventions to 

15 achieve long-term or permanent abstinence. 

16 (34) Because the only known safe alternative to 

17 smoking is cessation, interventions should target all 

18 smokers to help them quit completely. 

19 (35) Tobacco products have been used to facili20 tate and finance criminal activities both domestically 

21 and internationally. Illicit trade of tobacco products 

22 has been linked to organized crime and terrorist 

23 groups. 

24 (36) It is essential that the Food and Drug Ad25 ministration review products sold or distributed for 
68 

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1 use to reduce risks or exposures associated with to2 bacco products and that it be empowered to review 

3 any advertising and labeling for such products. It is 

4 also essential that manufacturers, prior to marketing 

5 such products, be required to demonstrate that such 

6 products will meet a series of rigorous criteria, and 

7 will benefit the health of the population as a whole, 

8 taking into account both users of tobacco products 

9 and persons who do not currently use tobacco prod10 ucts. 

11 (37) Unless tobacco products that purport to 

12 reduce the risks to the public of tobacco use actually 

13 reduce such risks, those products can cause substan14 tial harm to the public health to the extent that the 

15 individuals, who would otherwise not consume to16 bacco products or would consume such products less, 

17 use tobacco products purporting to reduce risk. 

18 Those who use products sold or distributed as modi19 fied risk products that do not in fact reduce risk, 

20 rather than quitting or reducing their use of tobacco 

21 products, have a substantially increased likelihood of 

22 suffering disability and premature death. The costs 

23 to society of the widespread use of products sold or 

24 distributed as modified risk products that do not in 

25 fact reduce risk or that increase risk include thou-
69 

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1 sands of unnecessary deaths and injuries and huge 

2 costs to our health care system. 

3 (38) As the National Cancer Institute has 

4 found, many smokers mistakenly believe that ‘‘low 

5 tar’’ and ‘‘light’’ cigarettes cause fewer health prob6 lems than other cigarettes. As the National Cancer 

7 Institute has also found, mistaken beliefs about the 

8 health consequences of smoking ‘‘low tar’’ and 

9 ‘‘light’’ cigarettes can reduce the motivation to quit 

10 smoking entirely and thereby lead to disease and 

11 death. 

12 (39) Recent studies have demonstrated that 

13 there has been no reduction in risk on a population14 wide basis from ‘‘low tar’’ and ‘‘light’’ cigarettes and 

15 such products may actually increase the risk of to16 bacco use. 

17 (40) The dangers of products sold or distrib18 uted as modified risk tobacco products that do not 

19 in fact reduce risk are so high that there is a com20 pelling governmental interest in insuring that state21 ments about modified risk tobacco products are com22 plete, accurate, and relate to the overall disease risk 

23 of the product. 

24 (41) As the Federal Trade Commission has 

25 found, consumers have misinterpreted advertise-
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1 ments in which one product is claimed to be less 

2 harmful than a comparable product, even in the 

3 presence of disclosures and advisories intended to 

4 provide clarification. 

5 (42) Permitting manufacturers to make unsub6 stantiated statements concerning modified risk to7 bacco products, whether express or implied, even if 

8 accompanied by disclaimers would be detrimental to 

9 the public health. 

10 (43) The only way to effectively protect the 

11 public health from the dangers of unsubstantiated 

12 modified risk tobacco products is to empower the 

13 Food and Drug Administration to require that prod14 ucts that tobacco manufacturers sold or distributed 

15 for risk reduction be approved in advance of mar16 keting, and to require that the evidence relied on to 

17 support approval of these products is rigorous. 

18 SEC. 223. PURPOSE. 

19 The purposes of this subtitle are— 

20 (1) to provide authority to the Food and Drug 

21 Administration to regulate tobacco products under 

22 the Federal Food, Drug, and Cosmetic Act (21 

23 U.S.C. 301 et seq.), by recognizing it as the primary 

24 Federal regulatory authority with respect to the 
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1 manufacture, marketing, and distribution of tobacco 

2 products; 

3 (2) to ensure that the Food and Drug Adminis4 tration has the authority to address issues of par5 ticular concern to public health officials, especially 

6 the use of tobacco by young people and dependence 

7 on tobacco; 

8 (3) to authorize the Food and Drug Adminis9 tration to set national standards controlling the 

10 manufacture of tobacco products and the identity, 

11 public disclosure, and amount of ingredients used in 

12 such products; 

13 (4) to provide new and flexible enforcement au14 thority to ensure that there is effective oversight of 

15 the tobacco industry’s efforts to develop, introduce, 

16 and promote less harmful tobacco products; 

17 (5) to vest the Food and Drug Administration 

18 with the authority to regulate the levels of tar, nico19 tine, and other harmful components of tobacco prod20 ucts; 

21 (6) in order to ensure that consumers are better 

22 informed, to require tobacco product manufacturers 

23 to disclose research which has not previously been 

24 made available, as well as research generated in the 
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1 future, relating to the health and dependency effects 

2 or safety of tobacco products; 

3 (7) to continue to permit the sale of tobacco 

4 products to adults in conjunction with measures to 

5 ensure that they are not sold or accessible to under6 age purchasers; 

7 (8) to impose appropriate regulatory controls on 

8 the tobacco industry; 

9 (9) to promote cessation to reduce disease risk 

10 and the social costs associated with tobacco related 

11 diseases; and 

12 (10) to strengthen legislation against illicit 

13 trade in tobacco products. 

14 SEC. 224. SCOPE AND EFFECT. 

15 (a) INTENDED EFFECT.—Nothing in this subtitle (or 

16 an amendment made by this subtitle) shall be construed 

17 to— 

18 (1) establish a precedent with regard to any 

19 other industry, situation, circumstance, or legal ac20 tion; or 

21 (2) affect any action pending in Federal, State, 

22 or Tribal court, or any agreement, consent decree, or 

23 contract of any kind. 

24 (b) AGRICULTURAL ACTIVITIES.—The provisions of 

25 this subtitle (or an amendment made by this subtitle) 
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1 which authorize the Secretary to take certain actions with 

2 regard to tobacco and tobacco products shall not be con3 strued to affect any authority of the Secretary of Agri4 culture under existing law regarding the growing, cultiva5 tion, or curing of raw tobacco. 

6 SEC. 225. SEVERABILITY. 

7 If any provision of this subtitle, the amendments 

8 made by this subtitle, or the application of any provision 

9 of this subtitle to any person or circumstance is held to 

10 be invalid, the remainder of this subtitle, the amendments 

11 made by this subtitle, and the application of the provisions 

12 of this subtitle to any other person or circumstance shall 

13 not be affected and shall continue to be enforced to the 

14 fullest extent possible. 

15 CHAPTER 1—AUTHORITY OF THE FOOD 

16 AND DRUG ADMINISTRATION 

17 SEC. 231. AMENDMENT OF FEDERAL FOOD, DRUG, AND 

18 COSMETIC ACT. 

19 (a) DEFINITION OF TOBACCO PRODUCTS.—Section 

20 201 of the Federal Food, Drug, and Cosmetic Act (21 

21 U.S.C. 321) is amended by adding at the end the fol22 lowing: 

23 ‘‘(nn)(1) The term ‘tobacco product’ means any prod24 uct made or derived from tobacco that is intended for 

25 human consumption, including any component, part, or 
74 

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1 accessory of a tobacco product (except for raw materials 

2 other than tobacco used in manufacturing a component, 

3 part, or accessory of a tobacco product). 

4 ‘‘(2) The term ‘tobacco product’ does not mean— 

5 ‘‘(A) a product in the form of conventional food 

6 (including water and chewing gum), a product rep7 resented for use as or for use in a conventional food, 

8 or a product that is intended for ingestion in cap9 sule, tablet, softgel, or liquid form; or 

10 ‘‘(B) an article that is approved or is regulated 

11 as a drug by the Food and Drug Administration. 

12 ‘‘(3) The products described in paragraph (2)(A) 

13 shall be subject to chapter IV or chapter V of this Act 

14 and the articles described in paragraph (2)(B) shall be 

15 subject to chapter V of this Act. 

16 ‘‘(4) A tobacco product may not be marketed in com17 bination with any other article or product regulated under 

18 this Act (including a drug, biologic, food, cosmetics, med19 ical device, or a dietary supplement).’’. 

20 (b) FDA AUTHORITY OVER TOBACCO PRODUCTS.— 

21 The Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

22 301 et seq.) is amended— 

23 (1) by redesignating chapter IX as chapter X; 

24 (2) by redesignating sections 901 through 907 

25 as sections 1001 through 1007; and 
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1 (3) by inserting after section 803 the following: 

2 ‘‘CHAPTER IX—TOBACCO 

3 PRODUCTS 

4 ‘‘SEC. 900. DEFINITIONS. 

5 ‘‘In this chapter: 

6 ‘‘(1) ADDITIVE.—The term ‘additive’ means 

7 any substance the intended use of which results or 

8 may reasonably be expected to result, directly or in9 directly, in its becoming a component or otherwise 

10 affecting the characteristic of any tobacco product 

11 (including any substances intended for use as a fla12 voring, coloring or in producing, manufacturing, 

13 packing, processing, preparing, treating, packaging, 

14 transporting, or holding), except that such term does 

15 not include tobacco or a pesticide chemical residue 

16 in or on raw tobacco or a pesticide chemical. 

17 ‘‘(2) BRAND.—The term ‘brand’ means a vari18 ety of tobacco product distinguished by the tobacco 

19 used, tar content, nicotine content, flavoring used, 

20 size, filtration, or packaging, logo, registered trade21 mark or brand name, identifiable pattern of colors, 

22 or any combination of such attributes. 

23 ‘‘(3) CIGARETTE.—The term ‘cigarette’ has the 

24 meaning given that term by section 3(1) of the Fed25 eral Cigarette Labeling and Advertising Act (15 
76 

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1 U.S.C. 1332(1)), but also includes tobacco, in any 

2 form, that is functional in the product, which, be3 cause of its appearance, the type of tobacco used in 

4 the filler, or its packaging and labeling, is likely to 

5 be offered to, or purchased by, consumers as a ciga6 rette or as roll-your-own tobacco. 

7 ‘‘(4) CIGARETTE TOBACCO.—The term ‘ciga8 rette tobacco’ means any product that consists of 

9 loose tobacco that is intended for use by consumers 

10 in a cigarette. Unless otherwise stated, the require11 ments for cigarettes shall also apply to cigarette to12 bacco. 

13 ‘‘(5) COMMERCE.—The term ‘commerce’ has 

14 the meaning given that term by section 3(2) of the 

15 Federal Cigarette Labeling and Advertising Act (15 

16 U.S.C. 1332(2)). 

17 ‘‘(6) COUNTERFEIT TOBACCO PRODUCT.—The 

18 term ‘counterfeit tobacco product’ means a tobacco 

19 product (or the container or labeling of such a prod20 uct) that, without authorization, bears the trade21 mark, trade name, or other identifying mark, im22 print or device, or any likeness thereof, of a tobacco 

23 product listed in a registration under section 

24 905(i)(1). 
77 

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1 ‘‘(7) DISTRIBUTOR.—The term ‘distributor’ as 

2 regards a tobacco product means any person who 

3 furthers the distribution of a tobacco product, 

4 whether domestic or imported, at any point from the 

5 original place of manufacture to the person who sells 

6 or distributes the product to individuals for personal 

7 consumption. Common carriers are not considered 

8 distributors for purposes of this chapter. 

9 ‘‘(8) ILLICIT TRADE.—The term ‘illicit trade’ 

10 means any practice or conduct prohibited by law 

11 which relates to production, shipment, receipt, pos12 session, distribution, sale, or purchase of tobacco 

13 products including any practice or conduct intended 

14 to facilitate such activity. 

15 ‘‘(9) INDIAN TRIBE.—The term ‘Indian tribe’ 

16 has the meaning given such term in section 4(e) of 

17 the Indian Self Determination and Education Assist18 ance Act (25 U.S.C. 450b(e)). 

19 ‘‘(10) LITTLE CIGAR.—The term ‘little cigar’ 

20 has the meaning given that term by section 3(7) of 

21 the Federal Cigarette Labeling and Advertising Act 

22 (15 U.S.C. 1332(7)). 

23 ‘‘(11) NICOTINE.—The term ‘nicotine’ means 

24 the chemical substance named 3-(1-Methyl-2- 
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1 pyrrolidinyl) pyridine or C[10]H[14]N[2], including 

2 any salt or complex of nicotine. 

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

4 pack, box, carton, or container of any kind or, if no 

5 other container, any wrapping (including cello6 phane), in which a tobacco product is offered for 

7 sale, sold, or otherwise distributed to consumers. 

8 ‘‘(13) RETAILER.—The term ‘retailer’ means 

9 any person who sells tobacco products to individuals 

10 for personal consumption, or who operates a facility 

11 where self-service displays of tobacco products are 

12 permitted. 

13 ‘‘(14) ROLL-YOUR-OWN TOBACCO.—The term 

14 ‘roll-your-own tobacco’ means any tobacco which, be15 cause of its appearance, type, packaging, or labeling, 

16 is suitable for use and likely to be offered to, or pur17 chased by, consumers as tobacco for making ciga18 rettes. 

19 ‘‘(15) SMOKE CONSTITUENT.—The term ‘smoke 

20 constituent’ means any chemical or chemical com21 pound in mainstream or sidestream tobacco smoke 

22 that either transfers from any component of the cig23 arette to the smoke or that is formed by the combus24 tion or heating of tobacco, additives, or other compo25 nent of the tobacco product. 
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1 ‘‘(16) SMOKELESS TOBACCO.—The term 

2 ‘smokeless tobacco’ means any tobacco product that 

3 consists of cut, ground, powdered, or leaf tobacco 

4 and that is intended to be placed in the oral or nasal 

5 cavity. 

6 ‘‘(17) STATE.—The term ‘State’ means any 

7 State of the United States and, for purposes of this 

8 chapter, includes the District of Columbia, the Com9 monwealth of Puerto Rico, Guam, the Virgin Is10 lands, American Samoa, Wake Island, Midway Is11 lands, Kingman Reef, Johnston Atoll, the Northern 

12 Mariana Islands, and any other trust territory or 

13 possession of the United States. 

14 ‘‘(18) TOBACCO PRODUCT MANUFACTURER.— 

15 Term ‘tobacco product manufacturer’ means any 

16 person, including any repacker or relabeler, who— 

17 ‘‘(A) manufactures, fabricates, assembles, 

18 processes, or labels a tobacco product; or 

19 ‘‘(B) imports a finished cigarette or 

20 smokeless tobacco product for sale or distribu21 tion in the United States. 

22 ‘‘(19) UNITED STATES.—The term ‘United 

23 States’ means the 50 States of the United States of 

24 America and the District of Columbia, the Common25 wealth of Puerto Rico, Guam, the Virgin Islands, 
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1 American Samoa, Wake Island, Midway Islands, 

2 Kingman Reef, Johnston Atoll, the Northern Mar3 iana Islands, and any other trust territory or posses4 sion of the United States. 

5 ‘‘SEC. 901. FDA AUTHORITY OVER TOBACCO PRODUCTS. 

6 ‘‘(a) IN GENERAL.—Tobacco products shall be regu7 lated by the Secretary under this chapter and shall not 

8 be subject to the provisions of chapter V, unless— 

9 ‘‘(1) such products are intended for use in the 

10 diagnosis, cure, mitigation, treatment, or prevention 

11 of disease (within the meaning of section 

12 201(g)(1)(B) or section 201(h)(2)); or 

13 ‘‘(2) a claim is made for such products under 

14 section 201(g)(1)(C) or 201(h)(3); 

15 other than modified risk tobacco products approved 

16 in accordance with section 911. 

17 ‘‘(b) APPLICABILITY.—This chapter shall apply to all 

18 tobacco products subject to the regulations referred to in 

19 section 232 of the Family Smoking Prevention and To20 bacco Control Act, and to any other tobacco products that 

21 the Secretary by regulation deems to be subject to this 

22 chapter. 

23 ‘‘(c) SCOPE.— 

24 ‘‘(1) IN GENERAL.—Nothing in this chapter, or 

25 any policy issued or regulation promulgated there-
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1 under, or the Family Smoking Prevention and To2 bacco Control Act, shall be construed to affect the 

3 Secretary’s authority over, or the regulation of, 

4 products under this Act that are not tobacco prod5 ucts under chapter V or any other chapter. 

6 ‘‘(2) LIMITATION OF AUTHORITY.— 

7 ‘‘(A) IN GENERAL.—The provisions of this 

8 chapter shall not apply to tobacco leaf that is 

9 not in the possession of a manufacturer of to10 bacco products, or to the producers of tobacco 

11 leaf, including tobacco growers, tobacco ware12 houses, and tobacco grower cooperatives, nor 

13 shall any employee of the Food and Drug Ad14 ministration have any authority to enter onto a 

15 farm owned by a producer of tobacco leaf with16 out the written consent of such producer. 

17 ‘‘(B) EXCEPTION.—Notwithstanding any 

18 other provision of this subparagraph, if a pro19 ducer of tobacco leaf is also a tobacco product 

20 manufacturer or controlled by a tobacco prod21 uct manufacturer, the producer shall be subject 

22 to this chapter in the producer’s capacity as a 

23 manufacturer. 

24 ‘‘(C) RULE OF CONSTRUCTION.—Nothing 

25 in this chapter shall be construed to grant the 
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1 Secretary authority to promulgate regulations on 

2 any matter that involves the production of to3 bacco leaf or a producer thereof, other than ac4 tivities by a manufacturer affecting production. 

5 ‘‘SEC. 902. ADULTERATED TOBACCO PRODUCTS. 

6 ‘‘A tobacco product shall be deemed to be adulterated 

7 if— 

8 ‘‘(1) it consists in whole or in part of any filthy, 

9 putrid, or decomposed substance, or is otherwise 

10 contaminated by any added poisonous or added dele11 terious substance that may render the product inju12 rious to health; 

13 ‘‘(2) it has been prepared, packed, or held 

14 under insanitary conditions whereby it may have 

15 been contaminated with filth, or whereby it may 

16 have been rendered injurious to health; 

17 ‘‘(3) its package is composed, in whole or in 

18 part, of any poisonous or deleterious substance 

19 which may render the contents injurious to health; 

20 ‘‘(4) it is, or purports to be or is represented 

21 as, a tobacco product which is subject to a tobacco 

22 product standard established under section 907 un23 less such tobacco product is in all respects in con24 formity with such standard; 
83 

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1 ‘‘(5)(A) it is required by section 910(a) to have 

2 premarket approval and does not have an approved 

3 application in effect; 

4 ‘‘(B) it is in violation of the order approving 

5 such an application; or 

6 ‘‘(6) the methods used in, or the facilities or 

7 controls used for, its manufacture, packing or stor8 age are not in conformity with applicable require9 ments under section 906(e)(1) or an applicable con10 dition prescribed by an order under section 

11 906(e)(2); or 

12 ‘‘(7) it is in violation of section 911. 

13 ‘‘SEC. 903. MISBRANDED TOBACCO PRODUCTS. 

14 ‘‘(a) IN GENERAL.—A tobacco product shall be 

15 deemed to be misbranded— 

16 ‘‘(1) if its labeling is false or misleading in any 

17 particular; 

18 ‘‘(2) if in package form unless it bears a label 

19 containing— 

20 ‘‘(A) the name and place of business of the 

21 tobacco product manufacturer, packer, or dis22 tributor; 

23 ‘‘(B) an accurate statement of the quantity 

24 of the contents in terms of weight, measure, or 

25 numerical count; 
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1 ‘‘(C) an accurate statement of the percent2 age of the tobacco used in the product that is 

3 domestically grown tobacco and the percentage 

4 that is foreign grown tobacco; and 

5 ‘‘(D) the statement required under section 

6 921(a), 

7 except that under subparagraph (B) reasonable vari8 ations shall be permitted, and exemptions as to 

9 small packages shall be established, by regulations 

10 prescribed by the Secretary; 

11 ‘‘(3) if any word, statement, or other informa12 tion required by or under authority of this chapter 

13 to appear on the label or labeling is not prominently 

14 placed thereon with such conspicuousness (as com15 pared with other words, statements or designs in the 

16 labeling) and in such terms as to render it likely to 

17 be read and understood by the ordinary individual 

18 under customary conditions of purchase and use; 

19 ‘‘(4) if it has an established name, unless its 

20 label bears, to the exclusion of any other nonpropri21 etary name, its established name prominently print22 ed in type as required by the Secretary by regula23 tion; 

24 ‘‘(5) if the Secretary has issued regulations re25 quiring that its labeling bear adequate directions for 
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1 use, or adequate warnings against use by children, 

2 that are necessary for the protection of users unless 

3 its labeling conforms in all respects to such regula4 tions; 

5 ‘‘(6) if it was manufactured, prepared, propa6 gated, compounded, or processed in any State in an 

7 establishment not duly registered under section 

8 905(b), 905(c), 905(d), or 905(h), if it was not in9 cluded in a list required by section 905(i), if a notice 

10 or other information respecting it was not provided 

11 as required by such section or section 905(j), or if 

12 it does not bear such symbols from the uniform sys13 tem for identification of tobacco products prescribed 

14 under section 905(e) as the Secretary by regulation 

15 requires; 

16 ‘‘(7) if, in the case of any tobacco product dis17 tributed or offered for sale in any State— 

18 ‘‘(A) its advertising is false or misleading 

19 in any particular; or 

20 ‘‘(B) it is sold or distributed in violation of 

21 regulations prescribed under section 906(d); 

22 ‘‘(8) unless, in the case of any tobacco product 

23 distributed or offered for sale in any State, the man24 ufacturer, packer, or distributor thereof includes in 

25 all advertisements and other descriptive printed mat-
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1 ter issued or caused to be issued by the manufac2 turer, packer, or distributor with respect to that to3 bacco product— 

4 ‘‘(A) a true statement of the tobacco prod5 uct’s established name as described in para6 graph (4), printed prominently; and 

7 ‘‘(B) a brief statement of— 

8 ‘‘(i) the uses of the tobacco product 

9 and relevant warnings, precautions, side 

10 effects, and contraindications; and 

11 ‘‘(ii) in the case of specific tobacco 

12 products made subject to a finding by the 

13 Secretary after notice and opportunity for 

14 comment that such action is appropriate to 

15 protect the public health, a full description 

16 of the components of such tobacco product 

17 or the formula showing quantitatively each 

18 ingredient of such tobacco product to the 

19 extent required in regulations which shall 

20 be issued by the Secretary after an oppor21 tunity for a hearing; 

22 ‘‘(9) if it is a tobacco product subject to a to23 bacco product standard established under section 

24 907, unless it bears such labeling as may be pre25 scribed in such tobacco product standard; or 
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1 ‘‘(10) if there was a failure or refusal— 

2 ‘‘(A) to comply with any requirement pre3 scribed under section 904 or 908; or 

4 ‘‘(B) to furnish any material or informa5 tion required under section 909. 

6 ‘‘(b) PRIOR APPROVAL OF LABEL STATEMENTS.— 

7 The Secretary may, by regulation, require prior approval 

8 of statements made on the label of a tobacco product. No 

9 regulation issued under this subsection may require prior 

10 approval by the Secretary of the content of any advertise11 ment, except for modified risk tobacco products as pro12 vided in section 911. No advertisement of a tobacco prod13 uct published after the date of enactment of the Family 

14 Smoking Prevention and Tobacco Control Act shall, with 

15 respect to the language of label statements as prescribed 

16 under section 4 of the Cigarette Labeling and Advertising 

17 Act and section 3 of the Comprehensive Smokeless To18 bacco Health Education Act of 1986 or the regulations 

19 issued under such sections, be subject to the provisions 

20 of sections 12 through 15 of the Federal Trade Commis21 sion Act (15 U.S.C. 52 through 55). 

22 ‘‘SEC. 904. SUBMISSION OF HEALTH INFORMATION TO THE 

23 SECRETARY. 

24 ‘‘(a) REQUIREMENT.—Not later than 6 months after 

25 the date of enactment of the Family Smoking Prevention 
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1 and Tobacco Control Act, each tobacco product manufac2 turer or importer, or agents thereof, shall submit to the 

3 Secretary the following information: 

4 ‘‘(1) A listing of all ingredients, including to5 bacco, substances, compounds, and additives that 

6 are, as of such date, added by the manufacturer to 

7 the tobacco, paper, filter, or other part of each to8 bacco product by brand and by quantity in each 

9 brand and subbrand. 

10 ‘‘(2) A description of the content, delivery, and 

11 form of nicotine in each tobacco product measured 

12 in milligrams of nicotine in accordance with regula13 tions promulgated by the Secretary in accordance 

14 with section 4(a)(4) of the Federal Cigarette Label15 ing and Advertising Act. 

16 ‘‘(3) A listing of all constituents, including 

17 smoke constituents as applicable, identified by the 

18 Secretary as harmful or potentially harmful to 

19 health in each tobacco product, and as applicable in 

20 the smoke of each tobacco product, by brand and by 

21 quantity in each brand and subbrand. Effective be22 ginning 2 years after the date of enactment of this 

23 chapter, the manufacturer, importer, or agent shall 

24 comply with regulations promulgated under section 
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1 915 in reporting information under this paragraph, 

2 where applicable. 

3 ‘‘(4) All documents developed after the date of 

4 enactment of the Family Smoking Prevention and 

5 Tobacco Control Act that relate to health, toxi6 cological, behavioral, or physiologic effects of current 

7 or future tobacco products, their constituents (in8 cluding smoke constituents), ingredients, compo9 nents, and additives. 

10 ‘‘(b) DATA SUBMISSION.—At the request of the Sec11 retary, each tobacco product manufacturer or importer of 

12 tobacco products, or agents thereof, shall submit the fol13 lowing: 

14 ‘‘(1) Any or all documents (including under15 lying scientific information) relating to research ac16 tivities, and research findings, conducted, supported, 

17 or possessed by the manufacturer (or agents thereof) 

18 on the health, toxicological, behavioral, or physio19 logic effects of tobacco products and their constitu20 ents (including smoke constituents), ingredients, 

21 components, and additives. 

22 ‘‘(2) Any or all documents (including under23 lying scientific information) relating to research ac24 tivities, and research findings, conducted, supported, 

25 or possessed by the manufacturer (or agents thereof) 
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1 that relate to the issue of whether a reduction in 

2 risk to health from tobacco products can occur upon 

3 the employment of technology available or known to 

4 the manufacturer. 

5 ‘‘(3) Any or all documents (including under6 lying scientific or financial information) relating to 

7 marketing research involving the use of tobacco 

8 products or marketing practices and the effective9 ness of such practices used by tobacco manufactur10 ers and distributors. 

11 An importer of a tobacco product not manufactured in the 

12 United States shall supply the information required of a 

13 tobacco product manufacturer under this subsection. 

14 ‘‘(c) TIME FOR SUBMISSION.— 

15 ‘‘(1) IN GENERAL.—At least 90 days prior to 

16 the delivery for introduction into interstate com17 merce of a tobacco product not on the market on the 

18 date of enactment of the Family Smoking Preven19 tion and Tobacco Control Act, the manufacturer of 

20 such product shall provide the information required 

21 under subsection (a). 

22 ‘‘(2) DISCLOSURE OF ADDITIVE.—If at any 

23 time a tobacco product manufacturer adds to its to24 bacco products a new tobacco additive or increases 

25 the quantity of an existing tobacco additive, the 
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1 manufacturer shall, except as provided in paragraph 

2 (3), at least 90 days prior to such action so advise 

3 the Secretary in writing. 

4 ‘‘(3) DISCLOSURE OF OTHER ACTIONS.—If at 

5 any time a tobacco product manufacturer eliminates 

6 or decreases an existing additive, or adds or in7 creases an additive that has by regulation been des8 ignated by the Secretary as an additive that is not 

9 a human or animal carcinogen, or otherwise harmful 

10 to health under intended conditions of use, the man11 ufacturer shall within 60 days of such action so ad12 vise the Secretary in writing. 

13 ‘‘(d) DATA LIST.— 

14 ‘‘(1) IN GENERAL.—Not later than 3 years 

15 after the date of enactment of the Family Smoking 

16 Prevention and Tobacco Control Act, and annually 

17 thereafter, the Secretary shall publish in a format 

18 that is understandable and not misleading to a lay 

19 person, and place on public display (in a manner de20 termined by the Secretary) the list established under 

21 subsection (e). 

22 ‘‘(2) CONSUMER RESEARCH.—The Secretary 

23 shall conduct periodic consumer research to ensure 

24 that the list published under paragraph (1) is not 

25 misleading to lay persons. Not later than 5 years 
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1 after the date of enactment of the Family Smoking 

2 Prevention and Tobacco Control Act, the Secretary 

3 shall submit to the appropriate committees of Con4 gress a report on the results of such research, to5 gether with recommendations on whether such publi6 cation should be continued or modified. 

7 ‘‘(e) DATA COLLECTION.—Not later than 12 months 

8 after the date of enactment of the Family Smoking Pre9 vention and Tobacco Control Act, the Secretary shall es10 tablish a list of harmful and potentially harmful constitu11 ents, including smoke constituents, to health in each to12 bacco product by brand and by quantity in each brand 

13 and subbrand. The Secretary shall publish a public notice 

14 requesting the submission by interested persons of sci15 entific and other information concerning the harmful and 

16 potentially harmful constituents in tobacco products and 

17 tobacco smoke. 

18 ‘‘SEC. 905. ANNUAL REGISTRATION. 

19 ‘‘(a) DEFINITIONS.—In this section: 

20 ‘‘(1) MANUFACTURE, PREPARATION, 

21 COMPOUNDING, OR PROCESSING.—The term ‘manu22 facture, preparation, compounding, or processing’ 

23 shall include repackaging or otherwise changing the 

24 container, wrapper, or labeling of any tobacco prod25 uct package in furtherance of the distribution of the 
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1 tobacco product from the original place of manufac2 ture to the person who makes final delivery or sale 

3 to the ultimate consumer or user. 

4 ‘‘(2) NAME.—The term ‘name’ shall include in 

5 the case of a partnership the name of each partner 

6 and, in the case of a corporation, the name of each 

7 corporate officer and director, and the State of in8 corporation. 

9 ‘‘(b) REGISTRATION BY OWNERS AND OPERATORS.— 

10 On or before December 31 of each year every person who 

11 owns or operates any establishment in any State engaged 

12 in the manufacture, preparation, compounding, or proc13 essing of a tobacco product or tobacco products shall reg14 ister with the Secretary the name, places of business, and 

15 all such establishments of that person. 

16 ‘‘(c) REGISTRATION OF NEW OWNERS AND OPERA17 TORS.—Every person upon first engaging in the manufac18 ture, preparation, compounding, or processing of a tobacco 

19 product or tobacco products in any establishment owned 

20 or operated in any State by that person shall immediately 

21 register with the Secretary that person’s name, place of 

22 business, and such establishment. 

23 ‘‘(d) REGISTRATION OF ADDED ESTABLISHMENTS.— 

24 Every person required to register under subsection (b) or 

25 (c) shall immediately register with the Secretary any addi-
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1 tional establishment which that person owns or operates 

2 in any State and in which that person begins the manufac3 ture, preparation, compounding, or processing of a tobacco 

4 product or tobacco products. 

5 ‘‘(e) UNIFORM PRODUCT IDENTIFICATION SYS6 TEM.—The Secretary may by regulation prescribe a uni7 form system for the identification of tobacco products and 

8 may require that persons who are required to list such 

9 tobacco products under subsection (i) shall list such to10 bacco products in accordance with such system. 

11 ‘‘(f) PUBLIC ACCESS TO REGISTRATION INFORMA12 TION.—The Secretary shall make available for inspection, 

13 to any person so requesting, any registration filed under 

14 this section. 

15 ‘‘(g) BIENNIAL INSPECTION OF REGISTERED ESTAB16 LISHMENTS.—Every establishment in any State registered 

17 with the Secretary under this section shall be subject to 

18 inspection under section 704, and every such establish19 ment engaged in the manufacture, compounding, or proc20 essing of a tobacco product or tobacco products shall be 

21 so inspected by 1 or more officers or employees duly des22 ignated by the Secretary at least once in the 2-year period 

23 beginning with the date of registration of such establish24 ment under this section and at least once in every succes25 sive 2-year period thereafter. 
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1 ‘‘(h) FOREIGN ESTABLISHMENTS SHALL REG2 ISTER.—Any establishment within any foreign country en3 gaged in the manufacture, preparation, compounding, or 

4 processing of a tobacco product or tobacco products, shall 

5 register under this section under regulations promulgated 

6 by the Secretary. Such regulations shall require such es7 tablishment to provide the information required by sub8 section (i) of this section and shall include provisions for 

9 registration of any such establishment upon condition that 

10 adequate and effective means are available, by arrange11 ment with the government of such foreign country or oth12 erwise, to enable the Secretary to determine from time to 

13 time whether tobacco products manufactured, prepared, 

14 compounded, or processed in such establishment, if im15 ported or offered for import into the United States, shall 

16 be refused admission on any of the grounds set forth in 

17 section 801(a). 

18 ‘‘(i) REGISTRATION INFORMATION.— 

19 ‘‘(1) PRODUCT LIST.—Every person who reg20 isters with the Secretary under subsection (b), (c), 

21 (d), or (h) shall, at the time of registration under 

22 any such subsection, file with the Secretary a list of 

23 all tobacco products which are being manufactured, 

24 prepared, compounded, or processed by that person 

25 for commercial distribution and which has not been 
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1 included in any list of tobacco products filed by that 

2 person with the Secretary under this paragraph or 

3 paragraph (2) before such time of registration. Such 

4 list shall be prepared in such form and manner as 

5 the Secretary may prescribe and shall be accom6 panied by— 

7 ‘‘(A) in the case of a tobacco product con8 tained in the applicable list with respect to 

9 which a tobacco product standard has been es10 tablished under section 907 or which is subject 

11 to section 910, a reference to the authority for 

12 the marketing of such tobacco product and a 

13 copy of all labeling for such tobacco product; 

14 ‘‘(B) in the case of any other tobacco prod15 uct contained in an applicable list, a copy of all 

16 consumer information and other labeling for 

17 such tobacco product, a representative sampling 

18 of advertisements for such tobacco product, 

19 and, upon request made by the Secretary for 

20 good cause, a copy of all advertisements for a 

21 particular tobacco product; and 

22 ‘‘(C) if the registrant filing a list has de23 termined that a tobacco product contained in 

24 such list is not subject to a tobacco product 

25 standard established under section 907, a brief 
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1 statement of the basis upon which the registrant 

2 made such determination if the Secretary re3 quests such a statement with respect to that par4 ticular tobacco product. 

5 ‘‘(2) BIANNUAL REPORT OF ANY CHANGE IN

6 PRODUCT LIST.—Each person who registers with the 

7 Secretary under this section shall report to the Sec8 retary once during the month of June of each year 

9 and once during the month of December of each 

10 year the following: 

11 ‘‘(A) A list of each tobacco product intro12 duced by the registrant for commercial distribu13 tion which has not been included in any list 

14 previously filed by that person with the Sec15 retary under this subparagraph or paragraph 

16 (1). A list under this subparagraph shall list a 

17 tobacco product by its established name and 

18 shall be accompanied by the other information 

19 required by paragraph (1). 

20 ‘‘(B) If since the date the registrant last 

21 made a report under this paragraph that person 

22 has discontinued the manufacture, preparation, 

23 compounding, or processing for commercial dis24 tribution of a tobacco product included in a list 

25 filed under subparagraph (A) or paragraph (1), 
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1 notice of such discontinuance, the date of such 

2 discontinuance, and the identity of its estab3 lished name. 

4 ‘‘(C) If since the date the registrant re5 ported under subparagraph (B) a notice of dis6 continuance that person has resumed the manu7 facture, preparation, compounding, or proc8 essing for commercial distribution of the to9 bacco product with respect to which such notice 

10 of discontinuance was reported, notice of such 

11 resumption, the date of such resumption, the 

12 identity of such tobacco product by established 

13 name, and other information required by para14 graph (1), unless the registrant has previously 

15 reported such resumption to the Secretary 

16 under this subparagraph. 

17 ‘‘(D) Any material change in any informa18 tion previously submitted under this paragraph 

19 or paragraph (1). 

20 ‘‘(j) REPORT PRECEDING INTRODUCTION OF CER21 TAIN SUBSTANTIALLY-EQUIVALENT PRODUCTS INTO

22 INTERSTATE COMMERCE.— 

23 ‘‘(1) IN GENERAL.—Each person who is re24 quired to register under this section and who pro25 poses to begin the introduction or delivery for intro-
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1 duction into interstate commerce for commercial dis2 tribution of a tobacco product intended for human 

3 use that was not commercially marketed (other than 

4 for test marketing) in the United States as of June 

5 1, 2003, shall, at least 90 days prior to making such 

6 introduction or delivery, report to the Secretary (in 

7 such form and manner as the Secretary shall pre8 scribe)— 

9 ‘‘(A) the basis for such person’s determina10 tion that the tobacco product is substantially 

11 equivalent, within the meaning of section 910, 

12 to a tobacco product commercially marketed 

13 (other than for test marketing) in the United 

14 States as of June 1, 2003, that is in compliance 

15 with the requirements of this Act; and 

16 ‘‘(B) action taken by such person to com17 ply with the requirements under section 907 

18 that are applicable to the tobacco product. 

19 ‘‘(2) APPLICATION TO CERTAIN POST JUNE 1, 

20 2003 PRODUCTS.—A report under this subsection for 

21 a tobacco product that was first introduced or deliv22 ered for introduction into interstate commerce for 

23 commercial distribution in the United States after 

24 June 1, 2003, and prior to the date that is 15 

25 months after the date of enactment of the Family 
100 

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1 Smoking Prevention and Tobacco Control Act shall 

2 be submitted to the Secretary not later than 15 

3 months after such date of enactment. 

4 ‘‘(3) EXEMPTIONS.— 

5 ‘‘(A) IN GENERAL.—The Secretary may by 

6 regulation, exempt from the requirements of 

7 this subsection tobacco products that are modi8 fied by adding or deleting a tobacco additive, or 

9 increasing or decreasing the quantity of an ex10 isting tobacco additive, if the Secretary deter11 mines that— 

12 ‘‘(i) such modification would be a 

13 minor modification of a tobacco product 

14 authorized for sale under this Act; 

15 ‘‘(ii) a report under this subsection is 

16 not necessary to ensure that permitting the 

17 tobacco product to be marketed would be 

18 appropriate for protection of the public 

19 health; and 

20 ‘‘(iii) an exemption is otherwise appro21 priate. 

22 ‘‘(B) REGULATIONS.—Not later than 9 

23 months after the date of enactment of the Fam24 ily Smoking Prevention and Tobacco Control 
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1 Act, the Secretary shall issue regulations to im2 plement this paragraph. 

3 ‘‘SEC. 906. GENERAL PROVISIONS RESPECTING CONTROL 

4 OF TOBACCO PRODUCTS. 

5 ‘‘(a) IN GENERAL.—Any requirement established by 

6 or under section 902, 903, 905, or 909 applicable to a 

7 tobacco product shall apply to such tobacco product until 

8 the applicability of the requirement to the tobacco product 

9 has been changed by action taken under section 907, sec10 tion 910, section 911, or subsection (d) of this section, 

11 and any requirement established by or under section 902, 

12 903, 905, or 909 which is inconsistent with a requirement 

13 imposed on such tobacco product under section 907, sec14 tion 910, section 911, or subsection (d) of this section 

15 shall not apply to such tobacco product. 

16 ‘‘(b) INFORMATION ON PUBLIC ACCESS AND COM17 MENT.—Each notice of proposed rulemaking under section 

18 907, 908, 909, 910, or 911 or under this section, any 

19 other notice which is published in the Federal Register 

20 with respect to any other action taken under any such sec21 tion and which states the reasons for such action, and 

22 each publication of findings required to be made in con23 nection with rulemaking under any such section shall set 

24 forth— 
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1 ‘‘(1) the manner in which interested persons 

2 may examine data and other information on which 

3 the notice or findings is based; and 

4 ‘‘(2) the period within which interested persons 

5 may present their comments on the notice or find6 ings (including the need therefore) orally or in writ7 ing, which period shall be at least 60 days but may 

8 not exceed 90 days unless the time is extended by 

9 the Secretary by a notice published in the Federal 

10 Register stating good cause therefore. 

11 ‘‘(c) LIMITED CONFIDENTIALITY OF INFORMA12 TION.—Any information reported to or otherwise obtained 

13 by the Secretary or the Secretary’s representative under 

14 section 903, 904, 907, 908, 909, 910, 911, or 704, or 

15 under subsection (e) or (f) of this section, which is exempt 

16 from disclosure under subsection (a) of section 552 of title 

17 5, United States Code, by reason of subsection (b)(4) of 

18 that section shall be considered confidential and shall not 

19 be disclosed, except that the information may be disclosed 

20 to other officers or employees concerned with carrying out 

21 this chapter, or when relevant in any proceeding under 

22 this chapter. 

23 ‘‘(d) RESTRICTIONS.— 

24 ‘‘(1) IN GENERAL.—The Secretary may by reg25 ulation require restrictions on the sale and distribu-
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1 tion of a tobacco product, including restrictions on 

2 the access to, and the advertising and promotion of, 

3 the tobacco product, if the Secretary determines that 

4 such regulation would be appropriate for the protec5 tion of the public health. The Secretary may by reg6 ulation impose restrictions on the advertising and 

7 promotion of a tobacco product consistent with and 

8 to full extent permitted by the first amendment to 

9 the Constitution. The finding as to whether such 

10 regulation would be appropriate for the protection of 

11 the public health shall be determined with respect to 

12 the risks and benefits to the population as a whole, 

13 including users and non-users of the tobacco prod14 uct, and taking into account— 

15 ‘‘(A) the increased or decreased likelihood 

16 that existing users of tobacco products will stop 

17 using such products; and 

18 ‘‘(B) the increased or decreased likelihood 

19 that those who do not use tobacco products will 

20 start using such products. 

21 No such regulation may require that the sale or dis22 tribution of a tobacco product be limited to the writ23 ten or oral authorization of a practitioner licensed 

24 by law to prescribe medical products. 
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1 ‘‘(2) LABEL STATEMENTS.—The label of a to2 bacco product shall bear such appropriate state3 ments of the restrictions required by a regulation 

4 under subsection (a) as the Secretary may in such 

5 regulation prescribe. 

6 ‘‘(3) LIMITATIONS.— 

7 ‘‘(A) IN GENERAL.—No restrictions under 

8 paragraph (1) may— 

9 ‘‘(i) prohibit the sale of any tobacco 

10 product in face-to-face transactions by a 

11 specific category of retail outlets; or 

12 ‘‘(ii) establish a minimum age of sale 

13 of tobacco products to any person older 

14 than 18 years of age. 

15 ‘‘(B) MATCHBOOKS.—For purposes of any 

16 regulations issued by the Secretary, matchbooks 

17 of conventional size containing not more than 

18 20 paper matches, and which are customarily 

19 given away for free with the purchase of to20 bacco products shall be considered as adult 

21 written publications which shall be permitted to 

22 contain advertising. Notwithstanding the pre23 ceding sentence, if the Secretary finds that such 

24 treatment of matchbooks is not appropriate for 

25 the protection of the public health, the Sec-
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•S 2558 IS 

1 retary may determine by regulation that match2 books shall not be considered adult written pub3 lications. 

4 ‘‘(e) GOOD MANUFACTURING PRACTICE REQUIRE5 MENTS.— 

6 ‘‘(1) METHODS, FACILITIES, AND CONTROLS TO

7 CONFORM.— 

8 ‘‘(A) IN GENERAL.—The Secretary may, in 

9 accordance with subparagraph (B), prescribe 

10 regulations (which may differ based on the type 

11 of tobacco product involved) requiring that the 

12 methods used in, and the facilities and controls 

13 used for, the manufacture, pre-production de14 sign validation (including a process to assess 

15 the performance of a tobacco product), packing 

16 and storage of a tobacco product, conform to 

17 current good manufacturing practice, as pre18 scribed in such regulations, to assure that the 

19 public health is protected and that the tobacco 

20 product is in compliance with this chapter. 

21 Good manufacturing practices may include the 

22 testing of raw tobacco for pesticide chemical 

23 residues regardless of whether a tolerance for 

24 such chemical residues has been established. 
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1 ‘‘(B) REQUIREMENTS.—The Secretary 

2 shall— 

3 ‘‘(i) before promulgating any regula4 tion under subparagraph (A), afford the 

5 Tobacco Products Scientific Advisory Com6 mittee an opportunity to submit rec7 ommendations with respect to the regula8 tion proposed to be promulgated; 

9 ‘‘(ii) before promulgating any regula10 tion under subparagraph (A), afford oppor11 tunity for an oral hearing; 

12 ‘‘(iii) provide the advisory committee a 

13 reasonable time to make its recommenda14 tion with respect to proposed regulations 

15 under subparagraph (A); and 

16 ‘‘(iv) in establishing the effective date 

17 of a regulation promulgated under this 

18 subsection, take into account the dif19 ferences in the manner in which the dif20 ferent types of tobacco products have his21 torically been produced, the financial re22 sources of the different tobacco product 

23 manufacturers, and the state of their exist24 ing manufacturing facilities, and shall pro25 vide for a reasonable period of time for 
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•S 2558 IS 

1 such manufacturers to conform to good 

2 manufacturing practices. 

3 ‘‘(2) EXEMPTIONS; VARIANCES.— 

4 ‘‘(A) PETITION.—Any person subject to 

5 any requirement prescribed under paragraph 

6 (1) may petition the Secretary for a permanent 

7 or temporary exemption or variance from such 

8 requirement. Such a petition shall be submitted 

9 to the Secretary in such form and manner as 

10 the Secretary shall prescribe and shall— 

11 ‘‘(i) in the case of a petition for an ex12 emption from a requirement, set forth the 

13 basis for the petitioner’s determination 

14 that compliance with the requirement is 

15 not required to assure that the tobacco 

16 product will be in compliance with this 

17 chapter; 

18 ‘‘(ii) in the case of a petition for a 

19 variance from a requirement, set forth the 

20 methods proposed to be used in, and the 

21 facilities and controls proposed to be used 

22 for, the manufacture, packing, and storage 

23 of the tobacco product in lieu of the meth24 ods, facilities, and controls prescribed by 

25 the requirement; and 
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1 ‘‘(iii) contain such other information 

2 as the Secretary shall prescribe. 

3 ‘‘(B) REFERRAL TO THE TOBACCO PROD4 UCTS SCIENTIFIC ADVISORY COMMITTEE.—The 

5 Secretary may refer to the Tobacco Products 

6 Scientific Advisory Committee any petition sub7 mitted under subparagraph (A). The Tobacco 

8 Products Scientific Advisory Committee shall 

9 report its recommendations to the Secretary 

10 with respect to a petition referred to it within 

11 60 days after the date of the petition’s referral. 

12 Within 60 days after— 

13 ‘‘(i) the date the petition was sub14 mitted to the Secretary under subpara15 graph (A); or 

16 ‘‘(ii) the day after the petition was re17 ferred to the Tobacco Products Scientific 

18 Advisory Committee, 

19 whichever occurs later, the Secretary shall by 

20 order either deny the petition or approve it. 

21 ‘‘(C) APPROVAL.—The Secretary may ap22 prove— 

23 ‘‘(i) a petition for an exemption for a 

24 tobacco product from a requirement if the 

25 Secretary determines that compliance with 
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•S 2558 IS 

1 such requirement is not required to assure 

2 that the tobacco product will be in compli3 ance with this chapter; and 

4 ‘‘(ii) a petition for a variance for a to5 bacco product from a requirement if the 

6 Secretary determines that the methods to 

7 be used in, and the facilities and controls 

8 to be used for, the manufacture, packing, 

9 and storage of the tobacco product in lieu 

10 of the methods, controls, and facilities pre11 scribed by the requirement are sufficient to 

12 assure that the tobacco product will be in 

13 compliance with this chapter. 

14 ‘‘(D) CONDITIONS.—An order of the Sec15 retary approving a petition for a variance shall 

16 prescribe such conditions respecting the meth17 ods used in, and the facilities and controls used 

18 for, the manufacture, packing, and storage of 

19 the tobacco product to be granted the variance 

20 under the petition as may be necessary to as21 sure that the tobacco product will be in compli22 ance with this chapter. 

23 ‘‘(E) HEARING.—After the issuance of an 

24 order under subparagraph (B) respecting a pe-
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1 tition, the petitioner shall have an opportunity 

2 for an informal hearing on such order. 

3 ‘‘(3) COMPLIANCE.—Compliance with require4 ments under this subsection shall not be required be5 fore the period ending 3 years after the date of en6 actment of the Family Smoking Prevention and To7 bacco Control Act. 

8 ‘‘(f) RESEARCH AND DEVELOPMENT.—The Secretary 

9 may enter into contracts for research, testing, and dem10 onstrations respecting tobacco products and may obtain 

11 tobacco products for research, testing, and demonstration 

12 purposes without regard to section 3324(a) and (b) of title 

13 31, United States Code, and section 5 of title 41, United 

14 States Code. 

15 ‘‘SEC. 907. TOBACCO PRODUCT STANDARDS. 

16 ‘‘(a) IN GENERAL.— 

17 ‘‘(1) SPECIAL RULE FOR CIGARETTES.—A ciga18 rette or any of its component parts (including the 

19 tobacco, filter, or paper) shall not contain, as a con20 stituent (including a smoke constituent) or additive, 

21 an artificial or natural flavor (other than tobacco or 

22 menthol) or an herb or spice, including strawberry, 

23 grape, orange, clove, cinnamon, pineapple, vanilla, 

24 coconut, licorice, cocoa, chocolate, cherry, or coffee, 

25 that is a characterizing flavor of the tobacco product 
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1 or tobacco smoke. Nothing in this subparagraph 

2 shall be construed to limit the Secretary’s authority 

3 to take action under this section or other sections of 

4 this Act applicable to menthol or any artificial or 

5 natural flavor, herb, or spice not specified in this 

6 paragraph. 

7 ‘‘(2) REVISION OF TOBACCO PRODUCT STAND8 ARDS.—The Secretary may revise the tobacco prod9 uct standards in paragraph (1) in accordance with 

10 subsection (b). 

11 ‘‘(3) TOBACCO PRODUCT STANDARDS.—The 

12 Secretary may adopt tobacco product standards in 

13 addition to those in paragraph (1) if the Secretary 

14 finds that a tobacco product standard is appropriate 

15 for the protection of the public health. This finding 

16 shall be determined with respect to the risks and 

17 benefits to the population as a whole, including 

18 users and non-users of the tobacco product, and tak19 ing into account— 

20 ‘‘(A) the increased or decreased likelihood 

21 that existing users of tobacco products will stop 

22 using such products; and 

23 ‘‘(B) the increased or decreased likelihood 

24 that those who do not use tobacco products will 

25 start using such products. 
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•S 2558 IS 

1 ‘‘(4) CONTENT OF TOBACCO PRODUCT STAND2 ARDS.—A tobacco product standard established 

3 under this section for a tobacco product— 

4 ‘‘(A) shall include provisions that are ap5 propriate for the protection of the public health, 

6 including provisions, where appropriate— 

7 ‘‘(i) for the reduction of nicotine 

8 yields of the product; 

9 ‘‘(ii) for the reduction or elimination 

10 of other constituents, including smoke con11 stituents, or harmful components of the 

12 product; or 

13 ‘‘(iii) relating to any other require14 ment under (B); 

15 ‘‘(B) shall, where appropriate for the pro16 tection of the public health, include— 

17 ‘‘(i) provisions respecting the con18 struction, components, ingredients, addi19 tives, constituents, including smoke con20 stituents, and properties of the tobacco 

21 product; 

22 ‘‘(ii) provisions for the testing (on a 

23 sample basis or, if necessary, on an indi24 vidual basis) of the tobacco product; 
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•S 2558 IS 

1 ‘‘(iii) provisions for the measurement 

2 of the tobacco product characteristics of 

3 the tobacco product; 

4 ‘‘(iv) provisions requiring that the re5 sults of each or of certain of the tests of 

6 the tobacco product required to be made 

7 under clause (ii) show that the tobacco 

8 product is in conformity with the portions 

9 of the standard for which the test or tests 

10 were required; and 

11 ‘‘(v) a provision requiring that the 

12 sale and distribution of the tobacco prod13 uct be restricted but only to the extent 

14 that the sale and distribution of a tobacco 

15 product may be restricted under a regula16 tion under section 906(d); and 

17 ‘‘(C) shall, where appropriate, require the 

18 use and prescribe the form and content of label19 ing for the proper use of the tobacco product. 

20 ‘‘(5) PERIODIC RE-EVALUATION OF TOBACCO

21 PRODUCT STANDARDS.—The Secretary shall provide 

22 for periodic evaluation of tobacco product standards 

23 established under this section to determine whether 

24 such standards should be changed to reflect new 

25 medical, scientific, or other technological data. The 
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•S 2558 IS 

1 Secretary may provide for testing under paragraph 

2 (4)(B) by any person. 

3 ‘‘(6) INVOLVEMENT OF OTHER AGENCIES; IN4 FORMED PERSONS.—In carrying out duties under 

5 this section, the Secretary shall endeavor to— 

6 ‘‘(A) use personnel, facilities, and other 

7 technical support available in other Federal 

8 agencies; 

9 ‘‘(B) consult with other Federal agencies 

10 concerned with standard-setting and other na11 tionally or internationally recognized standard12 setting entities; and 

13 ‘‘(C) invite appropriate participation, 

14 through joint or other conferences, workshops, 

15 or other means, by informed persons represent16 ative of scientific, professional, industry, agri17 cultural, or consumer organizations who in the 

18 Secretary’s judgment can make a significant 

19 contribution. 

20 ‘‘(b) ESTABLISHMENT OF STANDARDS.— 

21 ‘‘(1) NOTICE.— 

22 ‘‘(A) IN GENERAL.—The Secretary shall 

23 publish in the Federal Register a notice of pro24 posed rulemaking for the establishment, amend-
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•S 2558 IS 

1 ment, or revocation of any tobacco product 

2 standard. 

3 ‘‘(B) REQUIREMENTS OF NOTICE.—A no4 tice of proposed rulemaking for the establish5 ment or amendment of a tobacco product stand6 ard for a tobacco product shall— 

7 ‘‘(i) set forth a finding with sup8 porting justification that the tobacco prod9 uct standard is appropriate for the protec10 tion of the public health; 

11 ‘‘(ii) set forth proposed findings with 

12 respect to the risk of illness or injury that 

13 the tobacco product standard is intended 

14 to reduce or eliminate; and 

15 ‘‘(iii) invite interested persons to sub16 mit an existing tobacco product standard 

17 for the tobacco product, including a draft 

18 or proposed tobacco product standard, for 

19 consideration by the Secretary. 

20 ‘‘(C) STANDARD.—Upon a determination 

21 by the Secretary that an additive, constituent 

22 (including smoke constituent), or other compo23 nent of the product that is the subject of the 

24 proposed tobacco product standard is harmful, 

25 it shall be the burden of any party challenging 
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•S 2558 IS 

1 the proposed standard to prove that the pro2 posed standard will not reduce or eliminate the 

3 risk of illness or injury. 

4 ‘‘(D) FINDING.—A notice of proposed rule5 making for the revocation of a tobacco product 

6 standard shall set forth a finding with sup7 porting justification that the tobacco product 

8 standard is no longer appropriate for the pro9 tection of the public health. 

10 ‘‘(E) CONSIDERATION BY SECRETARY.— 

11 The Secretary shall consider all information 

12 submitted in connection with a proposed stand13 ard, including information concerning the coun14 tervailing effects of the tobacco product stand15 ard on the health of adolescent tobacco users, 

16 adult tobacco users, or non-tobacco users, such 

17 as the creation of a significant demand for con18 traband or other tobacco products that do not 

19 meet the requirements of this chapter and the 

20 significance of such demand, and shall issue the 

21 standard if the Secretary determines that the 

22 standard would be appropriate for the protec23 tion of the public health. 
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•S 2558 IS 

1 ‘‘(F) COMMENT.—The Secretary shall pro2 vide for a comment period of not less than 60 

3 days. 

4 ‘‘(2) PROMULGATION.— 

5 ‘‘(A) IN GENERAL.—After the expiration of 

6 the period for comment on a notice of proposed 

7 rulemaking published under paragraph (1) re8 specting a tobacco product standard and after 

9 consideration of such comments and any report 

10 from the Tobacco Products Scientific Advisory 

11 Committee, the Secretary shall— 

12 ‘‘(i) promulgate a regulation estab13 lishing a tobacco product standard and 

14 publish in the Federal Register findings on 

15 the matters referred to in paragraph (1); 

16 or 

17 ‘‘(ii) publish a notice terminating the 

18 proceeding for the development of the 

19 standard together with the reasons for 

20 such termination. 

21 ‘‘(B) EFFECTIVE DATE.—A regulation es22 tablishing a tobacco product standard shall set 

23 forth the date or dates upon which the standard 

24 shall take effect, but no such regulation may 

25 take effect before 1 year after the date of its 
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•S 2558 IS 

1 publication unless the Secretary determines 

2 that an earlier effective date is necessary for 

3 the protection of the public health. Such date or 

4 dates shall be established so as to minimize, 

5 consistent with the public health, economic loss 

6 to, and disruption or dislocation of, domestic 

7 and international trade. 

8 ‘‘(3) POWER RESERVED TO CONGRESS.—Be9 cause of the importance of a decision of the Sec10 retary to issue a regulation establishing a tobacco 

11 product standard— 

12 ‘‘(A) banning all cigarettes, all smokeless 

13 tobacco products, all little cigars, all cigars 

14 other than little cigars, all pipe tobacco, or all 

15 roll your own tobacco products; or 

16 ‘‘(B) requiring the reduction of nicotine 

17 yields of a tobacco product to zero, 

18 Congress expressly reserves to itself such power. 

19 ‘‘(4) AMENDMENT; REVOCATION.— 

20 ‘‘(A) AUTHORITY.—The Secretary, upon 

21 the Secretary’s own initiative or upon petition 

22 of an interested person may by a regulation, 

23 promulgated in accordance with the require24 ments of paragraphs (1) and (2)(B), amend or 

25 revoke a tobacco product standard. 
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•S 2558 IS 

1 ‘‘(B) EFFECTIVE DATE.—The Secretary 

2 may declare a proposed amendment of a to3 bacco product standard to be effective on and 

4 after its publication in the Federal Register and 

5 until the effective date of any final action taken 

6 on such amendment if the Secretary determines 

7 that making it so effective is in the public inter8 est. 

9 ‘‘(5) REFERENCE TO ADVISORY COMMITTEE.— 

10 The Secretary may— 

11 ‘‘(A) on the Secretary’s own initiative, 

12 refer a proposed regulation for the establish13 ment, amendment, or revocation of a tobacco 

14 product standard; or 

15 ‘‘(B) upon the request of an interested per16 son which demonstrates good cause for referral 

17 and which is made before the expiration of the 

18 period for submission of comments on such pro19 posed regulation, 

20 refer such proposed regulation to the Tobacco Products 

21 Scientific Advisory Committee, for a report and rec22 ommendation with respect to any matter involved in the 

23 proposed regulation which requires the exercise of sci24 entific judgment. If a proposed regulation is referred 

25 under this paragraph to the Tobacco Products Scientific 
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•S 2558 IS 

1 Advisory Committee, the Secretary shall provide the advi2 sory committee with the data and information on which 

3 such proposed regulation is based. The Tobacco Products 

4 Scientific Advisory Committee shall, within 60 days after 

5 the referral of a proposed regulation and after inde6 pendent study of the data and information furnished to 

7 it by the Secretary and other data and information before 

8 it, submit to the Secretary a report and recommendation 

9 respecting such regulation, together with all underlying 

10 data and information and a statement of the reason or 

11 basis for the recommendation. A copy of such report and 

12 recommendation shall be made public by the Secretary. 

13 ‘‘SEC. 908. NOTIFICATION AND OTHER REMEDIES. 

14 ‘‘(a) NOTIFICATION.—If the Secretary determines 

15 that— 

16 ‘‘(1) a tobacco product which is introduced or 

17 delivered for introduction into interstate commerce 

18 for commercial distribution presents an unreasonable 

19 risk of substantial harm to the public health; and 

20 ‘‘(2) notification under this subsection is nec21 essary to eliminate the unreasonable risk of such 

22 harm and no more practicable means is available 

23 under the provisions of this chapter (other than this 

24 section) to eliminate such risk, 
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•S 2558 IS 

1 the Secretary may issue such order as may be necessary 

2 to assure that adequate notification is provided in an ap3 propriate form, by the persons and means best suited 

4 under the circumstances involved, to all persons who 

5 should properly receive such notification in order to elimi6 nate such risk. The Secretary may order notification by 

7 any appropriate means, including public service announce8 ments. Before issuing an order under this subsection, the 

9 Secretary shall consult with the persons who are to give 

10 notice under the order. 

11 ‘‘(b) NO EXEMPTION FROM OTHER LIABILITY.— 

12 Compliance with an order issued under this section shall 

13 not relieve any person from liability under Federal or 

14 State law. In awarding damages for economic loss in an 

15 action brought for the enforcement of any such liability, 

16 the value to the plaintiff in such action of any remedy 

17 provided under such order shall be taken into account. 

18 ‘‘(c) RECALL AUTHORITY.— 

19 ‘‘(1) IN GENERAL.—If the Secretary finds that 

20 there is a reasonable probability that a tobacco prod21 uct contains a manufacturing or other defect not or22 dinarily contained in tobacco products on the market 

23 that would cause serious, adverse health con24 sequences or death, the Secretary shall issue an 

25 order requiring the appropriate person (including the 
122 

•S 2558 IS 

1 manufacturers, importers, distributors, or retailers of 

2 the tobacco product) to immediately cease distribu3 tion of such tobacco product. The order shall provide 

4 the person subject to the order with an opportunity 

5 for an informal hearing, to be held not later than 10 

6 days after the date of the issuance of the order, on 

7 the actions required by the order and on whether the 

8 order should be amended to require a recall of such 

9 tobacco product. If, after providing an opportunity 

10 for such a hearing, the Secretary determines that in11 adequate grounds exist to support the actions re12 quired by the order, the Secretary shall vacate the 

13 order. 

14 ‘‘(2) AMENDMENT OF ORDER TO REQUIRE RE15 CALL.— 

16 ‘‘(A) IN GENERAL.—If, after providing an 

17 opportunity for an informal hearing under 

18 paragraph (1), the Secretary determines that 

19 the order should be amended to include a recall 

20 of the tobacco product with respect to which the 

21 order was issued, the Secretary shall, except as 

22 provided in subparagraph (B), amend the order 

23 to require a recall. The Secretary shall specify 

24 a timetable in which the tobacco product recall 

25 will occur and shall require periodic reports to 
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•S 2558 IS 

1 the Secretary describing the progress of the re2 call. 

3 ‘‘(B) NOTICE.—An amended order under 

4 subparagraph (A)— 

5 ‘‘(i) shall not include recall of a to6 bacco product from individuals; and 

7 ‘‘(ii) shall provide for notice to per8 sons subject to the risks associated with 

9 the use of such tobacco product. 

10 In providing the notice required by clause (ii), 

11 the Secretary may use the assistance of retail12 ers and other persons who distributed such to13 bacco product. If a significant number of such 

14 persons cannot be identified, the Secretary shall 

15 notify such persons under section 705(b). 

16 ‘‘(3) REMEDY NOT EXCLUSIVE.—The remedy 

17 provided by this subsection shall be in addition to 

18 remedies provided by subsection (a) of this section. 

19 ‘‘SEC. 909. RECORDS AND REPORTS ON TOBACCO PROD20 UCTS. 

21 ‘‘(a) IN GENERAL.—Every person who is a tobacco 

22 product manufacturer or importer of a tobacco product 

23 shall establish and maintain such records, make such re24 ports, and provide such information, as the Secretary may 

25 by regulation reasonably require to assure that such to-
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•S 2558 IS 

1 bacco product is not adulterated or misbranded and to 

2 otherwise protect public health. Regulations prescribed 

3 under the preceding sentence— 

4 ‘‘(1) may require a tobacco product manufac5 turer or importer to report to the Secretary when6 ever the manufacturer or importer receives or other7 wise becomes aware of information that reasonably 

8 suggests that one of its marketed tobacco products 

9 may have caused or contributed to a serious unex10 pected adverse experience associated with the use of 

11 the product or any significant increase in the fre12 quency of a serious, expected adverse product experi13 ence; 

14 ‘‘(2) shall require reporting of other significant 

15 adverse tobacco product experiences as determined 

16 by the Secretary to be necessary to be reported; 

17 ‘‘(3) shall not impose requirements unduly bur18 densome to a tobacco product manufacturer or im19 porter, taking into account the cost of complying 

20 with such requirements and the need for the protec21 tion of the public health and the implementation of 

22 this chapter; 

23 ‘‘(4) when prescribing the procedure for making 

24 requests for reports or information, shall require 

25 that each request made under such regulations for 
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•S 2558 IS 

1 submission of a report or information to the Sec2 retary state the reason or purpose for such request 

3 and identify to the fullest extent practicable such re4 port or information; 

5 ‘‘(5) when requiring submission of a report or 

6 information to the Secretary, shall state the reason 

7 or purpose for the submission of such report or in8 formation and identify to the fullest extent prac9 ticable such report or information; and 

10 ‘‘(6) may not require that the identity of any 

11 patient or user be disclosed in records, reports, or 

12 information required under this subsection unless re13 quired for the medical welfare of an individual, to 

14 determine risks to public health of a tobacco prod15 uct, or to verify a record, report, or information sub16 mitted under this chapter. 

17 In prescribing regulations under this subsection, the Sec18 retary shall have due regard for the professional ethics of 

19 the medical profession and the interests of patients. The 

20 prohibitions of paragraph (6) continue to apply to records, 

21 reports, and information concerning any individual who 

22 has been a patient, irrespective of whether or when he 

23 ceases to be a patient. 

24 ‘‘(b) REPORTS OF REMOVALS AND CORRECTIONS.— 
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•S 2558 IS 

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), the Secretary shall by regulation require 

3 a tobacco product manufacturer or importer of a to4 bacco product to report promptly to the Secretary 

5 any corrective action taken or removal from the 

6 market of a tobacco product undertaken by such 

7 manufacturer or importer if the removal or correc8 tion was undertaken— 

9 ‘‘(A) to reduce a risk to health posed by 

10 the tobacco product; or 

11 ‘‘(B) to remedy a violation of this chapter 

12 caused by the tobacco product which may 

13 present a risk to health. 

14 A tobacco product manufacturer or importer of a to15 bacco product who undertakes a corrective action or 

16 removal from the market of a tobacco product which 

17 is not required to be reported under this subsection 

18 shall keep a record of such correction or removal. 

19 ‘‘(2) EXCEPTION.—No report of the corrective 

20 action or removal of a tobacco product may be re21 quired under paragraph (1) if a report of the correc22 tive action or removal is required and has been sub23 mitted under subsection (a). 
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1 ‘‘SEC. 910. APPLICATION FOR REVIEW OF CERTAIN TO2 BACCO PRODUCTS. 

3 ‘‘(a) IN GENERAL.— 

4 ‘‘(1) NEW TOBACCO PRODUCT DEFINED.—For 

5 purposes of this section the term ‘new tobacco prod6 uct’ means— 

7 ‘‘(A) any tobacco product (including those 

8 products in test markets) that was not commer9 cially marketed in the United States as of June 

10 1, 2003; or 

11 ‘‘(B) any modification (including a change 

12 in design, any component, any part, or any con13 stituent, including a smoke constituent, or in 

14 the content, delivery or form of nicotine, or any 

15 other additive or ingredient) of a tobacco prod16 uct where the modified product was commer17 cially marketed in the United States after June 

18 1, 2003. 

19 ‘‘(2) PREMARKET APPROVAL REQUIRED.— 

20 ‘‘(A) NEW PRODUCTS.—Approval under 

21 this section of an application for premarket ap22 proval for any new tobacco product is required 

23 unless— 

24 ‘‘(i) the manufacturer has submitted a 

25 report under section 905(j); and 
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•S 2558 IS 

1 ‘‘(ii) the Secretary has issued an order 

2 that the tobacco product— 

3 ‘‘(I) is substantially equivalent to 

4 a tobacco product commercially mar5 keted (other than for test marketing) 

6 in the United States as of June 1, 

7 2003; and 

8 ‘‘(II)(aa) is in compliance with 

9 the requirements of this Act; or 

10 ‘‘(bb) is exempt from the require11 ments of section 905(j) pursuant to a 

12 regulation issued under section 

13 905(j)(3). 

14 ‘‘(B) APPLICATION TO CERTAIN POST

15 JUNE 1, 2003 PRODUCTS.—Subparagraph (A) 

16 shall not apply to a tobacco product— 

17 ‘‘(i) that was first introduced or deliv18 ered for introduction into interstate com19 merce for commercial distribution in the 

20 United States after June 1, 2003, and 

21 prior to the date that is 15 months after 

22 the date of enactment of the Family Smok23 ing Prevention and Tobacco Control Act; 

24 and 
129 

•S 2558 IS 

1 ‘‘(ii) for which a report was submitted 

2 under section 905(j) within such 15-month 

3 period, until the Secretary issues an order 

4 that the tobacco product is not substan5 tially equivalent. 

6 ‘‘(3) SUBSTANTIALLY EQUIVALENT DEFINED.— 

7 ‘‘(A) IN GENERAL.—In this section and 

8 section 905(j), the terms ‘substantially equiva9 lent’ or ‘substantial equivalence’ mean, with re10 spect to the tobacco product being compared to 

11 the predicate tobacco product, that the Sec12 retary by order has found that the tobacco 

13 product— 

14 ‘‘(i) has the same characteristics as 

15 the predicate tobacco product; or 

16 ‘‘(ii) has different characteristics and 

17 the information submitted contains infor18 mation, including clinical data if deemed 

19 necessary by the Secretary, that dem20 onstrates that it is not appropriate to reg21 ulate the product under this section be22 cause the product does not raise different 

23 questions of public health. 

24 ‘‘(B) CHARACTERISTICS.—In subpara25 graph (A), the term ‘characteristics’ means the 
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•S 2558 IS 

1 materials, ingredients, design, composition, 

2 heating source, or other features of a tobacco 

3 product. 

4 ‘‘(C) LIMITATION.—A tobacco product may 

5 not be found to be substantially equivalent to a 

6 predicate tobacco product that has been re7 moved from the market at the initiative of the 

8 Secretary or that has been determined by a ju9 dicial order to be misbranded or adulterated. 

10 ‘‘(4) HEALTH INFORMATION.— 

11 ‘‘(A) SUMMARY.—As part of a submission 

12 under section 905(j) respecting a tobacco prod13 uct, the person required to file a premarket no14 tification under such section shall provide an 

15 adequate summary of any health information 

16 related to the tobacco product or state that 

17 such information will be made available upon 

18 request by any person. 

19 ‘‘(B) REQUIRED INFORMATION.—Any sum20 mary under subparagraph (A) respecting a to21 bacco product shall contain detailed information 

22 regarding data concerning adverse health effects 

23 and shall be made available to the public by the 

24 Secretary within 30 days of the issuance of a 
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•S 2558 IS 

1 determination that such tobacco product is sub2 stantially equivalent to another tobacco product. 

3 ‘‘(b) APPLICATION.— 

4 ‘‘(1) CONTENTS.—An application for premarket 

5 approval shall contain— 

6 ‘‘(A) full reports of all information, pub7 lished or known to, or which should reasonably 

8 be known to, the applicant, concerning inves9 tigations which have been made to show the 

10 health risks of such tobacco product and wheth11 er such tobacco product presents less risk than 

12 other tobacco products; 

13 ‘‘(B) a full statement of the components, 

14 ingredients, additives, and properties, and of 

15 the principle or principles of operation, of such 

16 tobacco product; 

17 ‘‘(C) a full description of the methods used 

18 in, and the facilities and controls used for, the 

19 manufacture, processing, and, when relevant, 

20 packing and installation of, such tobacco prod21 uct; 

22 ‘‘(D) an identifying reference to any to23 bacco product standard under section 907 

24 which would be applicable to any aspect of such 

25 tobacco product, and either adequate informa-
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1 tion to show that such aspect of such tobacco 

2 product fully meets such tobacco product stand3 ard or adequate information to justify any devi4 ation from such standard; 

5 ‘‘(E) such samples of such tobacco product 

6 and of components thereof as the Secretary 

7 may reasonably require; 

8 ‘‘(F) specimens of the labeling proposed to 

9 be used for such tobacco product; and 

10 ‘‘(G) such other information relevant to 

11 the subject matter of the application as the Sec12 retary may require. 

13 ‘‘(2) REFERENCE TO TOBACCO PRODUCTS SCI14 ENTIFIC ADVISORY COMMITTEE.—Upon receipt of an 

15 application meeting the requirements set forth in 

16 paragraph (1), the Secretary— 

17 ‘‘(A) may, on the Secretary’s own initia18 tive; or 

19 ‘‘(B) may, upon the request of an appli20 cant, 

21 refer such application to the Tobacco Products Sci22 entific Advisory Committee for reference and for 

23 submission (within such period as the Secretary may 

24 establish) of a report and recommendation respect25 ing approval of the application, together with all un-
133 

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1 derlying data and the reasons or basis for the rec2 ommendation. 

3 ‘‘(c) ACTION ON APPLICATION.— 

4 ‘‘(1) DEADLINE.— 

5 ‘‘(A) IN GENERAL.—As promptly as pos6 sible, but in no event later than 180 days after 

7 the receipt of an application under subsection 

8 (b), the Secretary, after considering the report 

9 and recommendation submitted under para10 graph (2) of such subsection, shall— 

11 ‘‘(i) issue an order approving the ap12 plication if the Secretary finds that none of 

13 the grounds for denying approval specified 

14 in paragraph (2) of this subsection applies; 

15 or 

16 ‘‘(ii) deny approval of the application 

17 if the Secretary finds (and sets forth the 

18 basis for such finding as part of or accom19 panying such denial) that 1 or more 

20 grounds for denial specified in paragraph 

21 (2) of this subsection apply. 

22 ‘‘(B) RESTRICTIONS ON SALE AND DIS23 TRIBUTION.—An order approving an application 

24 for a tobacco product may require as a condi25 tion to such approval that the sale and distribu-
134 

•S 2558 IS 

1 tion of the tobacco product be restricted but 

2 only to the extent that the sale and distribution 

3 of a tobacco product may be restricted under a 

4 regulation under section 906(d). 

5 ‘‘(2) DENIAL OF APPROVAL.—The Secretary 

6 shall deny approval of an application for a tobacco 

7 product if, upon the basis of the information sub8 mitted to the Secretary as part of the application 

9 and any other information before the Secretary with 

10 respect to such tobacco product, the Secretary finds 

11 that— 

12 ‘‘(A) there is a lack of a showing that per13 mitting such tobacco product to be marketed 

14 would be appropriate for the protection of the 

15 public health; 

16 ‘‘(B) the methods used in, or the facilities 

17 or controls used for, the manufacture, proc18 essing, or packing of such tobacco product do 

19 not conform to the requirements of section 

20 906(e); 

21 ‘‘(C) based on a fair evaluation of all mate22 rial facts, the proposed labeling is false or mis23 leading in any particular; or 

24 ‘‘(D) such tobacco product is not shown to 

25 conform in all respects to a tobacco product 
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•S 2558 IS 

1 standard in effect under section 907, compli2 ance with which is a condition to approval of 

3 the application, and there is a lack of adequate 

4 information to justify the deviation from such 

5 standard. 

6 ‘‘(3) DENIAL INFORMATION.—Any denial of an 

7 application shall, insofar as the Secretary determines 

8 to be practicable, be accompanied by a statement in9 forming the applicant of the measures required to 

10 place such application in approvable form (which 

11 measures may include further research by the appli12 cant in accordance with 1 or more protocols pre13 scribed by the Secretary). 

14 ‘‘(4) BASIS FOR FINDING.—For purposes of 

15 this section, the finding as to whether approval of a 

16 tobacco product is appropriate for the protection of 

17 the public health shall be determined with respect to 

18 the risks and benefits to the population as a whole, 

19 including users and nonusers of the tobacco product, 

20 and taking into account— 

21 ‘‘(A) the increased or decreased likelihood 

22 that existing users of tobacco products will stop 

23 using such products; and 
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•S 2558 IS 

1 ‘‘(B) the increased or decreased likelihood 

2 that those who do not use tobacco products will 

3 start using such products. 

4 ‘‘(5) BASIS FOR ACTION.— 

5 ‘‘(A) INVESTIGATIONS.—For purposes of 

6 paragraph (2)(A), whether permitting a tobacco 

7 product to be marketed would be appropriate 

8 for the protection of the public health shall, 

9 when appropriate, be determined on the basis of 

10 well-controlled investigations, which may in11 clude 1 or more clinical investigations by ex12 perts qualified by training and experience to 

13 evaluate the tobacco product. 

14 ‘‘(B) OTHER EVIDENCE.—If the Secretary 

15 determines that there exists valid scientific evi16 dence (other than evidence derived from inves17 tigations described in subparagraph (A)) which 

18 is sufficient to evaluate the tobacco product the 

19 Secretary may authorize that the determination 

20 for purposes of paragraph (2)(A) be made on the 

21 basis of such evidence. 

22 ‘‘(d) WITHDRAWAL AND TEMPORARY SUSPENSION.— 

23 ‘‘(1) IN GENERAL.—The Secretary shall, upon 

24 obtaining, where appropriate, advice on scientific 

25 matters from an advisory committee, and after due 
137 

•S 2558 IS 

1 notice and opportunity for informal hearing to the 

2 holder of an approved application for a tobacco 

3 product, issue an order withdrawing approval of the 

4 application if the Secretary finds— 

5 ‘‘(A) that the continued marketing of such 

6 tobacco product no longer is appropriate for the 

7 protection of the public health; 

8 ‘‘(B) that the application contained or was 

9 accompanied by an untrue statement of a mate10 rial fact; 

11 ‘‘(C) that the applicant— 

12 ‘‘(i) has failed to establish a system 

13 for maintaining records, or has repeatedly 

14 or deliberately failed to maintain records 

15 or to make reports, required by an applica16 ble regulation under section 909; 

17 ‘‘(ii) has refused to permit access to, 

18 or copying or verification of, such records 

19 as required by section 704; or 

20 ‘‘(iii) has not complied with the re21 quirements of section 905; 

22 ‘‘(D) on the basis of new information be23 fore the Secretary with respect to such tobacco 

24 product, evaluated together with the evidence 

25 before the Secretary when the application was 
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•S 2558 IS 

1 approved, that the methods used in, or the fa2 cilities and controls used for, the manufacture, 

3 processing, packing, or installation of such to4 bacco product do not conform with the require5 ments of section 906(e) and were not brought 

6 into conformity with such requirements within a 

7 reasonable time after receipt of written notice 

8 from the Secretary of nonconformity; 

9 ‘‘(E) on the basis of new information be10 fore the Secretary, evaluated together with the 

11 evidence before the Secretary when the applica12 tion was approved, that the labeling of such to13 bacco product, based on a fair evaluation of all 

14 material facts, is false or misleading in any par15 ticular and was not corrected within a reason16 able time after receipt of written notice from 

17 the Secretary of such fact; or 

18 ‘‘(F) on the basis of new information be19 fore the Secretary, evaluated together with the 

20 evidence before the Secretary when the applica21 tion was approved, that such tobacco product is 

22 not shown to conform in all respects to a to23 bacco product standard which is in effect under 

24 section 907, compliance with which was a con25 dition to approval of the application, and that 
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•S 2558 IS 

1 there is a lack of adequate information to jus2 tify the deviation from such standard. 

3 ‘‘(2) APPEAL.—The holder of an application 

4 subject to an order issued under paragraph (1) with5 drawing approval of the application may, by petition 

6 filed on or before the 30th day after the date upon 

7 which such holder receives notice of such with8 drawal, obtain review thereof in accordance with 

9 subsection (e). 

10 ‘‘(3) TEMPORARY SUSPENSION.—If, after pro11 viding an opportunity for an informal hearing, the 

12 Secretary determines there is reasonable probability 

13 that the continuation of distribution of a tobacco 

14 product under an approved application would cause 

15 serious, adverse health consequences or death, that 

16 is greater than ordinarily caused by tobacco prod17 ucts on the market, the Secretary shall by order 

18 temporarily suspend the approval of the application 

19 approved under this section. If the Secretary issues 

20 such an order, the Secretary shall proceed expedi21 tiously under paragraph (1) to withdraw such appli22 cation. 

23 ‘‘(e) SERVICE OF ORDER.—An order issued by the 

24 Secretary under this section shall be served— 
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•S 2558 IS 

1 ‘‘(1) in person by any officer or employee of the 

2 department designated by the Secretary; or 

3 ‘‘(2) by mailing the order by registered mail or 

4 certified mail addressed to the applicant at the ap5 plicant’s last known address in the records of the 

6 Secretary. 

7 ‘‘(f) RECORDS.— 

8 ‘‘(1) ADDITIONAL INFORMATION.—In the case 

9 of any tobacco product for which an approval of an 

10 application filed under subsection (b) is in effect, the 

11 applicant shall establish and maintain such records, 

12 and make such reports to the Secretary, as the Sec13 retary may by regulation, or by order with respect 

14 to such application, prescribe on the basis of a find15 ing that such records and reports are necessary in 

16 order to enable the Secretary to determine, or facili17 tate a determination of, whether there is or may be 

18 grounds for withdrawing or temporarily suspending 

19 such approval. 

20 ‘‘(2) ACCESS TO RECORDS.—Each person re21 quired under this section to maintain records, and 

22 each person in charge or custody thereof, shall, upon 

23 request of an officer or employee designated by the 

24 Secretary, permit such officer or employee at all rea-
141 

•S 2558 IS 

1 sonable times to have access to and copy and verify 

2 such records. 

3 ‘‘(g) INVESTIGATIONAL TOBACCO PRODUCT EXEMP4 TION FOR INVESTIGATIONAL USE.—The Secretary may 

5 exempt tobacco products intended for investigational use 

6 from the provisions of this chapter under such conditions 

7 as the Secretary may by regulation prescribe. 

8 ‘‘SEC. 911. MODIFIED RISK TOBACCO PRODUCTS. 

9 ‘‘(a) IN GENERAL.—No person may introduce or de10 liver for introduction into interstate commerce any modi11 fied risk tobacco product unless approval of an application 

12 filed pursuant to subsection (d) is effective with respect 

13 to such product. 

14 ‘‘(b) DEFINITIONS.—In this section: 

15 ‘‘(1) MODIFIED RISK TOBACCO PRODUCT.—The 

16 term ‘modified risk tobacco product’ means any to17 bacco product that is sold or distributed for use to 

18 reduce harm or the risk of tobacco-related disease 

19 associated with commercially marketed tobacco prod20 ucts. 

21 ‘‘(2) SOLD OR DISTRIBUTED.— 

22 ‘‘(A) IN GENERAL.—With respect to a to23 bacco product, the term ‘sold or distributed for 

24 use to reduce harm or the risk of tobacco-re25 lated disease associated with commercially mar-
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•S 2558 IS 

1 keted tobacco products’ means a tobacco prod2 uct— 

3 ‘‘(i) the label, labeling, or advertising 

4 of which represents explicitly or implicitly 

5 that— 

6 ‘‘(I) the tobacco product presents 

7 a lower risk of tobacco-related disease 

8 or is less harmful than one or more 

9 other commercially marketed tobacco 

10 products; 

11 ‘‘(II) the tobacco product or its 

12 smoke contains a reduced level of a 

13 substance or presents a reduced expo14 sure to a substance; or 

15 ‘‘(III) the tobacco product or its 

16 smoke does not contain or is free of a 

17 substance; 

18 ‘‘(ii) the label, labeling, or advertising 

19 of which uses the descriptors ‘light’, ‘mild’, 

20 or ‘low’ or similar descriptors; or 

21 ‘‘(iii) the tobacco product manufac22 turer of which has taken any action di23 rected to consumers through the media or 

24 otherwise, other than by means of the to25 bacco product’s label, labeling or adver-
143 

•S 2558 IS 

1 tising, after the date of enactment of the 

2 Family Smoking Prevention and Tobacco 

3 Control Act, respecting the product that 

4 would be reasonably expected to result in 

5 consumers believing that the tobacco prod6 uct or its smoke may present a lower risk 

7 of disease or is less harmful than one or 

8 more commercially marketed tobacco prod9 ucts, or presents a reduced exposure to, or 

10 does not contain or is free of, a substance 

11 or substances. 

12 ‘‘(B) LIMITATION.—No tobacco product 

13 shall be considered to be ‘sold or distributed for 

14 use to reduce harm or the risk of tobacco-re15 lated disease associated with commercially mar16 keted tobacco products’, except as described in 

17 subparagraph (A). 

18 ‘‘(c) TOBACCO DEPENDENCE PRODUCTS.—A product 

19 that is intended to be used for the treatment of tobacco 

20 dependence, including smoking cessation, is not a modified 

21 risk tobacco product under this section and is subject to 

22 the requirements of chapter V. 

23 ‘‘(d) FILING.—Any person may file with the Sec24 retary an application for a modified risk tobacco product. 

25 Such application shall include— 
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•S 2558 IS 

1 ‘‘(1) a description of the proposed product and 

2 any proposed advertising and labeling; 

3 ‘‘(2) the conditions for using the product; 

4 ‘‘(3) the formulation of the product; 

5 ‘‘(4) sample product labels and labeling; 

6 ‘‘(5) all documents (including underlying sci7 entific information) relating to research findings 

8 conducted, supported, or possessed by the tobacco 

9 product manufacturer relating to the effect of the 

10 product on tobacco related diseases and health-re11 lated conditions, including information both favor12 able and unfavorable to the ability of the product to 

13 reduce risk or exposure and relating to human 

14 health; 

15 ‘‘(6) data and information on how consumers 

16 actually use the tobacco product; and 

17 ‘‘(7) such other information as the Secretary 

18 may require. 

19 ‘‘(e) PUBLIC AVAILABILITY.—The Secretary shall 

20 make the application described in subsection (d) publicly 

21 available (except matters in the application which are 

22 trade secrets or otherwise confidential, commercial infor23 mation) and shall request comments by interested persons 

24 on the information contained in the application and on the 
145 

•S 2558 IS 

1 label, labeling, and advertising accompanying such appli2 cation. 

3 ‘‘(f) ADVISORY COMMITTEE.— 

4 ‘‘(1) IN GENERAL.—The Secretary shall refer to 

5 an advisory committee any application submitted 

6 under this subsection. 

7 ‘‘(2) RECOMMENDATIONS.—Not later than 60 

8 days after the date an application is referred to an 

9 advisory committee under paragraph (1), the advi10 sory committee shall report its recommendations on 

11 the application to the Secretary. 

12 ‘‘(g) APPROVAL.— 

13 ‘‘(1) MODIFIED RISK PRODUCTS.—Except as 

14 provided in paragraph (2), the Secretary shall ap15 prove an application for a modified risk tobacco 

16 product filed under this section only if the Secretary 

17 determines that the applicant has demonstrated that 

18 such product, as it is actually used by consumers, 

19 will— 

20 ‘‘(A) significantly reduce harm and the 

21 risk of tobacco-related disease to individual to22 bacco users; and 

23 ‘‘(B) benefit the health of the population 

24 as a whole taking into account both users of to-
146 

•S 2558 IS 

1 bacco products and persons who do not cur2 rently use tobacco products. 

3 ‘‘(2) SPECIAL RULE FOR CERTAIN PRODUCTS.— 

4 ‘‘(A) IN GENERAL.—The Secretary may 

5 approve an application for a tobacco product 

6 that has not been approved as a modified risk 

7 tobacco product pursuant to paragraph (1) if 

8 the Secretary makes the findings required 

9 under this paragraph and determines that the 

10 applicant has demonstrated that— 

11 ‘‘(i) the approval of the application 

12 would be appropriate to promote the public 

13 health; 

14 ‘‘(ii) any aspect of the label, labeling, 

15 and advertising for such product that 

16 would cause the tobacco product to be a 

17 modified risk tobacco product under sub18 section (b)(2) is limited to an explicit or 

19 implicit representation that such tobacco 

20 product or its smoke contains or is free of 

21 a substance or contains a reduced level of 

22 a substance, or presents a reduced expo23 sure to a substance in tobacco smoke; 

24 ‘‘(iii) scientific evidence is not avail25 able and, using the best available scientific 
147 

•S 2558 IS 

1 methods, cannot be made available without 

2 conducting long-term epidemiological stud3 ies for an application to meet the stand4 ards set forth in paragraph (1); and 

5 ‘‘(iv) the scientific evidence that is 

6 available without conducting long-term epi7 demiological studies demonstrates that a 

8 measurable and substantial reduction in 

9 morbidity or mortality among individual 

10 tobacco users is anticipated in subsequent 

11 studies. 

12 ‘‘(B) ADDITIONAL FINDINGS REQUIRED.— 

13 In order to approve an application under sub14 paragraph (A) the Secretary must also find 

15 that the applicant has demonstrated that— 

16 ‘‘(i) the magnitude of the overall re17 ductions in exposure to the substance or 

18 substances which are the subject of the ap19 plication is substantial, such substance or 

20 substances are harmful, and the product as 

21 actually used exposes consumers to the 

22 specified reduced level of the substance or 

23 substances; 

24 ‘‘(ii) the product as actually used by 

25 consumers will not expose them to higher 
148 

•S 2558 IS 

1 levels of other harmful substances com2 pared to the similar types of tobacco prod3 ucts then on the market unless such in4 creases are minimal and the anticipated 

5 overall impact of use of the product re6 mains a substantial and measurable reduc7 tion in overall morbidity and mortality 

8 among individual tobacco users; 

9 ‘‘(iii) testing of actual consumer per10 ception shows that, as the applicant pro11 poses to label and market the product, con12 sumers will not be misled into believing 

13 that the product— 

14 ‘‘(I) is or has been demonstrated 

15 to be less harmful; or 

16 ‘‘(II) presents or has been dem17 onstrated to present less of a risk of 

18 disease than 1 or more other commer19 cially marketed tobacco products; and 

20 ‘‘(iv) approval of the application is ex21 pected to benefit the health of the popu22 lation as a whole taking into account both 

23 users of tobacco products and persons who 

24 do not currently use tobacco products. 

25 ‘‘(C) CONDITIONS OF APPROVAL.— 
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•S 2558 IS 

1 ‘‘(i) IN GENERAL.—Applications ap2 proved under this paragraph shall be lim3 ited to a term of not more than 5 years, 

4 but may be renewed upon a finding by the 

5 Secretary that the requirements of this 

6 paragraph continue to be satisfied based 

7 on the filing of a new application. 

8 ‘‘(ii) AGREEMENTS BY APPLICANT.— 

9 Applications approved under this para10 graph shall be conditioned on the appli11 cant’s agreement to conduct post-market 

12 surveillance and studies and to submit to 

13 the Secretary the results of such surveil14 lance and studies to determine the impact 

15 of the application approval on consumer 

16 perception, behavior, and health and to en17 able the Secretary to review the accuracy 

18 of the determinations upon which the ap19 proval was based in accordance with a pro20 tocol approved by the Secretary. 

21 ‘‘(iii) ANNUAL SUBMISSION.—The re22 sults of such post-market surveillance and 

23 studies described in clause (ii) shall be 

24 submitted annually. 
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•S 2558 IS 

1 ‘‘(3) BASIS.—The determinations under para2 graphs (1) and (2) shall be based on— 

3 ‘‘(A) the scientific evidence submitted by 

4 the applicant; and 

5 ‘‘(B) scientific evidence and other informa6 tion that is available to the Secretary. 

7 ‘‘(4) BENEFIT TO HEALTH OF INDIVIDUALS

8 AND OF POPULATION AS A WHOLE.—In making the 

9 determinations under paragraphs (1) and (2), the 

10 Secretary shall take into account— 

11 ‘‘(A) the relative health risks to individuals 

12 of the tobacco product that is the subject of the 

13 application; 

14 ‘‘(B) the increased or decreased likelihood 

15 that existing users of tobacco products who 

16 would otherwise stop using such products will 

17 switch to the tobacco product that is the subject 

18 of the application; 

19 ‘‘(C) the increased or decreased likelihood 

20 that persons who do not use tobacco products 

21 will start using the tobacco product that is the 

22 subject of the application; 

23 ‘‘(D) the risks and benefits to persons 

24 from the use of the tobacco product that is the 

25 subject of the application as compared to the 
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•S 2558 IS 

1 use of products for smoking cessation approved 

2 under chapter V to treat nicotine dependence; 

3 and 

4 ‘‘(E) comments, data, and information 

5 submitted by interested persons. 

6 ‘‘(h) ADDITIONAL CONDITIONS FOR APPROVAL.— 

7 ‘‘(1) MODIFIED RISK PRODUCTS.—The Sec8 retary shall require for the approval of an applica9 tion under this section that any advertising or label10 ing concerning modified risk products enable the 

11 public to comprehend the information concerning 

12 modified risk and to understand the relative signifi13 cance of such information in the context of total 

14 health and in relation to all of the diseases and 

15 health-related conditions associated with the use of 

16 tobacco products. 

17 ‘‘(2) COMPARATIVE CLAIMS.— 

18 ‘‘(A) IN GENERAL.—The Secretary may re19 quire for the approval of an application under 

20 this subsection that a claim comparing a to21 bacco product to 1 or more other commercially 

22 marketed tobacco products shall compare the 

23 tobacco product to a commercially marketed to24 bacco product that is representative of that type 

25 of tobacco product on the market (for example 
152 

•S 2558 IS 

1 the average value of the top 3 brands of an es2 tablished regular tobacco product). 

3 ‘‘(B) QUANTITATIVE COMPARISONS.—The 

4 Secretary may also require, for purposes of sub5 paragraph (A), that the percent (or fraction) of 

6 change and identity of the reference tobacco 

7 product and a quantitative comparison of the 

8 amount of the substance claimed to be reduced 

9 shall be stated in immediate proximity to the 

10 most prominent claim. 

11 ‘‘(3) LABEL DISCLOSURE.— 

12 ‘‘(A) IN GENERAL.—The Secretary may re13 quire the disclosure on the label of other sub14 stances in the tobacco product, or substances 

15 that may be produced by the consumption of 

16 that tobacco product, that may affect a disease 

17 or health-related condition or may increase the 

18 risk of other diseases or health-related condi19 tions associated with the use of tobacco prod20 ucts. 

21 ‘‘(B) CONDITIONS OF USE.—If the condi22 tions of use of the tobacco product may affect 

23 the risk of the product to human health, the 

24 Secretary may require the labeling of conditions 

25 of use. 
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•S 2558 IS 

1 ‘‘(4) TIME.—The Secretary shall limit an ap2 proval under subsection (g)(1) for a specified period 

3 of time. 

4 ‘‘(5) ADVERTISING.—The Secretary may re5 quire that an applicant, whose application has been 

6 approved under this subsection, comply with require7 ments relating to advertising and promotion of the 

8 tobacco product. 

9 ‘‘(i) POSTMARKET SURVEILLANCE AND STUDIES.— 

10 ‘‘(1) IN GENERAL.—The Secretary shall require 

11 that an applicant under subsection (g)(1) conduct 

12 post market surveillance and studies for a tobacco 

13 product for which an application has been approved 

14 to determine the impact of the application approval 

15 on consumer perception, behavior, and health, to en16 able the Secretary to review the accuracy of the de17 terminations upon which the approval was based, 

18 and to provide information that the Secretary deter19 mines is otherwise necessary regarding the use or 

20 health risks involving the tobacco product. The re21 sults of post-market surveillance and studies shall be 

22 submitted to the Secretary on an annual basis. 

23 ‘‘(2) SURVEILLANCE PROTOCOL.—Each appli24 cant required to conduct a surveillance of a tobacco 

25 product under paragraph (1) shall, within 30 days 
154 

•S 2558 IS 

1 after receiving notice that the applicant is required 

2 to conduct such surveillance, submit, for the ap3 proval of the Secretary, a protocol for the required 

4 surveillance. The Secretary, within 60 days of the 

5 receipt of such protocol, shall determine if the prin6 cipal investigator proposed to be used in the surveil7 lance has sufficient qualifications and experience to 

8 conduct such surveillance and if such protocol will 

9 result in collection of the data or other information 

10 designated by the Secretary as necessary to protect 

11 the public health. 

12 ‘‘(j) WITHDRAWAL OF APPROVAL.—The Secretary, 

13 after an opportunity for an informal hearing, shall with14 draw the approval of an application under this section if 

15 the Secretary determines that— 

16 ‘‘(1) the applicant, based on new information, 

17 can no longer make the demonstrations required 

18 under subsection (g), or the Secretary can no longer 

19 make the determinations required under subsection 

20 (g); 

21 ‘‘(2) the application failed to include material 

22 information or included any untrue statement of ma23 terial fact; 
155 

•S 2558 IS 

1 ‘‘(3) any explicit or implicit representation that 

2 the product reduces risk or exposure is no longer 

3 valid, including if— 

4 ‘‘(A) a tobacco product standard is estab5 lished pursuant to section 907; 

6 ‘‘(B) an action is taken that affects the 

7 risks presented by other commercially marketed 

8 tobacco products that were compared to the 

9 product that is the subject of the application; or 

10 ‘‘(C) any postmarket surveillance or stud11 ies reveal that the approval of the application is 

12 no longer consistent with the protection of the 

13 public health; 

14 ‘‘(4) the applicant failed to conduct or submit 

15 the postmarket surveillance and studies required 

16 under subsection (g)(2)(C)(ii) or (i); or 

17 ‘‘(5) the applicant failed to meet a condition 

18 imposed under subsection (h). 

19 ‘‘(k) CHAPTER IV OR V.—A product approved in ac20 cordance with this section shall not be subject to chapter 

21 IV or V. 

22 ‘‘(l) IMPLEMENTING REGULATIONS OR GUIDANCE.— 

23 ‘‘(1) SCIENTIFIC EVIDENCE.—Not later than 2 

24 years after the date of enactment of the Family 

25 Smoking Prevention and Tobacco Control Act, the 
156 

•S 2558 IS 

1 Secretary shall issue regulations or guidance (or any 

2 combination thereof) on the scientific evidence re3 quired for assessment and ongoing review of modi4 fied risk tobacco products. Such regulations or guid5 ance shall— 

6 ‘‘(A) establish minimum standards for sci7 entific studies needed prior to approval to show 

8 that a substantial reduction in morbidity or 

9 mortality among individual tobacco users is 

10 likely; 

11 ‘‘(B) include validated biomarkers, inter12 mediate clinical endpoints, and other feasible 

13 outcome measures, as appropriate; 

14 ‘‘(C) establish minimum standards for post 

15 market studies, that shall include regular and 

16 long-term assessments of health outcomes and 

17 mortality, intermediate clinical endpoints, con18 sumer perception of harm reduction, and the 

19 impact on quitting behavior and new use of to20 bacco products, as appropriate; 

21 ‘‘(D) establish minimum standards for re22 quired postmarket surveillance, including ongo23 ing assessments of consumer perception; and 

24 ‘‘(E) require that data from the required 

25 studies and surveillance be made available to 
157 

•S 2558 IS 

1 the Secretary prior to the decision on renewal 

2 of a modified risk tobacco product. 

3 ‘‘(2) CONSULTATION.—The regulations or guid4 ance issued under paragraph (1) shall be developed 

5 in consultation with the Institute of Medicine, and 

6 with the input of other appropriate scientific and 

7 medical experts, on the design and conduct of such 

8 studies and surveillance. 

9 ‘‘(3) REVISION.—The regulations or guidance 

10 under paragraph (1) shall be revised on a regular 

11 basis as new scientific information becomes avail12 able. 

13 ‘‘(4) NEW TOBACCO PRODUCTS.—Not later 

14 than 2 years after the date of enactment of the 

15 Family Smoking Prevention and Tobacco Control 

16 Act, the Secretary shall issue a regulation or guid17 ance that permits the filing of a single application 

18 for any tobacco product that is a new tobacco prod19 uct under section 910 and for which the applicant 

20 seeks approval as a modified risk tobacco product 

21 under this section. 

22 ‘‘(m) DISTRIBUTORS.—No distributor may take any 

23 action, after the date of enactment of the Family Smoking 

24 Prevention and Tobacco Control Act, with respect to a to25 bacco product that would reasonably be expected to result 
158 

•S 2558 IS 

1 in consumers believing that the tobacco product or its 

2 smoke may present a lower risk of disease or is less harm3 ful than one or more commercially marketed tobacco prod4 ucts, or presents a reduced exposure to, or does not con5 tain or is free of, a substance or substances. 

6 ‘‘SEC. 912. JUDICIAL REVIEW. 

7 ‘‘(a) RIGHT TO REVIEW.— 

8 ‘‘(1) IN GENERAL.—Not later than 30 days 

9 after— 

10 ‘‘(A) the promulgation of a regulation 

11 under section 907 establishing, amending, or 

12 revoking a tobacco product standard; or 

13 ‘‘(B) a denial of an application for ap14 proval under section 910(c), 

15 any person adversely affected by such regulation or 

16 denial may file a petition for judicial review of such 

17 regulation or denial with the United States Court of 

18 Appeals for the District of Columbia or for the cir19 cuit in which such person resides or has their prin20 cipal place of business. 

21 ‘‘(2) REQUIREMENTS.— 

22 ‘‘(A) COPY OF PETITION.—A copy of the 

23 petition filed under paragraph (1) shall be 

24 transmitted by the clerk of the court involved to 

25 the Secretary. 
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•S 2558 IS 

1 ‘‘(B) RECORD OF PROCEEDINGS.—On re2 ceipt of a petition under subparagraph (A), the 

3 Secretary shall file in the court in which such 

4 petition was filed— 

5 ‘‘(i) the record of the proceedings on 

6 which the regulation or order was based; 

7 and 

8 ‘‘(ii) a statement of the reasons for 

9 the issuance of such a regulation or order. 

10 ‘‘(C) DEFINITION OF RECORD.—In this 

11 section, the term ‘record’ means— 

12 ‘‘(i) all notices and other matter pub13 lished in the Federal Register with respect 

14 to the regulation or order reviewed; 

15 ‘‘(ii) all information submitted to the 

16 Secretary with respect to such regulation 

17 or order; 

18 ‘‘(iii) proceedings of any panel or ad19 visory committee with respect to such reg20 ulation or order; 

21 ‘‘(iv) any hearing held with respect to 

22 such regulation or order; and 

23 ‘‘(v) any other information identified 

24 by the Secretary, in the administrative pro25 ceeding held with respect to such regula-
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•S 2558 IS 

1 tion or order, as being relevant to such 

2 regulation or order. 

3 ‘‘(b) STANDARD OF REVIEW.—Upon the filing of the 

4 petition under subsection (a) for judicial review of a regu5 lation or order, the court shall have jurisdiction to review 

6 the regulation or order in accordance with chapter 7 of 

7 title 5, United States Code, and to grant appropriate re8 lief, including interim relief, as provided for in such chap9 ter. A regulation or denial described in subsection (a) shall 

10 be reviewed in accordance with section 706(2)(A) of title 

11 5, United States Code. 

12 ‘‘(c) FINALITY OF JUDGMENT.—The judgment of the 

13 court affirming or setting aside, in whole or in part, any 

14 regulation or order shall be final, subject to review by the 

15 Supreme Court of the United States upon certiorari or 

16 certification, as provided in section 1254 of title 28, 

17 United States Code. 

18 ‘‘(d) OTHER REMEDIES.—The remedies provided for 

19 in this section shall be in addition to, and not in lieu of, 

20 any other remedies provided by law. 

21 ‘‘(e) REGULATIONS AND ORDERS MUST RECITE

22 BASIS IN RECORD.—To facilitate judicial review, a regula23 tion or order issued under section 906, 907, 908, 909, 

24 910, or 916 shall contain a statement of the reasons for 
161 

•S 2558 IS 

1 the issuance of such regulation or order in the record of 

2 the proceedings held in connection with its issuance. 

3 ‘‘SEC. 913. EQUAL TREATMENT OF RETAIL OUTLETS. 

4 ‘‘The Secretary shall issue regulations to require that 

5 retail establishments for which the predominant business 

6 is the sale of tobacco products comply with any advertising 

7 restrictions applicable to retail establishments accessible 

8 to individuals under the age of 18. 

9 ‘‘SEC. 914. JURISDICTION OF AND COORDINATION WITH 

10 THE FEDERAL TRADE COMMISSION. 

11 ‘‘(a) JURISDICTION.— 

12 ‘‘(1) IN GENERAL.—Except where expressly 

13 provided in this chapter, nothing in this chapter 

14 shall be construed as limiting or diminishing the au15 thority of the Federal Trade Commission to enforce 

16 the laws under its jurisdiction with respect to the 

17 advertising, sale, or distribution of tobacco products. 

18 ‘‘(2) ENFORCEMENT.—Any advertising that vio19 lates this chapter or a provision of the regulations 

20 referred to in section 232 of the Family Smoking 

21 Prevention and Tobacco Control Act, is an unfair or 

22 deceptive act or practice under section 5(a) of the 

23 Federal Trade Commission Act (15 U.S.C. 45(a)) 

24 and shall be considered a violation of a rule promul25 gated under section 18 of that Act (15 U.S.C. 57a). 
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•S 2558 IS 

1 ‘‘(b) COORDINATION.—With respect to the require2 ments of section 4 of the Federal Cigarette Labeling and 

3 Advertising Act (15 U.S.C. 1333) and section 3 of the 

4 Comprehensive Smokeless Tobacco Health Education Act 

5 of 1986 (15 U.S.C. 4402)— 

6 ‘‘(1) the Chairman of the Federal Trade Com7 mission shall coordinate with the Secretary con8 cerning the enforcement of such Act as such enforce9 ment relates to unfair or deceptive acts or practices 

10 in the advertising of cigarettes or smokeless tobacco; 

11 and 

12 ‘‘(2) the Secretary shall consult with the Chair13 man of such Commission in revising the label state14 ments and requirements under such sections. 

15 ‘‘SEC. 915. CONGRESSIONAL REVIEW PROVISIONS. 

16 ‘‘In accordance with section 801 of title 5, United 

17 States Code, Congress shall review, and may disapprove, 

18 any rule under this chapter that is subject to section 801. 

19 This section and section 801 do not apply to the regula20 tions referred to in section 232 of the Family Smoking 

21 Prevention and Tobacco Control Act. 

22 ‘‘SEC. 916. REGULATION REQUIREMENT. 

23 ‘‘(a) TESTING, REPORTING, AND DISCLOSURE.—Not 

24 later than 24 months after the date of enactment of the 

25 Family Smoking Prevention and Tobacco Control Act, the 
163 

•S 2558 IS 

1 Secretary, acting through the Commissioner of the Food 

2 and Drug Administration, shall promulgate regulations 

3 under this Act that meet the requirements of subsection 

4 (b). 

5 ‘‘(b) CONTENTS OF RULES.—The regulations pro6 mulgated under subsection (a) shall require testing and 

7 reporting of tobacco product constituents, ingredients, and 

8 additives, including smoke constituents, by brand and sub9 brand that the Secretary determines should be tested to 

10 protect the public health. The regulations may require 

11 that tobacco product manufacturers, packagers, or import12 ers make disclosures relating to the results of the testing 

13 of tar and nicotine through labels or advertising or other 

14 appropriate means, and make disclosures regarding the re15 sults of the testing of other constituents, including smoke 

16 constituents, ingredients, or additives, that the Secretary 

17 determines should be disclosed to the public to protect the 

18 public health and will not mislead consumers about the 

19 risk of tobacco related disease. 

20 ‘‘(c) AUTHORITY.—The Food and Drug Administra21 tion shall have the authority under this chapter to conduct 

22 or to require the testing, reporting, or disclosure of to23 bacco product constituents, including smoke constituents. 
164 

•S 2558 IS 

1 ‘‘SEC. 917. PRESERVATION OF STATE AND LOCAL AUTHOR2 ITY. 

3 ‘‘(a) IN GENERAL.— 

4 ‘‘(1) PRESERVATION.—Nothing in this chapter, 

5 or rules promulgated under this chapter, shall be 

6 construed to limit the authority of a Federal agency 

7 (including the Armed Forces), a State or political 

8 subdivision of a State, or the government of an In9 dian tribe to enact, adopt, promulgate, and enforce 

10 any law, rule, regulation, or other measure with re11 spect to tobacco products that is in addition to, or 

12 more stringent than, requirements established under 

13 this chapter, including a law, rule, regulation, or 

14 other measure relating to or prohibiting the sale, 

15 distribution, possession, exposure to, access to, ad16 vertising and promotion of, or use of tobacco prod17 ucts by individuals of any age, information reporting 

18 to the State, or measures relating to fire safety 

19 standards for tobacco products. No provision of this 

20 chapter shall limit or otherwise affect any State, 

21 Tribal, or local taxation of tobacco products. 

22 ‘‘(2) PREEMPTION OF CERTAIN STATE AND

23 LOCAL REQUIREMENTS.— 

24 ‘‘(A) IN GENERAL.—Except as provided in 

25 paragraph (1) and subparagraph (B), no State 

26 or political subdivision of a State may establish 
165 

•S 2558 IS 

1 or continue in effect with respect to a tobacco 

2 product any requirement which is different 

3 from, or in addition to, any requirement under 

4 the provisions of this chapter relating to to5 bacco product standards, premarket approval, 

6 adulteration, misbranding, labeling, registra7 tion, good manufacturing standards, or reduced 

8 risk products. 

9 ‘‘(B) EXCEPTION.—Subparagraph (A) 

10 does not apply to requirements relating to the 

11 sale, distribution, possession, information re12 porting to the State, exposure to, access to, the 

13 advertising and promotion of, or use of, tobacco 

14 products by individuals of any age, or relating 

15 to fire safety standards for tobacco products. 

16 Information disclosed to a State under subpara17 graph (A) that is exempt from disclosure under 

18 section 554(b)(4) of title 5, United States Code, 

19 shall be treated as trade secret and confidential 

20 information by the State. 

21 ‘‘(b) RULE OF CONSTRUCTION REGARDING PRODUCT

22 LIABILITY.—No provision of this chapter relating to a to23 bacco product shall be construed to modify or otherwise 

24 affect any action or the liability of any person under the 

25 product liability law of any State. 
166 

•S 2558 IS 

1 ‘‘SEC. 918. TOBACCO PRODUCTS SCIENTIFIC ADVISORY 

2 COMMITTEE. 

3 ‘‘(a) ESTABLISHMENT.—Not later than 1 year after 

4 the date of enactment of the Family Smoking Prevention 

5 and Tobacco Control Act, the Secretary shall establish an 

6 11-member advisory committee, to be known as the ‘To7 bacco Products Scientific Advisory Committee’. 

8 ‘‘(b) MEMBERSHIP.— 

9 ‘‘(1) IN GENERAL.— 

10 ‘‘(A) MEMBERS.—The Secretary shall ap11 point as members of the Tobacco Products Sci12 entific Advisory Committee individuals who are 

13 technically qualified by training and experience 

14 in the medicine, medical ethics, science, or tech15 nology involving the manufacture, evaluation, or 

16 use of tobacco products, who are of appro17 priately diversified professional backgrounds. 

18 The committee shall be composed of— 

19 ‘‘(i) 7 individuals who are physicians, 

20 dentists, scientists, or health care profes21 sionals practicing in the area of oncology, 

22 pulmonology, cardiology, toxicology, phar23 macology, addiction, or any other relevant 

24 specialty; 
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•S 2558 IS 

1 ‘‘(ii) 1 individual who is an officer or 

2 employee of a State or local government or 

3 of the Federal Government; 

4 ‘‘(iii) 1 individual as a representative 

5 of the general public; 

6 ‘‘(iv) 1 individual as a representative 

7 of the interests in the tobacco manufac8 turing industry; and 

9 ‘‘(v) 1 individual as a representative 

10 of the interests of the tobacco growers. 

11 ‘‘(B) NONVOTING MEMBERS.—The mem12 bers of the committee appointed under clauses 

13 (iv) and (v) of subparagraph (A) shall serve as 

14 consultants to those described in clauses (i) 

15 through (iii) of subparagraph (A) and shall be 

16 nonvoting representatives. 

17 ‘‘(2) LIMITATION.—The Secretary may not ap18 point to the Advisory Committee any individual who 

19 is in the regular full-time employ of the Food and 

20 Drug Administration or any agency responsible for 

21 the enforcement of this Act. The Secretary may ap22 point Federal officials as ex officio members. 

23 ‘‘(3) CHAIRPERSON.—The Secretary shall des24 ignate 1 of the members of the Advisory Committee 

25 to serve as chairperson. 
168 

•S 2558 IS 

1 ‘‘(c) DUTIES.—The Tobacco Products Scientific Ad2 visory Committee shall provide advice, information, and 

3 recommendations to the Secretary— 

4 ‘‘(1) as provided in this chapter; 

5 ‘‘(2) on the effects of the alteration of the nico6 tine yields from tobacco products; 

7 ‘‘(3) on whether there is a threshold level below 

8 which nicotine yields do not produce dependence on 

9 the tobacco product involved; and 

10 ‘‘(4) on its review of other safety, dependence, 

11 or health issues relating to tobacco products as re12 quested by the Secretary. 

13 ‘‘(d) COMPENSATION; SUPPORT; FACA.— 

14 ‘‘(1) COMPENSATION AND TRAVEL.—Members 

15 of the Advisory Committee who are not officers or 

16 employees of the United States, while attending con17 ferences or meetings of the committee or otherwise 

18 engaged in its business, shall be entitled to receive 

19 compensation at rates to be fixed by the Secretary, 

20 which may not exceed the daily equivalent of the 

21 rate in effect for level 4 of the Senior Executive 

22 Schedule under section 5382 of title 5, United 

23 States Code, for each day (including travel time) 

24 they are so engaged; and while so serving away from 

25 their homes or regular places of business each mem-
169 

•S 2558 IS 

1 ber may be allowed travel expenses, including per 

2 diem in lieu of subsistence, as authorized by section 

3 5703 of title 5, United States Code, for persons in 

4 the Government service employed intermittently. 

5 ‘‘(2) ADMINISTRATIVE SUPPORT.—The Sec6 retary shall furnish the Advisory Committee clerical 

7 and other assistance. 

8 ‘‘(3) NONAPPLICATION OF FACA.—Section 14 of 

9 the Federal Advisory Committee Act (5 U.S.C. 

10 App.) does not apply to the Advisory Committee. 

11 ‘‘(e) PROCEEDINGS OF ADVISORY PANELS AND COM12 MITTEES.—The Advisory Committee shall make and 

13 maintain a transcript of any proceeding of the panel or 

14 committee. Each such panel and committee shall delete 

15 from any transcript made under this subsection informa16 tion which is exempt from disclosure under section 552(b) 

17 of title 5, United States Code. 

18 ‘‘SEC. 919. DRUG PRODUCTS USED TO TREAT TOBACCO DE19 PENDENCE. 

20 ‘‘The Secretary shall consider— 

21 ‘‘(1) at the request of the applicant, designating 

22 nicotine replacement products as fast track research 

23 and approval products within the meaning of section 

24 506; 
170 

•S 2558 IS 

1 ‘‘(2) direct the Commissioner to consider ap2 proving the extended use of nicotine replacement 

3 products (such as nicotine patches, nicotine gum, 

4 and nicotine lozenges) for the treatment of tobacco 

5 dependence; 

6 ‘‘(3) review and consider the evidence for addi7 tional indications for nicotine replacement products, 

8 such as for craving relief or relapse prevention; and 

9 ‘‘(4) consider— 

10 ‘‘(A) relieving companies of premarket bur11 dens under section 505 if the requirement is re12 dundant considering other nicotine replacement 

13 therapies already on the market; and 

14 ‘‘(B) time and extent applications for nico15 tine replacement therapies that have been ap16 proved by a regulatory body in a foreign coun17 try and have marketing experience in such 

18 country. 

19 ‘‘SEC. 920. USER FEE. 

20 ‘‘(a) ESTABLISHMENT OF QUARTERLY USER FEE.— 

21 The Secretary shall assess a quarterly user fee with re22 spect to every quarter of each fiscal year commencing fis23 cal year 2004, calculated in accordance with this section, 

24 upon each manufacturer and importer of tobacco products 

25 subject to this chapter. 
171 

•S 2558 IS 

1 ‘‘(b) FUNDING OF FDA REGULATION OF TOBACCO

2 PRODUCTS.—The Secretary shall make user fees collected 

3 pursuant to this section available to pay, in each fiscal 

4 year, for the costs of the activities of the Food and Drug 

5 Administration related to the regulation of tobacco prod6 ucts under this chapter. 

7 ‘‘(c) ASSESSMENT OF USER FEE.— 

8 ‘‘(1) AMOUNT OF ASSESSMENT.—Except as 

9 provided in paragraph (4), the total user fees as10 sessed each year pursuant to this section shall be 

11 sufficient, and shall not exceed what is necessary, to 

12 pay for the costs of the activities described in sub13 section (b) for each fiscal year. 

14 ‘‘(2) ALLOCATION OF ASSESSMENT BY CLASS

15 OF TOBACCO PRODUCTS.— 

16 ‘‘(A) IN GENERAL.—Subject to paragraph 

17 (3), the total user fees assessed each fiscal year 

18 with respect to each class of importers and 

19 manufacturers shall be equal to an amount that 

20 is the applicable percentage of the total costs of 

21 activities of the Food and Drug Administration 

22 described in subsection (b). 

23 ‘‘(B) APPLICABLE PERCENTAGE.—For 

24 purposes of subparagraph (A) the applicable 
172 

•S 2558 IS 

1 percentage for a fiscal year shall be the fol2 lowing: 

3 ‘‘(i) 92.07 percent shall be assessed 

4 on manufacturers and importers of ciga5 rettes; 

6 ‘‘(ii) 0.05 percent shall be assessed on 

7 manufacturers and importers of little ci8 gars; 

9 ‘‘(iii) 7.15 percent shall be assessed 

10 on manufacturers and importers of cigars 

11 other than little cigars; 

12 ‘‘(iv) 0.43 percent shall be assessed on 

13 manufacturers and importers of snuff; 

14 ‘‘(v) 0.10 percent shall be assessed on 

15 manufacturers and importers of chewing 

16 tobacco; 

17 ‘‘(vi) 0.06 percent shall be assessed on 

18 manufacturers and importers of pipe to19 bacco; and 

20 ‘‘(vii) 0.14 percent shall be assessed 

21 on manufacturers and importers of roll22 your-own tobacco. 

23 ‘‘(3) DISTRIBUTION OF FEE SHARES OF MANU24 FACTURERS AND IMPORTERS EXEMPT FROM USER

25 FEE.—Where a class of tobacco products is not sub-
173 

•S 2558 IS 

1 ject to a user fee under this section, the portion of 

2 the user fee assigned to such class under subsection 

3 (d)(2) shall be allocated by the Secretary on a pro 

4 rata basis among the classes of tobacco products 

5 that are subject to a user fee under this section. 

6 Such pro rata allocation for each class of tobacco 

7 products that are subject to a user fee under this 

8 section shall be the quotient of— 

9 ‘‘(A) the sum of the percentages assigned 

10 to all classes of tobacco products subject to this 

11 section; divided by 

12 ‘‘(B) the percentage assigned to such class 

13 under paragraph (2). 

14 ‘‘(4) ANNUAL LIMIT ON ASSESSMENT.—The 

15 total assessment under this section— 

16 ‘‘(A) for fiscal year 2004 shall be 

17 $85,000,000; 

18 ‘‘(B) for fiscal year 2005 shall be 

19 $175,000,000; 

20 ‘‘(C) for fiscal year 2006 shall be 

21 $300,000,000; and 

22 ‘‘(D) for each subsequent fiscal year, shall 

23 not exceed the limit on the assessment imposed 

24 during the previous fiscal year, as adjusted by 
174 

•S 2558 IS 

1 the Secretary (after notice, published in the 

2 Federal Register) to reflect the greater of— 

3 ‘‘(i) the total percentage change that 

4 occurred in the Consumer Price Index for 

5 all urban consumers (all items; United 

6 States city average) for the 12-month pe7 riod ending on June 30 of the preceding 

8 fiscal year for which fees are being estab9 lished; or 

10 ‘‘(ii) the total percentage change for 

11 the previous fiscal year in basic pay under 

12 the General Schedule in accordance with 

13 section 5332 of title 5, United States 

14 Code, as adjusted by any locality-based 

15 comparability payment pursuant to section 

16 5304 of such title for Federal employees 

17 stationed in the District of Columbia. 

18 ‘‘(5) TIMING OF USER FEE ASSESSMENT.—The 

19 Secretary shall notify each manufacturer and im20 porter of tobacco products subject to this section of 

21 the amount of the quarterly assessment imposed on 

22 such manufacturer or importer under subsection (f) 

23 during each quarter of each fiscal year. Such notifi24 cations shall occur not earlier than 3 months prior 

25 to the end of the quarter for which such assessment 
175 

•S 2558 IS 

1 is made, and payments of all assessments shall be 

2 made not later than 60 days after each such notifi3 cation. 

4 ‘‘(d) DETERMINATION OF USER FEE BY COMPANY

5 MARKET SHARE.— 

6 ‘‘(1) IN GENERAL.—The user fee to be paid by 

7 each manufacturer or importer of a given class of to8 bacco products shall be determined in each quarter 

9 by multiplying— 

10 ‘‘(A) such manufacturer’s or importer’s 

11 market share of such class of tobacco products; 

12 by 

13 ‘‘(B) the portion of the user fee amount 

14 for the current quarter to be assessed on manu15 facturers and importers of such class of tobacco 

16 products as determined under subsection (e). 

17 ‘‘(2) NO FEE IN EXCESS OF MARKET SHARE.— 

18 No manufacturer or importer of tobacco products 

19 shall be required to pay a user fee in excess of the 

20 market share of such manufacturer or importer. 

21 ‘‘(e) DETERMINATION OF VOLUME OF DOMESTIC

22 SALES.— 

23 ‘‘(1) IN GENERAL.—The calculation of gross 

24 domestic volume of a class of tobacco product by a 

25 manufacturer or importer, and by all manufacturers 
176 

•S 2558 IS 

1 and importers as a group, shall be made by the Sec2 retary using information provided by manufacturers 

3 and importers pursuant to subsection (f), as well as 

4 any other relevant information provided to or ob5 tained by the Secretary. 

6 ‘‘(2) MEASUREMENT.—For purposes of the cal7 culations under this subsection and the information 

8 provided under subsection (f) by the Secretary, gross 

9 domestic volume shall be measured by— 

10 ‘‘(A) in the case of cigarettes, the number 

11 of cigarettes sold; 

12 ‘‘(B) in the case of little cigars, the num13 ber of little cigars sold; 

14 ‘‘(C) in the case of large cigars, the num15 ber of cigars weighing more than 3 pounds per 

16 thousand sold; and 

17 ‘‘(D) in the case of other classes of tobacco 

18 products, in terms of number of pounds, or 

19 fraction thereof, of these products sold. 

20 ‘‘(f) MEASUREMENT OF GROSS DOMESTIC VOL21 UME.— 

22 ‘‘(1) IN GENERAL.—Each manufacturer and 

23 importer of tobacco products shall submit to the 

24 Secretary a certified copy of each of the returns or 

25 forms described by this paragraph that are required 
177 

•S 2558 IS 

1 to be filed with a Government agency on the same 

2 date that those returns or forms are filed, or required 

3 to be filed, with such agency. The returns and forms 

4 described by this paragraph are those returns and 

5 forms related to the release of tobacco products into 

6 domestic commerce, as defined by section 5702(k) of 

7 the Internal Revenue Code of 1986, and the repay8 ment of the taxes imposed under chapter 52 of such 

9 Code (ATF Form 500.24 and United States Customs 

10 Form 7501 under currently applicable regulations). 

11 ‘‘(2) PENALTIES.—Any person that knowingly 

12 fails to provide information required under this sub13 section or that provides false information under this 

14 subsection shall be subject to the penalties described 

15 in section 1003 of title 18, United States Code. In 

16 addition, such person may be subject to a civil pen17 alty in an amount not to exceed 2 percent of the 

18 value of the kind of tobacco products manufactured 

19 or imported by such person during the applicable 

20 quarter, as determined by the Secretary. 

21 ‘‘(h) EFFECTIVE DATE.—The user fees prescribed by 

22 this section shall be assessed in fiscal year 2004, based 

23 on domestic sales of tobacco products during fiscal year 

24 2003 and shall be assessed in each fiscal year thereafter.’’. 
178 

•S 2558 IS 

1 SEC. 232. INTERIM FINAL RULE. 

2 (a) CIGARETTES AND SMOKELESS TOBACCO.— 

3 (1) IN GENERAL.—Not later than 30 days after 

4 the date of enactment of this Act, the Secretary of 

5 Health and Human Services shall publish in the 

6 Federal Register an interim final rule regarding 

7 cigarettes and smokeless tobacco, which is hereby 

8 deemed to be in compliance with the Administrative 

9 Procedures Act and other applicable law. 

10 (2) CONTENTS OF RULE.—Except as provided 

11 in this subsection, the interim final rule published 

12 under paragraph (1), shall be identical in its provi13 sions to part 897 of the regulations promulgated by 

14 the Secretary of Health and Human Services in the 

15 August 28, 1996, issue of the Federal Register (61 

16 Fed. Reg., 44615–44618). Such rule shall— 

17 (A) provide for the designation of jurisdic18 tional authority that is in accordance with this 

19 subsection; 

20 (B) strike Subpart C—Labeling and sec21 tion 897.32(c); and 

22 (C) become effective not later than 1 year 

23 after the date of enactment of this Act. 

24 (3) AMENDMENTS TO RULE.—Prior to making 

25 amendments to the rule published under paragraph 

26 (1), the Secretary shall promulgate a proposed rule 
179 

•S 2558 IS 

1 in accordance with the Administrative Procedures 

2 Act. 

3 (4) RULE OF CONSTRUCTION.—Except as pro4 vided in paragraph (3), nothing in this section shall 

5 be construed to limit the authority of the Secretary 

6 to amend, in accordance with the Administrative 

7 Procedures Act, the regulation promulgated pursu8 ant to this section. 

9 (b) LIMITATION ON ADVISORY OPINIONS.—As of the 

10 date of enactment of this Act, the following documents 

11 issued by the Food and Drug Administration shall not 

12 constitute advisory opinions under section 10.85(d)(1) of 

13 title 21, Code of Federal Regulations, except as they apply 

14 to tobacco products, and shall not be cited by the Sec15 retary of Health and Human Services or the Food and 

16 Drug Administration as binding precedent: 

17 (1) The preamble to the proposed rule in the 

18 document entitled ‘‘Regulations Restricting the Sale 

19 and Distribution of Cigarettes and Smokeless To20 bacco Products to Protect Children and Adoles21 cents’’ (60 Fed. Reg. 41314–41372 (August 11, 

22 1995)). 

23 (2) The document entitled ‘‘Nicotine in Ciga24 rettes and Smokeless Tobacco Products is a Drug 

25 and These Products Are Nicotine Delivery Devices 
180 

•S 2558 IS 

1 Under the Federal Food, Drug, and Cosmetic Act’’ 

2 (60 Fed. Reg. 41453–41787 (August 11, 1995)). 

3 (3) The preamble to the final rule in the docu4 ment entitled ‘‘Regulations Restricting the Sale and 

5 Distribution of Cigarettes and Smokeless Tobacco to 

6 Protect Children and Adolescents’’ (61 Fed. Reg. 

7 44396–44615 (August 28, 1996)). 

8 (4) The document entitled ‘‘Nicotine in Ciga9 rettes and Smokeless Tobacco is a Drug and These 

10 Products are Nicotine Delivery Devices Under the 

11 Federal Food, Drug, and Cosmetic Act; Jurisdic12 tional Determination’’ (61 Fed. Reg. 44619–45318 

13 (August 28, 1996)). 

14 SEC. 233. CONFORMING AND OTHER AMENDMENTS TO GEN15 ERAL PROVISIONS. 

16 (a) AMENDMENT OF FEDERAL FOOD, DRUG, AND

17 COSMETIC ACT.—Except as otherwise expressly provided, 

18 whenever in this section an amendment is expressed in 

19 terms of an amendment to, or repeal of, a section or other 

20 provision, the reference is to a section or other provision 

21 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

22 301 et seq.). 

23 (b) SECTION 301.—Section 301 (21 U.S.C. 331) is 

24 amended— 
181 

•S 2558 IS 

1 (1) in subsection (a), by inserting ‘‘tobacco 

2 product,’’ after ‘‘device,’’; 

3 (2) in subsection (b), by inserting ‘‘tobacco 

4 product,’’ after ‘‘device,’’; 

5 (3) in subsection (c), by inserting ‘‘tobacco 

6 product,’’ after ‘‘device,’’; 

7 (4) in subsection (e), by striking ‘‘515(f), or 

8 519’’ and inserting ‘‘515(f), 519, or 909’’; 

9 (5) in subsection (g), by inserting ‘‘tobacco 

10 product,’’ after ‘‘device,’’; 

11 (6) in subsection (h), by inserting ‘‘tobacco 

12 product,’’ after ‘‘device,’’; 

13 (7) in subsection (j), by striking ‘‘708, or 721’’ 

14 and inserting ‘‘708, 721, 904, 905, 906, 907, 908, 

15 909, or section 921(b)’’; 

16 (8) in subsection (k), by inserting ‘‘tobacco 

17 product,’’ after ‘‘device,’’; 

18 (9) by striking subsection (p) and inserting the 

19 following: 

20 ‘‘(p) The failure to register in accordance with section 

21 510 or 905, the failure to provide any information re22 quired by section 510(j), 510(k), 905(i), or 905(j), or the 

23 failure to provide a notice required by section 510(j)(2) 

24 or 905(i)(2).’’; 
182 

•S 2558 IS 

1 (10) by striking subsection (q)(1) and inserting 

2 the following: 

3 ‘‘(q)(1) The failure or refusal— 

4 ‘‘(A) to comply with any requirement prescribed 

5 under section 518, 520(g), 903(b)(8), or 908, or 

6 condition prescribed under section 

7 903(b)(6)(B)(ii)(II); 

8 ‘‘(B) to furnish any notification or other mate9 rial or information required by or under section 519, 

10 520(g), 904, 909, or section 921; or 

11 ‘‘(C) to comply with a requirement under sec12 tion 522 or 913.’’; 

13 (11) in subsection (q)(2), by striking ‘‘device,’’ 

14 and inserting ‘‘device or tobacco product,’’; 

15 (12) in subsection (r), by inserting ‘‘or tobacco 

16 product’’ after ‘‘device’’ each time that it appears; 

17 and 

18 (13) by adding at the end the following: 

19 ‘‘(aa) The sale of tobacco products in violation 

20 of a no-tobacco-sale order issued under section 

21 303(f). 

22 ‘‘(bb) The introduction or delivery for introduc23 tion into interstate commerce of a tobacco product 

24 in violation of section 911. 
183 

•S 2558 IS 

1 ‘‘(cc)(1) Forging, counterfeiting, simulating, or 

2 falsely representing, or without proper authority 

3 using any mark, stamp (including tax stamp), tag, 

4 label, or other identification device upon any tobacco 

5 product or container or labeling thereof so as to 

6 render such tobacco product a counterfeit tobacco 

7 product. 

8 ‘‘(2) Making, selling, disposing of, or keeping in 

9 possession, control, or custody, or concealing any 

10 punch, die, plate, stone, or other item that is de11 signed to print, imprint, or reproduce the trade12 mark, trade name, or other identifying mark, im13 print, or device of another or any likeness of any of 

14 the foregoing upon any tobacco product or container 

15 or labeling thereof so as to render such tobacco 

16 product a counterfeit tobacco product. 

17 ‘‘(3) The doing of any act that causes a tobacco 

18 product to be a counterfeit tobacco product, or the 

19 sale or dispensing, or the holding for sale or dis20 pensing, of a counterfeit tobacco product. 

21 ‘‘(dd) The charitable distribution of tobacco 

22 products. 

23 ‘‘(ee) The failure of a manufacturer or dis24 tributor to notify the Attorney General of their 

25 knowledge of tobacco products used in illicit trade.’’. 
184 

•S 2558 IS 

1 (c) SECTION 303.—Section 303 (21 U.S.C. 333(f)) 

2 is amended in subsection (f)— 

3 (1) by striking the subsection heading and in4 serting the following: 

5 ‘‘(f) CIVIL PENALTIES; NO-TOBACCO-SALE OR6 DERS.—’’; 

7 (2) in paragraph (1)(A), by inserting ‘‘or to8 bacco products’’ after ‘‘devices’’; 

9 (3) by redesignating paragraphs (3), (4), and 

10 (5) as paragraphs (4), (5), and (6), and inserting 

11 after paragraph (2) the following: 

12 ‘‘(3) If the Secretary finds that a person has 

13 committed repeated violations of restrictions promul14 gated under section 906(d) at a particular retail out15 let then the Secretary may impose a no-tobacco-sale 

16 order on that person prohibiting the sale of tobacco 

17 products in that outlet. A no-tobacco-sale order may 

18 be imposed with a civil penalty under paragraph 

19 (1).’’; 

20 (4) in paragraph (4) as so redesignated— 

21 (A) in subparagraph (A)— 

22 (i) by striking ‘‘assessed’’ the first 

23 time it appears and inserting ‘‘assessed, or 

24 a no-tobacco-sale order may be imposed,’’; 

25 and 
185 

•S 2558 IS 

1 (ii) by striking ‘‘penalty’’ and insert2 ing ‘‘penalty, or upon whom a no-tobacco3 order is to be imposed,’’; 

4 (B) in subparagraph (B)— 

5 (i) by inserting after ‘‘penalty,’’ the 

6 following: ‘‘or the period to be covered by 

7 a no-tobacco-sale order,’’; and 

8 (ii) by adding at the end the fol9 lowing: ‘‘A no-tobacco-sale order perma10 nently prohibiting an individual retail out11 let from selling tobacco products shall in12 clude provisions that allow the outlet, after 

13 a specified period of time, to request that 

14 the Secretary compromise, modify, or ter15 minate the order.’’; and 

16 (C) by adding at the end, the following: 

17 ‘‘(D) The Secretary may compromise, mod18 ify, or terminate, with or without conditions, 

19 any no-tobacco-sale order.’’; 

20 (5) in paragraph (5) as so redesignated— 

21 (A) by striking ‘‘(3)(A)’’ as redesignated, 

22 and inserting ‘‘(4)(A)’’; 

23 (B) by inserting ‘‘or the imposition of a 

24 no-tobacco-sale order’’ after ‘‘penalty’’ the first 

25 2 places it appears; and 
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•S 2558 IS 

1 (C) by striking ‘‘issued.’’ and inserting 

2 ‘‘issued, or on which the no-tobacco-sale order 

3 was imposed, as the case may be.’’; and 

4 (6) in paragraph (6), as so redesignated, by 

5 striking ‘‘paragraph (4)’’ each place it appears and 

6 inserting ‘‘paragraph (5)’’. 

7 (d) SECTION 304.—Section 304 (21 U.S.C. 334) is 

8 amended— 

9 (1) in subsection (a)(2)— 

10 (A) by striking ‘‘and’’ before ‘‘(D)’’; and 

11 (B) by striking ‘‘device.’’ and inserting the 

12 following: ‘‘, (E) Any adulterated or misbranded 

13 tobacco product.’’; 

14 (2) in subsection (d)(1), by inserting ‘‘tobacco 

15 product,’’ after ‘‘device,’’; 

16 (3) in subsection (g)(1), by inserting ‘‘or to17 bacco product’’ after ‘‘device’’ each place it appears; 

18 and 

19 (4) in subsection (g)(2)(A), by inserting ‘‘or to20 bacco product’’ after ‘‘device’’ each place it appears. 

21 (e) SECTION 702.—Section 702(a) (21 U.S.C. 

22 372(a)) is amended— 

23 (1) by inserting ‘‘(1)’’ after ‘‘(a)’’; and 

24 (2) by adding at the end thereof the following: 
187 

•S 2558 IS 

1 ‘‘(2) For a tobacco product, to the extent feasible, 

2 the Secretary shall contract with the States in accordance 

3 with paragraph (1) to carry out inspections of retailers 

4 in connection with the enforcement of this Act.’’. 

5 (f) SECTION 703.—Section 703 (21 U.S.C. 373) is 

6 amended— 

7 (1) by inserting ‘‘tobacco product,’’ after ‘‘de8 vice,’’ each place it appears; and 

9 (2) by inserting ‘‘tobacco products,’’ after ‘‘de10 vices,’’ each place it appears. 

11 (g) SECTION 704.—Section 704 (21 U.S.C. 374) is 

12 amended— 

13 (1) in subsection (a)(1)(A), by inserting ‘‘to14 bacco products,’’ after ‘‘devices,’’ each place it ap15 pears; 

16 (2) in subsection (a)(1)(B), by inserting ‘‘or to17 bacco product’’ after ‘‘restricted devices’’ each place 

18 it appears; and 

19 (3) in subsection (b), by inserting ‘‘tobacco 

20 product,’’ after ‘‘device,’’. 

21 (h) SECTION 705.—Section 705(b) (21 U.S.C. 

22 375(b)) is amended by inserting ‘‘tobacco products,’’ after 

23 ‘‘devices,’’. 

24 (i) SECTION 709.—Section 709 (21 U.S.C. 379) is 

25 amended by inserting ‘‘or tobacco product’’ after ‘‘device’’. 
188 

•S 2558 IS 

1 (j) SECTION 801.—Section 801 (21 U.S.C. 381) is 

2 amended— 

3 (1) in subsection (a)— 

4 (A) by inserting ‘‘tobacco products,’’ after 

5 ‘‘devices,’’ the first time it appears; 

6 (B) by inserting ‘‘or section 905(j)’’ after 

7 ‘‘section 510’’; and 

8 (C) by striking ‘‘drugs or devices’’ each 

9 time it appears and inserting ‘‘drugs, devices, 

10 or tobacco products’’; 

11 (2) in subsection (e)(1), by inserting ‘‘tobacco 

12 product,’’ after ‘‘device,’’; and 

13 (3) by adding at the end the following: 

14 ‘‘(p)(1) Not later than 2 years after the date of enact15 ment of the Family Smoking Prevention and Tobacco 

16 Control Act, and annually thereafter, the Secretary shall 

17 submit to the Committee on Health, Education, Labor, 

18 and Pensions of the Senate and the Committee on Energy 

19 and Commerce of the House of Representatives, a report 

20 regarding— 

21 ‘‘(A) the nature, extent, and destination of 

22 United States tobacco product exports that do not 

23 conform to tobacco product standards established 

24 pursuant to this Act; 
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•S 2558 IS 

1 ‘‘(B) the public health implications of such ex2 ports, including any evidence of a negative public 

3 health impact; and 

4 ‘‘(C) recommendations or assessments of policy 

5 alternatives available to Congress and the Executive 

6 Branch to reduce any negative public health impact 

7 caused by such exports. 

8 ‘‘(2) The Secretary is authorized to establish appro9 priate information disclosure requirements to carry out 

10 this subsection.’’. 

11 (k) SECTION 1003.—Section 1003(d)(2)(C) (as re12 designated by section 101(a)) is amended— 

13 (1) by striking ‘‘and’’ after ‘‘cosmetics,’’; and 

14 (2) inserting a comma and ‘‘and tobacco prod15 ucts’’ after ‘‘devices’’. 

16 (l) EFFECTIVE DATE FOR NO-TOBACCO-SALE

17 ORDER AMENDMENTS.—The amendments made by sub18 section (c), other than the amendment made by paragraph 

19 (2) of such subsection, shall take effect upon the issuance 

20 of guidance by the Secretary of Health and Human Serv21 ices— 

22 (1) defining the term ‘‘repeated violation’’, as 

23 used in section 303(f) of the Federal Food, Drug, 

24 and Cosmetic Act (21 U.S.C. 333(f)) as amended by 

25 subsection (c), by identifying the number of viola-
190 

•S 2558 IS 

1 tions of particular requirements over a specified pe2 riod of time at a particular retail outlet that con3 stitute a repeated violation; 

4 (2) providing for timely and effective notice to 

5 the retailer of each alleged violation at a particular 

6 retail outlet and an expedited procedure for the ad7 ministrative appeal of an alleged violation; 

8 (3) providing that a person may not be charged 

9 with a violation at a particular retail outlet unless 

10 the Secretary has provided notice to the retailer of 

11 all previous violations at that outlet; 

12 (4) establishing a period of time during which, 

13 if there are no violations by a particular retail out14 let, that outlet will not be considered to have been 

15 the site of repeated violations when the next viola16 tion occurs; and 

17 (5) providing that good faith reliance on the 

18 presentation of a false government issued photo19 graphic identification that contains the bearer’s date 

20 of birth does not constitute a violation of any min21 imum age requirement for the sale of tobacco prod22 ucts if the retailer has taken effective steps to pre23 vent such violations, including— 

24 (A) adopting and enforcing a written policy 

25 against sales to minors; 
191 

•S 2558 IS 

1 (B) informing its employees of all applica2 ble laws; 

3 (C) establishing disciplinary sanctions for 

4 employee noncompliance; and 

5 (D) requiring its employees to verify age 

6 by way of photographic identification or elec7 tronic scanning device. 

8 CHAPTER 2—TOBACCO PRODUCT WARN9 INGS; CONSTITUENT AND SMOKE CON10 STITUENT DISCLOSURE 

11 SEC. 241. CIGARETTE LABEL AND ADVERTISING WARNINGS. 

12 Section 4 of the Federal Cigarette Labeling and Ad13 vertising Act (15 U.S.C. 1333) is amended to read as fol14 lows: 

15 ‘‘SEC. 4. LABELING. 

16 ‘‘(a) LABEL REQUIREMENTS.— 

17 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

18 person to manufacture, package, sell, offer to sell, 

19 distribute, or import for sale or distribution within 

20 the United States any cigarettes the package of 

21 which fails to bear, in accordance with the require22 ments of this section, one of the following labels: 

23 ‘WARNING: Cigarettes are addictive’. 

24 ‘WARNING: Tobacco smoke can harm your chil25 dren’. 
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1 ‘WARNING: Cigarettes cause fatal lung disease’. 

2 ‘WARNING: Cigarettes cause cancer’. 

3 ‘WARNING: Cigarettes cause strokes and heart dis4 ease’. 

5 ‘WARNING: Smoking during pregnancy can harm 

6 your baby’. 

7 ‘WARNING: Smoking can kill you’. 

8 ‘WARNING: Tobacco smoke causes fatal lung dis9 ease in non-smokers’. 

10 ‘WARNING: Quitting smoking now greatly reduces 

11 serious risks to your health’. 

12 ‘‘(2) PLACEMENT; TYPOGRAPHY; ETC.— 

13 ‘‘(A) IN GENERAL.—Each label statement 

14 required by paragraph (1) shall be located in 

15 the upper portion of the front and rear panels 

16 of the package, directly on the package under17 neath the cellophane or other clear wrapping. 

18 Except as provided in subparagraph (B), each 

19 label statement shall comprise at least the top 

20 30 percent of the front and rear panels of the 

21 package. The word ‘WARNING’ shall appear in 

22 capital letters and all text shall be in con23 spicuous and legible 17-point type, unless the 

24 text of the label statement would occupy more 

25 than 70 percent of such area, in which case the 
193 

•S 2558 IS 

1 text may be in a smaller conspicuous and leg2 ible type size, provided that at least 60 percent 

3 of such area is occupied by required text. The 

4 text shall be black on a white background, or 

5 white on a black background, in a manner that 

6 contrasts, by typography, layout, or color, with 

7 all other printed material on the package, in an 

8 alternating fashion under the plan submitted 

9 under subsection (b)(4). 

10 ‘‘(B) FLIP-TOP BOXES.—For any cigarette 

11 brand package manufactured or distributed be12 fore January 1, 2000, which employs a flip-top 

13 style (if such packaging was used for that 

14 brand in commerce prior to June 21, 1997), the 

15 label statement required by paragraph (1) shall 

16 be located on the flip-top area of the package, 

17 even if such area is less than 25 percent of the 

18 area of the front panel. Except as provided in 

19 this paragraph, the provisions of this subsection 

20 shall apply to such packages. 

21 ‘‘(3) DOES NOT APPLY TO FOREIGN DISTRIBU22 TION.—The provisions of this subsection do not 

23 apply to a tobacco product manufacturer or dis24 tributor of cigarettes which does not manufacture, 
194 

•S 2558 IS 

1 package, or import cigarettes for sale or distribution 

2 within the United States. 

3 ‘‘(4) APPLICABILITY TO RETAILERS.—A retailer 

4 of cigarettes shall not be in violation of this sub5 section for packaging that is supplied to the retailer 

6 by a tobacco product manufacturer, importer, or dis7 tributor and is not altered by the retailer in a way 

8 that is material to the requirements of this sub9 section except that this paragraph shall not relieve 

10 a retailer of liability if the retailer sells or distributes 

11 tobacco products that are not labeled in accordance 

12 with this subsection. 

13 ‘‘(b) ADVERTISING REQUIREMENTS.— 

14 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

15 tobacco product manufacturer, importer, distributor, 

16 or retailer of cigarettes to advertise or cause to be 

17 advertised within the United States any cigarette 

18 unless its advertising bears, in accordance with the 

19 requirements of this section, one of the labels speci20 fied in subsection (a) of this section. 

21 ‘‘(2) TYPOGRAPHY, ETC.—Each label statement 

22 required by subsection (a) of this section in cigarette 

23 advertising shall comply with the standards set forth 

24 in this paragraph. For press and poster advertise25 ments, each such statement and (where applicable) 
195 

•S 2558 IS 

1 any required statement relating to tar, nicotine, or 

2 other constituent (including a smoke constituent) 

3 yield shall comprise at least 20 percent of the area 

4 of the advertisement and shall appear in a con5 spicuous and prominent format and location at the 

6 top of each advertisement within the trim area. The 

7 Secretary may revise the required type sizes in such 

8 area in such manner as the Secretary determines ap9 propriate. The word ‘WARNING’ shall appear in 

10 capital letters, and each label statement shall appear 

11 in conspicuous and legible type. The text of the label 

12 statement shall be black if the background is white 

13 and white if the background is black, under the plan 

14 submitted under paragraph (4) of this subsection. 

15 The label statements shall be enclosed by a rectan16 gular border that is the same color as the letters of 

17 the statements and that is the width of the first 

18 downstroke of the capital ‘W’ of the word ‘WARN19 ING’ in the label statements. The text of such label 

20 statements shall be in a typeface pro rata to the fol21 lowing requirements: 45-point type for a whole-page 

22 broadsheet newspaper advertisement; 39-point type 

23 for a half-page broadsheet newspaper advertisement; 

24 39-point type for a whole-page tabloid newspaper ad25 vertisement; 27-point type for a half-page tabloid 
196 

•S 2558 IS 

1 newspaper advertisement; 31.5-point type for a dou2 ble page spread magazine or whole-page magazine 

3 advertisement; 22.5-point type for a 28 centimeter 

4 by 3 column advertisement; and 15-point type for a 

5 20 centimeter by 2 column advertisement. The label 

6 statements shall be in English, except that in the 

7 case of— 

8 ‘‘(A) an advertisement that appears in a 

9 newspaper, magazine, periodical, or other publi10 cation that is not in English, the statements 

11 shall appear in the predominant language of the 

12 publication; and 

13 ‘‘(B) in the case of any other advertise14 ment that is not in English, the statements 

15 shall appear in the same language as that prin16 cipally used in the advertisement. 

17 ‘‘(3) MATCHBOOKS.—Notwithstanding para18 graph (2), for matchbooks (defined as containing not 

19 more than 20 matches) customarily given away with 

20 the purchase of tobacco products, each label state21 ment required by subsection (a) may be printed on 

22 the inside cover of the matchbook. 

23 ‘‘(4) ADJUSTMENT BY SECRETARY.—The Sec24 retary may, through a rulemaking under section 553 

25 of title 5, United States Code, adjust the format and 
197 

•S 2558 IS 

1 type sizes for the label statements required by this section 

2 or the text, format, and type sizes of any required tar, 

3 nicotine yield, or other constituent (including smoke con4 stituent) disclosures, or to establish the text, format, and 

5 type sizes for any other disclosures required under the 

6 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 

7 et seq.). The text of any such label statements or disclo8 sures shall be required to appear only within the 20 per9 cent area of cigarette advertisements provided by para10 graph (2) of this subsection. The Secretary shall promul11 gate regulations which provide for adjustments in the for12 mat and type sizes of any text required to appear in such 

13 area to ensure that the total text required to appear by 

14 law will fit within such area. 

15 ‘‘(5) MARKETING REQUIREMENTS.— 

16 ‘‘(A) The label statements specified in sub17 section (a)(1) shall be randomly displayed in 

18 each 12-month period, in as equal a number of 

19 times as is possible on each brand of the prod20 uct and be randomly distributed in all areas of 

21 the United States in which the product is mar22 keted in accordance with a plan submitted by 

23 the tobacco product manufacturer, importer, 

24 distributor, or retailer and approved by the Sec25 retary. 
198 

•S 2558 IS 

1 ‘‘(B) The label statements specified in sub2 section (a)(1) shall be rotated quarterly in al3 ternating sequence in advertisements for each 

4 brand of cigarettes in accordance with a plan 

5 submitted by the tobacco product manufacturer, 

6 importer, distributor, or retailer to, and ap7 proved by, the Secretary. 

8 ‘‘(C) The Secretary shall review each plan 

9 submitted under subparagraph (B) and approve 

10 it if the plan— 

11 ‘‘(i) will provide for the equal distribu12 tion and display on packaging and the ro13 tation required in advertising under this 

14 subsection; and 

15 ‘‘(ii) assures that all of the labels re16 quired under this section will be displayed 

17 by the tobacco product manufacturer, im18 porter, distributor, or retailer at the same 

19 time. 

20 ‘‘(6) APPLICABILITY TO RETAILERS.—This sub21 section applies to a retailer only if that retailer is re22 sponsible for or directs the label statements required 

23 under this section except that this paragraph shall 

24 not relieve a retailer of liability if the retailer dis25 plays, in a location open to the public, an advertise-
199 

•S 2558 IS 

1 ment that is not labeled in accordance with the re2 quirements of this subsection.’’. 

3 SEC. 242. AUTHORITY TO REVISE CIGARETTE WARNING 

4 LABEL STATEMENTS. 

5 Section 4 of the Federal Cigarette Labeling and Ad6 vertising Act (15 U.S.C. 1333), as amended by section 

7 241, is further amended by adding at the end the fol8 lowing: 

9 ‘‘(c) CHANGE IN REQUIRED STATEMENTS.—The Sec10 retary may, by a rulemaking conducted under section 553 

11 of title 5, United States Code, adjust the format, type size, 

12 and text of any of the label requirements, require color 

13 graphics to accompany the text, increase the required label 

14 area from 30 percent up to 50 percent of the front and 

15 rear panels of the package, or establish the format, type 

16 size, and text of any other disclosures required under the 

17 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 

18 et seq.), if the Secretary finds that such a change would 

19 promote greater public understanding of the risks associ20 ated with the use of tobacco products.’’. 

21 SEC. 243. STATE REGULATION OF CIGARETTE ADVER22 TISING AND PROMOTION. 

23 Section 5 of the Federal Cigarette Labeling and Ad24 vertising Act (15 U.S.C. 1334) is amended by adding at 

25 the end the following: 
200 

•S 2558 IS 

1 ‘‘(c) EXCEPTION.—Notwithstanding subsection (b), a 

2 State or locality may enact statutes and promulgate regu3 lations, based on smoking and health, that take effect 

4 after the effective date of the Family Smoking Prevention 

5 and Tobacco Control Act, imposing specific bans or re6 strictions on the time, place, and manner, but not content, 

7 of the advertising or promotion of any cigarettes.’’. 

8 SEC. 244. SMOKELESS TOBACCO LABELS AND ADVERTISING 

9 WARNINGS. 

10 Section 3 of the Comprehensive Smokeless Tobacco 

11 Health Education Act of 1986 (15 U.S.C. 4402) is amend12 ed to read as follows: 

13 ‘‘SEC. 3. SMOKELESS TOBACCO WARNING. 

14 ‘‘(a) GENERAL RULE.— 

15 ‘‘(1) It shall be unlawful for any person to man16 ufacture, package, sell, offer to sell, distribute, or 

17 import for sale or distribution within the United 

18 States any smokeless tobacco product unless the 

19 product package bears, in accordance with the re20 quirements of this Act, one of the following labels: 

21 ‘WARNING: This product can cause mouth cancer’. 

22 ‘WARNING: This product can cause gum disease 

23 and tooth loss’. 

24 ‘WARNING: This product is not a safe alternative 

25 to cigarettes’. 
201 

•S 2558 IS 

1 ‘WARNING: Smokeless tobacco is addictive’. 

2 ‘‘(2) Each label statement required by para3 graph (1) shall be— 

4 ‘‘(A) located on the 2 principal display 

5 panels of the package, and each label statement 

6 shall comprise at least 30 percent of each such 

7 display panel; and 

8 ‘‘(B) in 17-point conspicuous and legible 

9 type and in black text on a white background, 

10 or white text on a black background, in a man11 ner that contrasts by typography, layout, or 

12 color, with all other printed material on the 

13 package, in an alternating fashion under the 

14 plan submitted under subsection (b)(3), except 

15 that if the text of a label statement would oc16 cupy more than 70 percent of the area specified 

17 by subparagraph (A), such text may appear in 

18 a smaller type size, so long as at least 60 per19 cent of such warning area is occupied by the 

20 label statement. 

21 ‘‘(3) The label statements required by para22 graph (1) shall be introduced by each tobacco prod23 uct manufacturer, packager, importer, distributor, or 

24 retailer of smokeless tobacco products concurrently 

25 into the distribution chain of such products. 
202 

•S 2558 IS 

1 ‘‘(4) The provisions of this subsection do not 

2 apply to a tobacco product manufacturer or dis3 tributor of any smokeless tobacco product that does 

4 not manufacture, package, or import smokeless to5 bacco products for sale or distribution within the 

6 United States. 

7 ‘‘(5) A retailer of smokeless tobacco products 

8 shall not be in violation of this subsection for pack9 aging that is supplied to the retailer by a tobacco 

10 products manufacturer, importer, or distributor and 

11 that is not altered by the retailer unless the retailer 

12 offers for sale, sells, or distributes a smokeless to13 bacco product that is not labeled in accordance with 

14 this subsection. 

15 ‘‘(b) REQUIRED LABELS.— 

16 ‘‘(1) It shall be unlawful for any tobacco prod17 uct manufacturer, packager, importer, distributor, or 

18 retailer of smokeless tobacco products to advertise or 

19 cause to be advertised within the United States any 

20 smokeless tobacco product unless its advertising 

21 bears, in accordance with the requirements of this 

22 section, one of the labels specified in subsection (a). 

23 ‘‘(2) Each label statement required by sub24 section (a) in smokeless tobacco advertising shall 

25 comply with the standards set forth in this para-
203 

•S 2558 IS 

1 graph. For press and poster advertisements, each 

2 such statement and (where applicable) any required 

3 statement relating to tar, nicotine, or other con4 stituent yield shall— 

5 ‘‘(A) comprise at least 20 percent of the 

6 area of the advertisement, and the warning area 

7 shall be delineated by a dividing line of con8 trasting color from the advertisement; and 

9 ‘‘(B) the word ‘WARNING’ shall appear in 

10 capital letters and each label statement shall 

11 appear in conspicuous and legible type. The text 

12 of the label statement shall be black on a white 

13 background, or white on a black background, in 

14 an alternating fashion under the plan submitted 

15 under paragraph (3). 

16 ‘‘(3)(A) The label statements specified in sub17 section (a)(1) shall be randomly displayed in each 

18 12-month period, in as equal a number of times as 

19 is possible on each brand of the product and be ran20 domly distributed in all areas of the United States 

21 in which the product is marketed in accordance with 

22 a plan submitted by the tobacco product manufac23 turer, importer, distributor, or retailer and approved 

24 by the Secretary. 
204 

•S 2558 IS 

1 ‘‘(B) The label statements specified in sub2 section (a)(1) shall be rotated quarterly in alter3 nating sequence in advertisements for each brand of 

4 smokeless tobacco product in accordance with a plan 

5 submitted by the tobacco product manufacturer, im6 porter, distributor, or retailer to, and approved by, 

7 the Secretary. 

8 ‘‘(C) The Secretary shall review each plan sub9 mitted under subparagraph (B) and approve it if the 

10 plan— 

11 ‘‘(i) will provide for the equal distribution 

12 and display on packaging and the rotation re13 quired in advertising under this subsection; and 

14 ‘‘(ii) assures that all of the labels required 

15 under this section will be displayed by the to16 bacco product manufacturer, importer, dis17 tributor, or retailer at the same time. 

18 ‘‘(D) This paragraph applies to a retailer only 

19 if that retailer is responsible for or directs the label 

20 statements under this section, unless the retailer dis21 plays in a location open to the public, an advertise22 ment that is not labeled in accordance with the re23 quirements of this subsection. 

24 ‘‘(c) TELEVISION AND RADIO ADVERTISING.—It is 

25 unlawful to advertise smokeless tobacco on any medium 
205 

•S 2558 IS 

1 of electronic communications subject to the jurisdiction of 

2 the Federal Communications Commission.’’. 

3 SEC. 245. AUTHORITY TO REVISE SMOKELESS TOBACCO 

4 PRODUCT WARNING LABEL STATEMENTS. 

5 Section 3 of the Comprehensive Smokeless Tobacco 

6 Health Education Act of 1986 (15 U.S.C. 4402), as 

7 amended by section 243, is further amended by adding 

8 at the end the following: 

9 ‘‘(d) AUTHORITY TO REVISE WARNING LABEL

10 STATEMENTS.—The Secretary may, by a rulemaking con11 ducted under section 553 of title 5, United States Code, 

12 adjust the format, type size, and text of any of the label 

13 requirements, require color graphics to accompany the 

14 text, increase the required label area from 30 percent up 

15 to 50 percent of the front and rear panels of the package, 

16 or establish the format, type size, and text of any other 

17 disclosures required under the Federal Food, Drug, and 

18 Cosmetic Act (21 U.S.C. 301 et seq.), if the Secretary 

19 finds that such a change would promote greater public un20 derstanding of the risks associated with the use of smoke21 less tobacco products.’’. 

22 SEC. 246. TAR, NICOTINE, AND OTHER SMOKE CON23 STITUENT DISCLOSURE TO THE PUBLIC. 

24 Section 4(a) of the Federal Cigarette Labeling and 

25 Advertising Act (15 U.S.C. 1333 (a)), as amended by sec-
206 

•S 2558 IS 

1 tion 241, is further amended by adding at the end the 

2 following: 

3 ‘‘(4)(A) The Secretary shall, by a rulemaking 

4 conducted under section 553 of title 5, United 

5 States Code, determine (in the Secretary’s sole dis6 cretion) whether cigarette and other tobacco product 

7 manufacturers shall be required to include in the 

8 area of each cigarette advertisement specified by 

9 subsection (b) of this section, or on the package 

10 label, or both, the tar and nicotine yields of the ad11 vertised or packaged brand. Any such disclosure 

12 shall be in accordance with the methodology estab13 lished under such regulations, shall conform to the 

14 type size requirements of subsection (b) of this sec15 tion, and shall appear within the area specified in 

16 subsection (b) of this section. 

17 ‘‘(B) Any differences between the requirements 

18 established by the Secretary under subparagraph (A) 

19 and tar and nicotine yield reporting requirements es20 tablished by the Federal Trade Commission shall be 

21 resolved by a memorandum of understanding be22 tween the Secretary and the Federal Trade Commis23 sion. 

24 ‘‘(C) In addition to the disclosures required by 

25 subparagraph (A) of this paragraph, the Secretary 
207 

•S 2558 IS 

1 may, under a rulemaking conducted under section 

2 553 of title 5, United States Code, prescribe disclo3 sure requirements regarding the level of any ciga4 rette or other tobacco product constituent including 

5 any smoke constituent. Any such disclosure may be 

6 required if the Secretary determines that disclosure 

7 would be of benefit to the public health, or otherwise 

8 would increase consumer awareness of the health 

9 consequences of the use of tobacco products, except 

10 that no such prescribed disclosure shall be required 

11 on the face of any cigarette package or advertise12 ment. Nothing in this section shall prohibit the Sec13 retary from requiring such prescribed disclosure 

14 through a cigarette or other tobacco product pack15 age or advertisement insert, or by any other means 

16 under the Federal Food, Drug, and Cosmetic Act 

17 (21 U.S.C. 301 et seq.). 

18 ‘‘(D) This paragraph applies to a retailer only 

19 if that retailer is responsible for or directs the label 

20 statements required under this section, except that 

21 this paragraph shall not relieve a retailer of liability 

22 if the retailer sells or distributes tobacco products 

23 that are not labeled in accordance with the require24 ments of this subsection.’’. 
208 

•S 2558 IS 

1 CHAPTER 3—PREVENTION OF ILLICIT 

2 TRADE IN TOBACCO PRODUCTS 

3 SEC. 251. LABELING, RECORDKEEPING, RECORDS INSPEC4 TION. 

5 Chapter IX of the Federal Food, Drug, and Cosmetic 

6 Act, as added by section 231, is further amended by add7 ing at the end the following: 

8 ‘‘SEC. 921. LABELING, RECORDKEEPING, RECORDS INSPEC9 TION. 

10 ‘‘(a) ORIGIN LABELING.—The label, packaging, and 

11 shipping containers of tobacco products for introduction 

12 or delivery for introduction into interstate commerce shall 

13 bear the statement ‘sale only allowed in the United 

14 States.’ 

15 ‘‘(b) REGULATIONS CONCERNING RECORDKEEPING

16 FOR TRACKING AND TRACING.— 

17 ‘‘(1) IN GENERAL.—Not later than 9 months 

18 after the date of enactment of the Family Smoking 

19 Prevention and Tobacco Control Act, the Secretary 

20 shall promulgate regulations regarding the establish21 ment and maintenance of records by any person who 

22 manufactures, processes, transports, distributes, re23 ceives, packages, holds, exports, or imports tobacco 

24 products. 
209 

•S 2558 IS 

1 ‘‘(2) INSPECTION.—In promulgating the regula2 tions described in paragraph (1), the Secretary shall 

3 consider which records are needed for inspection to 

4 monitor the movement of tobacco products from the 

5 point of manufacture through distribution to retail 

6 outlets to assist in investigating potential illicit 

7 trade, smuggling or counterfeiting of tobacco prod8 ucts. 

9 ‘‘(3) CODES.—The Secretary may require codes 

10 on the labels of tobacco products or other designs or 

11 devices for the purpose of tracking or tracing the to12 bacco product through the distribution system. 

13 ‘‘(4) SIZE OF BUSINESS.—The Secretary shall 

14 take into account the size of a business in promul15 gating regulations under this section. 

16 ‘‘(5) RECORDKEEPING BY RETAILERS.—The 

17 Secretary shall not require any retailer to maintain 

18 records relating to individual purchasers of tobacco 

19 products for personal consumption. 

20 ‘‘(c) RECORDS INSPECTION.—If the Secretary has a 

21 reasonable belief that a tobacco product is part of an illicit 

22 trade or smuggling or is a counterfeit product, each person 

23 who manufactures, processes, transports, distributes, re24 ceives, holds, packages, exports, or imports tobacco prod25 ucts shall, at the request of an officer or employee duly 
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1 designated by the Secretary, permit such officer or em2 ployee, at reasonable times and within reasonable limits 

3 and in a reasonable manner, upon the presentation of ap4 propriate credentials and a written notice to such person, 

5 to have access to and copy all records (including financial 

6 records) relating to such article that are needed to assist 

7 the Secretary in investigating potential illicit trade, smug8 gling or counterfeiting of tobacco products. 

9 ‘‘(d) KNOWLEDGE OF ILLEGAL TRANSACTION.—If 

10 the manufacturer or distributor of a tobacco product has 

11 knowledge which reasonably supports the conclusion that 

12 a tobacco product manufactured or distributed by such 

13 manufacturer or distributor that has left the control of 

14 such person may be or has been— 

15 ‘‘(A) imported, exported, distributed or of16 fered for sale in interstate commerce by a per17 son without paying duties or taxes required by 

18 law; or 

19 ‘‘(B) imported, exported, distributed or di20 verted for possible illicit marketing, 

21 the manufacturer or distributor shall promptly notify the 

22 Attorney General of such knowledge. 

23 ‘‘(e) KNOWLEDGE DEFINED.—For purposes of this 

24 subsection, the term ‘knowledge’ as applied to a manufac25 turer or distributor means— 
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1 ‘‘(1) the actual knowledge that the manufac2 turer or distributor had; or 

3 ‘‘(2) the knowledge which a reasonable person 

4 would have had under like circumstances or which 

5 would have been obtained upon the exercise of due 

6 care. 

7 SEC. 252. STUDY AND REPORT. 

8 (a) STUDY.—The Comptroller General of the United 

9 States shall conduct a study of cross-border trade in to10 bacco products to— 

11 (1) collect data on cross-border trade in tobacco 

12 products, including illicit trade and trade of counter13 feit tobacco products and make recommendations on 

14 the monitoring of such trade; and 

15 (2) collect data on cross-border advertising (any 

16 advertising intended to be broadcast, transmitted, or 

17 distributed from the United States to another coun18 try) of tobacco products and make recommendations 

19 on how to prevent or eliminate, and what tech20 nologies could help facilitate the elimination of, 

21 cross-border advertising. 

22 (b) REPORT.—Not later than 18 months after the 

23 date of enactment of this Act, the Comptroller General 

24 of the United States shall submit to the Committee on 

25 Health, Education, Labor, and Pensions of the Senate and 
212 

•S 2558 IS 

1 the Committee on Energy and Commerce of the House 

2 of Representatives a report on the study described in sub3 section (a). 

4 TITLE III—RESPONSIBLE MAR5 KETING AND CONSUMER 

6 AWARENESS 

7 Subtitle A—General Provisions 

8 SEC. 301. NUTRITION LABELING OF RESTAURANT FOODS. 

9 Section 403(q)(5) of the Federal Food, Drug, and 

10 Cosmetic Act (21 U.S.C. 343(q)(5)(A)(i)) is amended— 

11 (1) in clause (A)— 

12 (A) in subclause (i), by inserting ‘‘except 

13 as provided in clauses (H) and (I),’’ before 

14 ‘‘which’’ the first place it appears; and 

15 (B) in subclause (ii), by inserting ‘‘except 

16 as provided in clauses (H) and (I),’’ before 

17 ‘‘which’’ the first place it appears; and 

18 (2) by adding at the end the following: 

19 ‘‘(H) RESTAURANTS AND RETAIL FOOD ESTABLISH20 MENTS.— 

21 ‘‘(i) IN GENERAL.—Except for food described in 

22 subclause (iii), in the case of food that— 

23 ‘‘(I) is served in a restaurant or similar re24 tail food establishment; or 
213 

•S 2558 IS 

1 ‘‘(II) is processed and prepared primarily 

2 in a retail establishment; 

3 that is part of a chain with 20 or more locations 

4 doing business under the same trade name (regard5 less of the type of ownership of the locations), the 

6 restaurant of the establishment shall disclose the in7 formation described in subclause (ii). 

8 ‘‘(ii) INFORMATION REQUIRED TO BE DIS9 CLOSED.—Except as provided in clause (iii), the es10 tablishment shall disclose— 

11 ‘‘(I)(aa) in a statement adjacent to the 

12 name of the food on any menu listing the food 

13 for sale, or by any other means approved by the 

14 Secretary, the number of calories, grams of 

15 saturated fat plus trans fat, and milligrams of 

16 sodium contained in a serving of the food, as 

17 offered for sale, in a clear and conspicuous 

18 manner; and 

19 ‘‘(bb) information, specified by the Sec20 retary by regulation, designed to enable the 

21 public to understand, in the context of a total 

22 daily diet, the significance of the nutrition in23 formation that is provided; and 

24 ‘‘(II) in a statement adjacent to the name 

25 of the food on any menu board or other sign 
214 

•S 2558 IS 

1 listing the food for sale, or by any other means 

2 approved by the Secretary, the number of cal3 ories contained in a serving of the food, as of4 fered for sale, in a clear and conspicuous man5 ner. 

6 ‘‘(iii) NONAPPLICABILITY TO CERTAIN FOOD.— 

7 This clause does not apply to— 

8 ‘‘(I) items that are not listed on a menu or 

9 menu board (such as condiments, other items 

10 placed on the table or counter for general use, 

11 and items from salad bars or other self-service 

12 facilities); or 

13 ‘‘(II) daily specials, temporary menu items, 

14 or other irregular menu items, as specified by 

15 the Secretary by regulation. 

16 ‘‘(iv) SELF-SERVICE FACILITIES.— 

17 ‘‘(I) IN GENERAL.—In the case of food 

18 sold at a salad bar, buffet line, cafeteria line, or 

19 similar self-service facility, a restaurant or 

20 other establishment shall place a sign that lists 

21 calories per standard serving adjacent to the 

22 name of each food offered. 

23 ‘‘(II) VENDING MACHINES.—In the case of 

24 an article of food sold from a vending machine 

25 or other arrangement that does not permit a 
215 

•S 2558 IS 

1 prospective purchaser to examine the article so 

2 as to be able to read a statement affixed to the 

3 article as required under subclause (I) before 

4 purchasing the article, a restaurant or other es5 tablishment (or, in the case of a vending ma6 chine that is owned and operated by a vending 

7 machine operator, the vending machine oper8 ator) shall provide a conspicuous sign, in close 

9 proximity to the article, identifying the food 

10 and including a statement disclosing the num11 ber of calories contained in the article. 

12 ‘‘(v) VOLUNTARY PROVISION OF NUTRITION IN13 FORMATION; STATE REGULATION OF NUTRITION IN14 FORMATION FOR RESTAURANT FOOD.— 

15 ‘‘(I) RETAIL FOOD ESTABLISHMENTS.— 

16 Nothing in this clause precludes a restaurant or 

17 similar retail food establishment from providing 

18 additional nutrition information, voluntarily, if 

19 the information complies with the nutrition la20 beling requirements contained in this subpara21 graph. 

22 ‘‘(II) STATE OR LOCAL REQUIREMENTS.— 

23 Nothing in this clause precludes a State or po24 litical subdivision of a State from requiring that 

25 a restaurant or similar food establishment pro-
216 

•S 2558 IS 

1 vide nutrition information in addition to that 

2 required under this clause. 

3 ‘‘(vi) REGULATIONS.— 

4 ‘‘(I) PROPOSED REGULATION.—Not later 

5 than 1 year after the date of enactment of this 

6 clause, the Secretary shall promulgate proposed 

7 regulations to carry out this clause. 

8 ‘‘(II) CONTENTS.—The regulations shall 

9 allow for the variations in serving sizes and in 

10 food preparation that can reasonably be ex11 pected to result from inadvertent human error, 

12 training of food service workers, and other fac13 tors. 

14 ‘‘(III) FINAL REGULATIONS.—Not later 

15 than 2 years after the date of enactment of this 

16 clause, the Secretary shall promulgate final reg17 ulations to implement this clause. 

18 ‘‘(IV) FAILURE TO PROMULGATE FINAL

19 REGULATIONS BY REQUIRED DATE.—If the Sec20 retary does not promulgate final regulations 

21 under item (III) by the date that is 2 years 

22 after the date of enactment of this clause— 

23 ‘‘(aa) the proposed regulations issued 

24 in accordance with item (I) shall become 
217 

•S 2558 IS 

1 effective as the final regulations on the day 

2 after that date; and 

3 ‘‘(bb) the Secretary shall publish in 

4 the Federal Register notice of the final 

5 regulations. 

6 ‘‘(I) VENDING MACHINES.— 

7 ‘‘(i) IN GENERAL.—In the case of an article of 

8 food sold from a vending machine that— 

9 ‘‘(I) does not permit a prospective pur10 chaser to examine the article so as to be able 

11 to read a statement affixed to the article before 

12 purchasing the article; and 

13 ‘‘(II) is operated by a person that is en14 gaged in the business of owning and operating 

15 20 or more vending machines; 

16 the vending machine operator shall provide a con17 spicuous sign, in close proximity to the article, iden18 tifying the food and including a statement disclosing 

19 the number of calories contained in the article. 

20 ‘‘(ii) VOLUNTARY PROVISION OF NUTRITION IN21 FORMATION; STATE REGULATION OF NUTRITION IN22 FORMATION FOR VENDING MACHINES.— 

23 ‘‘(I) VENDING MACHINE OPERATORS.— 

24 Nothing in this clause precludes a vending ma25 chine operator from providing additional nutri-
218 

•S 2558 IS 

1 tion information, voluntarily, if the information 

2 complies with the nutrition labeling require3 ments contained in this subparagraph. 

4 ‘‘(II) STATE OR LOCAL REQUIREMENTS.— 

5 Nothing in this title precludes a State or polit6 ical subdivision of a State from requiring that 

7 a vending machine operator provide nutrition 

8 information in addition to that required under 

9 this clause. 

10 ‘‘(iii) REGULATIONS.— 

11 ‘‘(I) PROPOSED REGULATION.—Not later 

12 than 1 year after the date of enactment of this 

13 clause, the Secretary shall promulgate proposed 

14 regulations to carry out this clause. 

15 ‘‘(II) FINAL REGULATIONS.—Not later 

16 than 2 years after the date of enactment of this 

17 clause, the Secretary shall promulgate final reg18 ulations to implement this clause. 

19 ‘‘(III) FAILURE TO PROMULGATE FINAL

20 REGULATIONS BY REQUIRED DATE.—If the Sec21 retary does not promulgate final regulations 

22 under item (II) by the date that is 2 years after 

23 the date of enactment of this clause— 

24 ‘‘(aa) the proposed regulations issued 

25 in accordance with item (I) shall become 
219 

•S 2558 IS 

1 effective as the final regulations on the day 

2 after that date; and 

3 ‘‘(bb) the Secretary shall publish in 

4 the Federal Register notice of the final 

5 regulations.’’. 

6 SEC. 302. RULEMAKING AUTHORITY FOR ADVERTISING TO 

7 CHILDREN. 

8 (a) PURPOSE.—The purpose of this section is to allow 

9 the Federal Trade Commission to issue regulations that 

10 restrict the marketing or advertising of foods and bev11 erages to children under the age of 18 years if the Federal 

12 Trade Commission determines that there is evidence that 

13 consumption of certain foods and beverages is detrimental 

14 to the health of children or it determines advertising to 

15 children to be unfair or deceptive. 

16 (b) AUTHORITY.—Section 18 of the Federal Trade 

17 Commission Act (15 U.S.C. 57a) is amended by striking 

18 subsection (h). 

19 SEC. 303. FOOD ADVERTISING IN SCHOOLS. 

20 Section 10 of the Child Nutrition Act of 1966 (42 

21 U.S.C. 1779) is amended by adding at the end the fol22 lowing: 

23 ‘‘(d) FOOD ADVERTISING.—The Secretary may pro24 hibit the advertising of food in participating schools if the 

25 Secretary determines that consumption of the advertised 
220 

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1 food has a detrimental effect on the diets or health of chil2 dren.’’. 

3 SEC. 304. DISALLOWANCE OF DEDUCTIONS FOR ADVER4 TISING AND MARKETING EXPENSES RELAT5 ING TO TOBACCO PRODUCT USE. 

6 (a) IN GENERAL.—Part IX of subchapter B of chap7 ter 1 of subtitle A of the Internal Revenue Code of 1986 

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

9 at the end the following new section: 

10 ‘‘SEC. 280I. DISALLOWANCE OF DEDUCTION FOR TOBACCO 

11 ADVERTISING AND MARKETING EXPENSES. 

12 No deduction shall be allowed under this chapter for 

13 expenses relating to advertising or marketing cigars, ciga14 rettes, smokeless tobacco, pipe tobacco, or any similar to15 bacco product. For purposes of this section, any term used 

16 in this section which is also used in section 5702 shall 

17 have the same meaning given such term by section 5702.’’. 

18 (b) CONFORMING AMENDMENT.—The table of sec19 tions for such part IX is amended by adding after the 

20 item relating to section 280H the following new item: 

‘‘Sec. 280I. Disallowance of deduction for tobacco advertising 

and marketing expenses.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 
221 

•S 2558 IS 

1 SEC. 305. FEDERAL-STATE TOBACCO COUNTER-ADVER2 TISING PROGRAMS. 

3 Part P of title III of the Public Health Service Act 

4 (42 U.S.C. 280g et seq.), as amended in section 212, is 

5 further amended by adding at the end the following: 

6 ‘‘SEC. 399S. FEDERAL-STATE TOBACCO COUNTER-ADVER7 TISING PROGRAMS. 

8 ‘‘(a) IN GENERAL.—The Secretary, acting through 

9 the Director of the Centers for Disease Control and Pre10 vention, shall award grants to and enter into contracts 

11 with eligible entities for the implementation of national 

12 and local media (such as counter-advertising) and non13 media campaigns designed to reduce the use of tobacco 

14 products. 

15 ‘‘(b) ELIGIBILITY.—To be eligible to receive a grant 

16 under subsection (a), an entity shall be— 

17 ‘‘(1) a public entity, including a State public 

18 health department; or 

19 ‘‘(2) a private, nonprofit entity that— 

20 ‘‘(A) is not affiliated with a manufacturer 

21 or importer of a tobacco product; 

22 ‘‘(B) has demonstrated a record of con23 ducting a national antitobacco public education 

24 campaign to effectively reduce the use of to25 bacco products; 
222 

•S 2558 IS 

1 ‘‘(C) has expertise in conducting a multi2 media communications campaign; and 

3 ‘‘(D) has expertise in developing strategies 

4 that affect behavior changes in children and 

5 other targeted populations. 

6 ‘‘(c) APPLICATION.—An eligible entity shall submit 

7 an application to the Secretary for a grant under this sec8 tion at such time, in such manner, and accompanied by 

9 such information as the Secretary may require. 

10 ‘‘(d) USE OF FUNDS.—An eligible entity shall use 

11 amounts received under a grant under this section to— 

12 ‘‘(1) design and implement multimedia public 

13 education and social marketing campaigns that— 

14 ‘‘(A) discourage the use of tobacco prod15 ucts; 

16 ‘‘(B) encourage the use of products de17 signed to enable tobacco use cessation; and 

18 ‘‘(C) educate the public about the hazards 

19 of environmental tobacco smoke exposure; or 

20 ‘‘(2) conduct research related to the effective21 ness of the campaigns described in paragraph (1). 

22 ‘‘(e) ALLOCATION OF GRANTS.—Of the amounts 

23 awarded under this section, the Secretary shall award— 

24 ‘‘(1) 50 percent of such amounts to eligible 

25 public entities; and 
223 

•S 2558 IS 

1 ‘‘(2) 50 percent of such amounts to eligible pri2 vate, nonprofit entities. 

3 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated $200,000,000 to carry 

5 out this section.’’. 

6 Subtitle B—Penalties for Failure to 

7 Reduce Teen Smoking 

8 SEC. 311. CHILD CIGARETTE USE SURVEYS. 

9 (a) ANNUAL PERFORMANCE SURVEY.— 

10 (1) IN GENERAL.—Not later than August 31, 

11 2005, and annually thereafter, the Secretary of 

12 Health and Human Services (referred to in this sec13 tion as the ‘‘Secretary’’) shall publish the results of 

14 an annual cigarette survey, to be carried out after 

15 the date of enactment of this Act and completed 

16 prior to August 21, 2005, and prior to August 21 

17 of each year thereafter, to determine— 

18 (A) the percentage of all young individuals 

19 who used a type of cigarette within the 30-day 

20 period prior to the conduct of the survey in21 volved; and 

22 (B) the percentage of young individuals 

23 who identify each brand of each type of ciga24 rette as the usual brand smoked within such 

25 30-day period. 
224 

•S 2558 IS 

1 (2) YOUNG INDIVIDUALS.—For the purposes of 

2 this subtitle, the term ‘‘young individuals’’ means in3 dividuals who are under 18 years of age. 

4 (b) SIZE AND METHODOLOGY.— 

5 (1) IN GENERAL.—The survey referred to in 

6 subsection (a) shall be comparable in size and meth7 odology to the Monitoring the Future survey that 

8 was completed in 1999 to measure the use of ciga9 rettes (by brand) by youths under 18 years of age 

10 within the 30 day period prior to the conduct of the 

11 study. 

12 (2) CONCLUSIVE ACCURATENESS.—A survey 

13 using the methodology described in paragraph (1) 

14 shall be deemed conclusively proper, correct, and ac15 curate for purposes of this section. 

16 (3) DEFINITION.—In this subtitle, the term 

17 ‘‘Monitoring the Future survey’’ means the com18 bined survey of 8th, 10th, and 12th grade students 

19 that was conducted at the Institute for Social Re20 search at the University of Michigan. 

21 (c) REDUCTION.—The Secretary, based on a com22 parison of the results of the first annual cigarette survey 

23 referred to in subsection (a) and the Monitoring the Fu24 ture survey referred to in subsection (b)(1), shall deter-
225 

•S 2558 IS 

1 mine the percentage reduction (if any) in youth cigarette 

2 use for each manufacturer of cigarettes. 

3 (d) PARTICIPATION IN SURVEY.—Notwithstanding 

4 any other provision of law, the Secretary may conduct a 

5 survey under this section involving minors if the results 

6 of such survey with respect to such minors are kept con7 fidential and not disclosed. 

8 (e) NONAPPLICABILITY.—Chapter 35 of title 44, 

9 United States Code, shall not apply to information re10 quired for the purposes of carrying out this section. 

11 (f) DEFINITION.—In this subtitle the term ‘‘ciga12 rette’’ has the meaning given such term in section 3(1) 

13 of the Federal Cigarette Labeling and Advertising Act (15 

14 U.S.C. 1332(1)). 

15 SEC. 312. CIGARETTE USE REDUCTION GOAL AND NON16 COMPLIANCE. 

17 (a) GOAL.—It shall be the cigarette use reduction 

18 goal that each manufacturer reduce youth cigarette use 

19 by at least 15 percent during the period between the Moni20 toring the Future survey referred to in section 311(b)(1) 

21 and the completion of the first annual cigarette survey 

22 (and such subsequent surveys as compared to the previous 

23 year’s survey) referred to in section 311(a). 

24 (b) NONCOMPLIANCE.— 
226 

•S 2558 IS 

1 (1) INDUSTRY-WIDE PENALTY.—If the Sec2 retary determines that the cigarette use reduction 

3 goal under subsection (a) has not been achieved, the 

4 Secretary shall, not later than September 10, 2005, 

5 and September 10 of each year thereafter, impose 

6 an industry-wide penalty on the manufacturers of 

7 cigarettes in an amount that is in the aggregate 

8 equal to— 

9 (A) if youth cigarette use has been reduced 

10 by 5 percent or less, $6,000,000,000; 

11 (B) if youth cigarette use has been reduced 

12 by at least 6 percent but less than 10 percent, 

13 $4,000,000,000; and 

14 (C) if youth cigarette use has been reduced 

15 by at least 11 percent but less than 15 percent, 

16 $2,000,000,000. 

17 (2) PAYMENT.—The industry-wide penalty im18 posed under this subsection shall be paid by each 

19 manufacturer based on the percentage of cigarettes 

20 of each such manufacturer that, are used by youth 

21 (as determined under the Monitoring the Future 

22 survey and compared to the cigarettes manufactured 

23 by all manufacturers) as such percentage relates to 

24 the total amount to be paid by all manufacturers. 
227 

•S 2558 IS 

1 (3) FINAL DETERMINATION.—The determina2 tion of the Secretary as to the amount and allocation 

3 of a surcharge under this subtitle shall be final and 

4 the manufacturer shall pay such surcharge within 10 

5 days of the date on which the manufacturer is as6 sessed. Such payment shall be retained by the Sec7 retary pending final judicial review of what, if any, 

8 change in the surcharge is appropriate. 

9 (4) COMPLIANCE BY CERTAIN MANUFACTUR10 ERS.—A manufacturer that individually complies 

11 with the goal under subsection (a) shall not be liable 

12 for the payment of any portion of the penalty under 

13 this subsection. 

14 (5) LIMITATION.—With respect to cigarettes, a 

15 manufacturer with a market share of 1 percent or 

16 less of youth cigarette use shall not be liable for the 

17 payment of a surcharge under this section. 

18 (c) PENALTIES NONDEDUCTIBLE.—The payment of 

19 penalties under this subtitle shall not be considered to be 

20 an ordinary and necessary expense in carrying on a trade 

21 or business for purposes of the Internal Revenue Code of 

22 1986 and shall not be deductible. 

23 (d) JUDICIAL REVIEW.— 

24 (1) AFTER PAYMENT.—A manufacturer of ciga25 rettes may seek judicial review of any action under 
228 

•S 2558 IS 

1 this subtitle only after the assessment involved has 

2 been paid by the manufacturer to the Department of 

3 the Treasury and only in the United States District 

4 Court for the District of Columbia. 

5 (2) REVIEW BY ATTORNEY GENERAL.—Prior to 

6 the filing of an action by a manufacturer seeking ju7 dicial review of an action under this subtitle, the 

8 manufacturer shall notify the Attorney General of 

9 such intent to file and the Attorney General shall 

10 have 30 days in which to respond to the action. 

11 (3) REVIEW.—The amount of any surcharge 

12 paid under this subtitle shall be subject to judicial 

13 review by the United States Court of Appeals for the 

14 District of Columbia Circuit, based on the arbitrary 

15 and capricious standard of section 706 of title 5, 

16 United States Code. Notwithstanding any other pro17 vision of law, no court shall have the authority to 

18 stay any surcharge payment due to the Secretary 

19 under this subtitle pending judicial review until the 

20 Secretary has made or failed to make a compliance 

21 determination, as described under this subtitle, that 

22 has adversely affected the person seeking the review. 

23 SEC. 313. ENFORCEMENT. 

24 (a) INITIAL PENALTY.—There is hereby imposed an 

25 initial penalty on the failure of any manufacturer to make 
229 

•S 2558 IS 

1 any payment required under this subtitle within 10 days 

2 after the date on which such payment is due. 

3 (b) AMOUNT OF PENALTY.—The amount of the pen4 alty imposed by subsection (a) on any failure with respect 

5 to a manufacturer shall be an amount equal to 2 percent 

6 of the penalty owed under section 312 for each day during 

7 the noncompliance period. 

8 (c) NONCOMPLIANCE PERIOD.—For purposes of this 

9 section, the term ‘‘noncompliance period’’ means, with re10 spect to any failure to make the surcharge payment re11 quired under this subtitle, the period— 

12 (1) beginning on the due date for such pay13 ment; and 

14 (2) ending on the date on which such payment 

15 is paid in full. 

16 (d) LIMITATIONS.—No penalty shall be imposed by 

17 subsection (a) on— 

18 (1) any failure to make a surcharge payment 

19 under this subtitle during any period for which it is 

20 established to the satisfaction of the Secretary that 

21 none of the persons responsible for such failure 

22 knew or, exercising reasonable diligence, would have 

23 known, that such failure existed; or 
230 

•S 2558 IS 

1 (2) any manufacturer that produces less than 1 

2 percent of cigarettes used by youth in that year (as 

3 determined by the annual survey). 

4 TITLE IV—REIMBURSEMENT 

5 AND COVERAGE OF PREVEN6 TIVE SERVICES 

7 SEC. 401. COVERAGE OF SUBSTANCE USE (OTHER THAN TO8 BACCO), DIET, EXERCISE, INJURY PREVEN9 TION, AND DENTAL HEALTH COUNSELING. 

10 (a) COVERAGE.— 

11 (1) IN GENERAL.—Section 1861(s)(2) of the 

12 Social Security Act (42 U.S.C. 1395x(s)(2)), as 

13 amended by section 642(a) of the Medicare Prescrip14 tion Drug, Improvement, and Modernization Act of 

15 2003 (Public Law 108–173; 117 Stat. 2322), is 

16 amended— 

17 (A) in subparagraph (Y), by striking 

18 ‘‘and’’ after the semicolon at the end; 

19 (B) in subparagraph (Z), by adding ‘‘and’’ 

20 after the semicolon at the end; and 

21 (C) by adding at the end the following new 

22 subparagraph: 

23 ‘‘(AA) substance use (other than tobacco), diet, 

24 exercise, injury prevention, and dental health coun25 seling (as defined in subsection (bbb)(1));’’. 
231 

•S 2558 IS 

1 (2) CONFORMING AMENDMENTS.—(A) Section 

2 1862(a)(12) of the Social Security Act (42 U.S.C. 

3 1395y(a)(12)) is amended by inserting ‘‘(except as 

4 otherwise allowed under subsection 

5 1861(s)(2)(AA))’’ after ‘‘directly supporting teeth’’. 

6 (B) Clauses (i) and (ii) of section 

7 1861(s)(2)(K) of the Social Security Act (42 U.S.C. 

8 1395x(s)(2)(K)), as amended by section 611(d)(2) of 

9 the Medicare Prescription Drug, Improvement, and 

10 Modernization Act of 2003 (Public Law 108–173; 

11 117 Stat. 2304), are each amended by striking 

12 ‘‘subsection (ww)(1)’’ and inserting ‘‘subsections 

13 (ww)(1) and (bbb)’’. 

14 (b) SERVICES DESCRIBED.—Section 1861 of the So15 cial Security Act (42 U.S.C. 1395x), as amended by sec16 tion 706(b) of the Medicare Prescription Drug, Improve17 ment, and Modernization Act of 2003 (Public Law 108– 

18 173; 117 Stat. 2339), is amended by adding at the end 

19 the following new subsection: 

20 ‘‘Substance Use (Other Than Tobacco), Diet, Exercise, 

21 Injury Prevention, and Dental Health Counseling 

22 ‘‘(bbb) The term ‘substance use (other than tobacco), 

23 diet, exercise, injury prevention, and dental health coun24 seling’ means therapy and counseling relating to substance 
232 

•S 2558 IS 

1 use (other than tobacco), diet, exercise, injury prevention, 

2 and dental health counseling that is furnished— 

3 ‘‘(1) by or under the supervision of a physician; 

4 or 

5 ‘‘(2) by any other health care professional 

6 who— 

7 ‘‘(A) is legally authorized to furnish such 

8 services under State law (or the State regu9 latory mechanism provided by State law) of the 

10 State in which the services are furnished; and 

11 ‘‘(B) is authorized to receive payment for 

12 other services under this title or is designated 

13 by the Secretary for this purpose.’’. 

14 (c) PAYMENT AND ELIMINATION OF COST-SHAR15 ING.— 

16 (1) PAYMENT AND ELIMINATION OF COINSUR17 ANCE.—Section 1833(a)(1) of the Social Security 

18 Act (42 U.S.C. 1395l(a)(1)), as amended by section 

19 302(b)(2) of the Medicare Prescription Drug, Im20 provement, and Modernization Act of 2003 (Public 

21 Law 108–173; 117 Stat. 2229), is amended— 

22 (A) in subparagraph (N), by inserting ‘‘or 

23 substance use (other than tobacco), diet, exer24 cise, injury prevention, and dental health coun-
233 

•S 2558 IS 

1 seling (as defined in section 1861(bbb))’’ after 

2 ‘‘(as defined in section 1848(j)(3))’’; 

3 (B) by striking ‘‘and’’ before ‘‘(V)’’; and 

4 (C) by inserting before the semicolon at 

5 the end the following: ‘‘and (W) with respect to 

6 substance use (other than tobacco), diet, exer7 cise, injury prevention, and dental health coun8 seling (as defined in section 1861(bbb) the 

9 amount paid shall be the lesser of the actual 

10 charge for the services or the amount deter11 mined under the payment basis determined 

12 under section 1848’’. 

13 (2) PAYMENT UNDER PHYSICIAN FEE SCHED14 ULE.—Section 1848(j)(3) of the Social Security Act 

15 (42 U.S.C. 1395w–4(j)(3)), as amended by section 

16 611(c) of the Medicare Prescription Drug, Improve17 ment, and Modernization Act of 2003 (Public Law 

18 108–173; 117 Stat. 2304), is amended by inserting 

19 ‘‘(2)(AA),’’ after ‘‘(2)(W),’’. 

20 (3) ELIMINATION OF COINSURANCE IN OUT21 PATIENT HOSPITAL SETTINGS.— 

22 (A) EXCLUSION FROM OPD FEE SCHED23 ULE.—Section 1833(t)(1)(B)(iv) of the Social 

24 Security Act (42 U.S.C. 1395l(t)(1)(B)(iv)), as 

25 amended by section 614(a) of the Medicare 
234 

•S 2558 IS 

1 Prescription Drug, Improvement, and Mod2 ernization Act of 2003 (Public Law 108–173; 

3 117 Stat. 2306), is amended by striking ‘‘and 

4 diagnostic mammography’’ and inserting ‘‘, di5 agnostic mammography, or substance use 

6 (other than tobacco), diet, exercise, injury pre7 vention, and dental health counseling (as de8 fined in section 1861(bbb))’’. 

9 (B) CONFORMING AMENDMENTS.—Section 

10 1833(a)(2) of the Social Security Act (42 

11 U.S.C. 1395l(a)(2)) is amended— 

12 (i) in subparagraph (F), by striking 

13 ‘‘and’’ after the semicolon at the end; 

14 (ii) in subparagraph (G)(ii), by strik15 ing the comma at the end and inserting 

16 ‘‘; and’’; and 

17 (iii) by inserting after subparagraph 

18 (G)(ii) the following new subparagraph: 

19 ‘‘(H) with respect to substance use (other 

20 than tobacco), diet, exercise, injury prevention, 

21 and dental health counseling (as defined in sec22 tion 1861(bbb)) furnished by an outpatient de23 partment of a hospital, the amount determined 

24 under paragraph (1)(W),’’. 
235 

•S 2558 IS 

1 (4) ELIMINATION OF DEDUCTIBLE.—The first 

2 sentence of section 1833(b) of the Social Security 

3 Act (42 U.S.C. 1395l(b)) is amended— 

4 (A) by striking ‘‘and’’ before ‘‘(6)’’; and 

5 (B) by inserting before the period at the 

6 end the following: ‘‘, and (7) such deductible 

7 shall not apply with respect to substance use 

8 (other than tobacco), diet, exercise, injury pre9 vention, and dental health counseling (as de10 fined in section 1861(bbb))’’. 

11 (d) APPLICATION OF LIMITS ON BILLING.—Section 

12 1842(b)(18)(C) of the Social Security Act (42 U.S.C. 

13 1395u(b)(18)(C)) is amended by adding at the end the 

14 following new clause: 

15 ‘‘(vii) Any health care professional designated 

16 under section 1861(bbb)(2)(B) to perform substance 

17 use (other than tobacco), diet, exercise, injury pre18 vention, and dental health counseling that is not oth19 erwise described in this subparagraph.’’. 

20 (e) EFFECTIVE DATE.—The amendments made by 

21 this section shall take effect as if included in the enact22 ment of the Medicare Prescription Drug, Improvement, 

23 and Modernization Act of 2003 (Public Law 108–173; 117 

24 Stat. 2066) and shall apply to services furnished on and 

25 after January 1, 2005. 
236 

•S 2558 IS 

1 SEC. 402. PREVENTIVE MENTAL HEALTH SCREENINGS. 

2 (a) COVERAGE.— 

3 (1) IN GENERAL.—Section 1861(s)(2) of the 

4 Social Security Act (42 U.S.C. 1395x(s)(2)), as 

5 amended by section 401(a)(1), is amended— 

6 (A) in subparagraph (Z), by striking 

7 ‘‘and’’ after the semicolon at the end; 

8 (B) in subparagraph (AA), by adding 

9 ‘‘and’’ after the semicolon at the end; and 

10 (C) by adding at the end the following new 

11 subparagraph: 

12 ‘‘(BB) screenings for clinical depression, anx13 iety, and impaired cognitive functioning (as defined 

14 in subsection (ccc)(1));’’. 

15 (2) CONFORMING AMENDMENTS.—Clauses (i) 

16 and (ii) of section 1861(s)(2)(K) of the Social Secu17 rity Act (42 U.S.C. 1395x(s)(2)(K)), as amended by 

18 section 401(a)(2)(B), are each amended by striking 

19 ‘‘and (bbb)’’ and inserting ‘‘(bbb), and (ccc)’’. 

20 (b) SERVICES DESCRIBED.—Section 1861 of the So21 cial Security Act (42 U.S.C. 1395x), as amended by sec22 tion 401(b), is amended by adding at the end the following 

23 new subsection: 
237 

•S 2558 IS 

1 ‘‘Screenings for Clinical Depression, Anxiety, and 

2 Impaired Cognitive Functioning 

3 ‘‘(ccc)(1) The term ‘screening for clinical depression, 

4 anxiety, and impaired cognitive functioning’ means a con5 sultation for the purpose of detecting clinical depression, 

6 anxiety, and impaired cognitive functioning during which 

7 a qualified health professional (as defined in paragraph 

8 (2))— 

9 ‘‘(A) uses a screening on the list established or 

10 identified under paragraph (3); 

11 ‘‘(B) assesses the individual’s risk of clinical de12 pression, anxiety, and impaired cognitive func13 tioning; and 

14 ‘‘(C) if the qualified health professional deter15 mines that the individual is at high risk for clinical 

16 depression, anxiety, or impaired cognitive func17 tioning, refers the individual for a full diagnostic 

18 evaluation and such additional treatment as may be 

19 required. 

20 Nothing in subparagraph (C) shall be construed as prohib21 iting a qualified health professional performing the screen22 ing for clinical depression, anxiety, and impaired cognitive 

23 functioning with respect to an individual from directly pro24 viding the diagnostic evaluation and additional treatment 

25 described in such clause to such individual if such profes-
238 

•S 2558 IS 

1 sional is legally authorized to provide such an evaluation 

2 and additional treatment under State law (or the State 

3 regulatory mechanism provided by State law) of the State 

4 in which the screening is performed. 

5 ‘‘(2) For purposes of this subsection, the term ‘quali6 fied health professional’ means an individual who— 

7 ‘‘(A) is— 

8 ‘‘(i) a physician (as defined in subsection 

9 (r)(1)); 

10 ‘‘(ii) a nurse practitioner (as defined in 

11 subsection (aa)(5)); or 

12 ‘‘(iii) a mental health care professional (in13 cluding clinical psychologists (as defined by the 

14 Secretary for purposes of section 1861(ii)) and 

15 clinical social workers (as defined in subsection 

16 1861(hh))) that is licensed or certified to per17 form mental health services by the State in 

18 which the screenings are performed; and 

19 ‘‘(B) has an agreement in effect with the Sec20 retary to accept— 

21 ‘‘(i) the amount determined under section 

22 1833(a)(1)(W) as full payment for screenings 

23 for clinical depression, anxiety, and impaired 

24 cognitive functioning; and 
239 

•S 2558 IS 

1 ‘‘(ii) an assignment described in section 

2 1842(b)(3)(B)(ii) with respect to payment for 

3 each screening furnished by the professional to 

4 an individual enrolled under part B. 

5 ‘‘(3) The Secretary shall, in consultation with mental 

6 health professionals and other stakeholders with experi7 ence in screening for clinical depression, anxiety, and im8 paired cognitive functioning, shall establish or identify a 

9 list of approved screenings to be used under this para10 graph. The Secretary, in consultation with such profes11 sionals and stakeholders, shall review and update such list 

12 not less frequently than once every 5 years.’’. 

13 (c) PAYMENT AND ELIMINATION OF COST-SHAR14 ING.— 

15 (1) PAYMENT AND ELIMINATION OF COINSUR16 ANCE.—Section 1833(a)(1) of the Social Security 

17 Act (42 U.S.C. 1395l(a)(1)), as amended by section 

18 401(c)(1), is amended— 

19 (A) in subparagraph (N), by striking ‘‘or 

20 substance use (other than tobacco), diet, exer21 cise, injury prevention, and dental health coun22 seling (as defined in section 1861(bbb))’’ and 

23 inserting ‘‘substance use (other than tobacco), 

24 diet, exercise, injury prevention, and dental 

25 health counseling (as defined in section 
240 

•S 2558 IS 

1 1861(bbb)), or screenings for clinical depres2 sion, anxiety, and impaired cognitive func3 tioning (as defined in section 1861(ccc))’’; and 

4 (B) in subparagraph (W), by inserting 

5 ‘‘and screenings for clinical depression, anxiety, 

6 and impaired cognitive functioning (as defined 

7 in section 1861(ccc))’’ after ‘‘(as defined in sec8 tion 1861(bbb))’’. 

9 (2) PAYMENT UNDER PHYSICIAN FEE SCHED10 ULE.—Section 1848(j)(3) of the Social Security Act 

11 (42 U.S.C. 1395w–4(j)(3)), as amended by section 

12 401(c)(2), is amended by inserting ‘‘(2)(BB),’’ after 

13 ‘‘(2)(AA),’’. 

14 (3) ELIMINATION OF COINSURANCE IN OUT15 PATIENT HOSPITAL SETTINGS.— 

16 (A) EXCLUSION FROM OPD FEE SCHED17 ULE.—Section 1833(t)(1)(B)(iv) of the Social 

18 Security Act (42 U.S.C. 1395l(t)(1)(B)(iv)), as 

19 amended by section 401(c)(3)(A), is amended 

20 by striking ‘‘or substance use (other than to21 bacco), diet, exercise, injury prevention, and 

22 dental health counseling (as defined in section 

23 1861(bbb))’’ and inserting ‘‘substance use 

24 (other than tobacco), diet, exercise, injury pre25 vention, and dental health counseling (as de-
241 

•S 2558 IS 

1 fined in section 1861(bbb)), or screenings for 

2 clinical depression, anxiety, and impaired cog3 nitive functioning (as defined in section 

4 1861(ccc))’’. 

5 (B) CONFORMING AMENDMENT.—Section 

6 1833(a)(2)(H) of the Social Security Act (42 

7 U.S.C. 1395l(a)(2)(H)), as added by section 

8 401(c)(3)(B)(iii), is amended by inserting ‘‘and 

9 screenings for clinical depression, anxiety, and 

10 impaired cognitive functioning (as defined in 

11 section 1861(ccc))’’ after ‘‘(as defined in section 

12 1861(bbb))’’. 

13 (4) ELIMINATION OF DEDUCTIBLE.—Section 

14 1833(b)(7) of the Social Security Act (42 U.S.C. 

15 1395l(b)(7)), as amended by section 401(c)(4), is 

16 amended by inserting ‘‘or screenings for clinical de17 pression, anxiety, and impaired cognitive functioning 

18 (as defined in section 1861(ccc))’’ before the period 

19 at the end. 

20 (d) APPLICATION OF LIMITS ON BILLING.—Section 

21 1842(b)(18)(C) of the Social Security Act (42 U.S.C. 

22 1395u(b)(18)(C)), as amended by section 401(d), is 

23 amended by adding at the end the following new clause: 

24 ‘‘(viii) A mental health care professional de25 scribed in section 1861(ccc)(2) that is authorized to 
242 

•S 2558 IS 

1 perform screenings for clinical depression, anxiety, 

2 and impaired cognitive functioning (as defined in 

3 section 1861(ccc)(1)) that is not otherwise described 

4 in this subparagraph.’’. 

5 (e) FREQUENCY.—Section 1862(a)(1) of the Social 

6 Security Act (42 U.S.C. 1395y(a)(1)), as amended by sec7 tion 613(c) of the Medicare Prescription Drug, Improve8 ment, and Modernization Act of 2003 (Public Law 108– 

9 173; 117 Stat. 2306), is amended— 

10 (1) in subparagraph (L), by striking ‘‘and’’ 

11 after the comma at the end; 

12 (2) in subparagraph (M), by striking the semi13 colon at the end and inserting ‘‘, and’’; and 

14 (3) by adding at the end the following new sub15 paragraph: 

16 ‘‘(N) in the case of screenings for clinical de17 pression, anxiety, and impaired cognitive functioning 

18 (as defined in section 1861(ccc)(1)), which is per19 formed more frequently than is covered under such 

20 section;’’. 

21 (f) EFFECTIVE DATE.—The amendments made by 

22 this section shall take effect as if included in the enact23 ment of the Medicare Prescription Drug, Improvement, 

24 and Modernization Act of 2003 (Public Law 108–173; 117 
243 

•S 2558 IS 

1 Stat. 2066) and shall apply to services furnished on and 

2 after January 1, 2005. 

3 SEC. 403. ENCOURAGEMENT OF CESSATION OF TOBACCO 

4 USE. 

5 (a) MEDICARE COVERAGE OF COUNSELING AND

6 PHARMACOTHERAPY FOR CESSATION OF TOBACCO

7 USE.— 

8 (1) COVERAGE.— 

9 (A) IN GENERAL.—Section 1861(s)(2) of 

10 the Social Security Act (42 U.S.C. 

11 1395x(s)(2)), as amended by section 402(a)(1), 

12 is amended— 

13 (i) in subparagraph (AA), by striking 

14 ‘‘and’’ after the semicolon at the end; 

15 (ii) in subparagraph (BB), by adding 

16 ‘‘and’’ after the semicolon at the end; and 

17 (iii) by adding at the end the fol18 lowing new subparagraph: 

19 ‘‘(CC) counseling and pharmacotherapy for ces20 sation of tobacco use (as defined in subsection 

21 (ddd)(1));’’. 

22 (B) CONFORMING AMENDMENTS.—Clauses 

23 (i) and (ii) of section 1861(s)(2)(K) of the So24 cial Security Act (42 U.S.C. 1395x(s)(2)(K)), 

25 as amended by section 402(a)(2), are each 
244 

•S 2558 IS 

1 amended by striking ‘‘and (ccc)’’ and inserting 

2 ‘‘(ccc), and (ddd)’’. 

3 (2) SERVICES DESCRIBED.—Section 1861 of 

4 the Social Security Act (42 U.S.C. 1395x), as 

5 amended by section 402(b), is amended by adding at 

6 the end the following new subsection: 

7 ‘‘Counseling and Pharmacotherapy for Cessation of 

8 Tobacco Use 

9 ‘‘(ddd)(1) Subject to paragraphs (2) and (3), the 

10 term ‘counseling and pharmacotherapy for cessation of to11 bacco use’ means diagnostic, therapy, and counseling serv12 ices and pharmacotherapy (including the coverage of pre13 scription and nonprescription tobacco cessation agents ap14 proved by the Food and Drug Administration) for ces15 sation of tobacco use for individuals who use tobacco prod16 ucts or who are being treated for tobacco use which are 

17 furnished— 

18 ‘‘(A) by or under the supervision of a physician; 

19 or 

20 ‘‘(B) by any other health care professional 

21 who— 

22 ‘‘(i) is legally authorized to furnish such 

23 services under State law (or the State regu24 latory mechanism provided by State law) of the 

25 State in which the services are furnished; and 
245 

•S 2558 IS 

1 ‘‘(ii) is authorized to receive payment for 

2 other services under this title or is designated 

3 by the Secretary for this purpose. 

4 ‘‘(2) Such term is limited to— 

5 ‘‘(A) services recommended in ‘Treating To6 bacco Use and Dependence: A Clinical Practice 

7 Guideline’, published by the Public Health Service in 

8 June 2000, or any subsequent modification of such 

9 Guideline; and 

10 ‘‘(B) such other services that the Secretary rec11 ognizes to be effective. 

12 ‘‘(3) Each individual who is described in paragraph 

13 (1) and enrolled under part B shall be eligible for the serv14 ices described in this subsection for up to 3 attempts to 

15 cease the use of tobacco.’’. 

16 (3) PAYMENT AND ELIMINATION OF COST17 SHARING.— 

18 (A) PAYMENT AND ELIMINATION OF COIN19 SURANCE.—Section 1833(a)(1) of the Social 

20 Security Act (42 U.S.C. 1395l(a)(1)), as 

21 amended by section 402(c)(1), is amended— 

22 (i) in subparagraph (N) by striking 

23 ‘‘or screenings for clinical depression, anx24 iety, and impaired cognitive functioning (as 

25 defined in section 1861(ccc))’’ and insert-
246 

•S 2558 IS 

1 ing ‘‘, screenings for clinical depression, 

2 anxiety, and impaired cognitive functioning 

3 (as defined in section 1861(ccc)), or coun4 seling and pharmacotherapy for cessation 

5 of tobacco use (as defined in section 

6 1861(ddd))’’; and 

7 (ii) in subparagraph (W), by striking 

8 ‘‘and screenings for clinical depression, 

9 anxiety, and impaired cognitive functioning 

10 (as defined in section 1861(ccc))’’ and in11 serting ‘‘screenings for clinical depression, 

12 anxiety, and impaired cognitive functioning 

13 (as defined in section 1861(ccc)), and 

14 counseling and pharmacotherapy for ces15 sation of tobacco use (as defined in section 

16 1861(ddd))’’. 

17 (B) PAYMENT UNDER PHYSICIAN FEE

18 SCHEDULE.—Section 1848(j)(3) of the Social 

19 Security Act (42 U.S.C. 1395w–4(j)(3)), as 

20 amended by section 402(c)(2), is amended by 

21 inserting ‘‘(2)(CC) (with separate payment 

22 amounts for pharmacotherapy, including pre23 scription and nonprescription tobacco cessation 

24 agents approved by the Food and Drug Admin25 istration),’’ after ‘‘(2)(BB),’’. 
247 

•S 2558 IS 

1 (C) ELIMINATION OF COINSURANCE IN

2 OUTPATIENT HOSPITAL SETTINGS.— 

3 (i) EXCLUSION FROM OPD FEE

4 SCHEDULE.—Section 1833(t)(1)(B)(iv) of 

5 the Social Security Act (42 U.S.C. 

6 1395l(t)(1)(B)(iv)), as amended by section 

7 402(c)(3)(A), is amended by striking ‘‘or 

8 screenings for clinical depression, anxiety, 

9 and impaired cognitive functioning (as de10 fined in section 1861(ccc))’’ and inserting 

11 ‘‘screenings for clinical depression, anxiety, 

12 and impaired cognitive functioning (as de13 fined in section 1861(ccc)), or counseling 

14 and pharmacotherapy for cessation of to15 bacco use (as defined in section 

16 1861(ddd))’’. 

17 (ii) CONFORMING AMENDMENT.—Sec18 tion 1833(a)(2)(H) of the Social Security 

19 Act (42 U.S.C. 1395l(a)(2)(H)), as added 

20 by section 402(c)(3)(B), is amended by 

21 striking ‘‘and screenings for clinical de22 pression, anxiety, and impaired cognitive 

23 functioning (as defined in section 

24 1861(ccc))’’ and inserting ‘‘screenings for 

25 clinical depression, anxiety, and impaired 
248 

•S 2558 IS 

1 cognitive functioning (as defined in section 

2 1861(ccc)), and counseling and 

3 pharmacotherapy for cessation of tobacco 

4 use (as defined in section 1861(ddd))’’. 

5 (D) ELIMINATION OF DEDUCTIBLE.—Sec6 tion 1833(b)(7) of the Social Security Act (42 

7 U.S.C. 1395l(b)(7)), as added by section 

8 402(c)(4), is amended by striking ‘‘or 

9 screenings for clinical depression, anxiety, and 

10 impaired cognitive functioning (as defined in 

11 section 1861(ccc))’’ and inserting ‘‘screenings 

12 for clinical depression, anxiety, and impaired 

13 cognitive functioning (as defined in section 

14 1861(ccc)), or counseling and pharmacotherapy 

15 for cessation of tobacco use (as defined in sec16 tion 1861(ddd))’’. 

17 (4) APPLICATION OF LIMITS ON BILLING.—Sec18 tion 1842(b)(18)(C) of the Social Security Act (42 

19 U.S.C. 1395u(b)(18)(C)), as amended by section 

20 402(d), is amended by adding at the end the fol21 lowing new clause: 

22 ‘‘(ix) Any individual designated by the Sec23 retary under section 1861(ddd)(1)(B)(ii).’’. 
249 

•S 2558 IS 

1 (5) FREQUENCY.—Section 1862(a)(1) of the 

2 Social Security Act (42 U.S.C. 1395y(a)(1)), as 

3 amended by section 402(e), is amended— 

4 (A) in subparagraph (M), by striking 

5 ‘‘and’’ after the comma at the end; 

6 (B) in subparagraph (N), by striking the 

7 semicolon at the end and inserting ‘‘, and’’; and 

8 (C) by adding at the end the following new 

9 subparagraph: 

10 ‘‘(O) in the case of counseling and 

11 pharmacotherapy for cessation of tobacco use (as de12 fined in section 1861(ddd)), which is performed with 

13 respect to more attempts to cease tobacco use than 

14 is covered under such section;’’. 

15 (b) PROMOTING CESSATION OF TOBACCO USE

16 UNDER THE MEDICAID PROGRAM.— 

17 (1) DROPPING EXCEPTION FROM MEDICAID

18 PRESCRIPTION DRUG COVERAGE FOR TOBACCO CES19 SATION MEDICATIONS.—Section 1927(d)(2) of the 

20 Social Security Act (42 U.S.C. 1396r–8(d)(2)) is 

21 amended— 

22 (A) by striking subparagraph (E); 

23 (B) by redesignating subparagraphs (F) 

24 through (J) as subparagraphs (E) through (I), 

25 respectively; and 
250 

•S 2558 IS 

1 (C) in subparagraph (F) (as redesignated 

2 by paragraph (2)), by inserting before the pe3 riod at the end the following: ‘‘, except agents 

4 approved by the Food and Drug Administration 

5 for purposes of promoting, and when used to 

6 promote, tobacco cessation’’. 

7 (2) REQUIRING COVERAGE OF TOBACCO CES8 SATION COUNSELING AND PHARMACOTHERAPY

9 SERVICES FOR PREGNANT WOMEN.—Section 

10 1905(a)(4) of the Social Security Act (42 U.S.C. 

11 1396d(a)(4)) is amended— 

12 (A) by striking ‘‘and’’ before ‘‘(C)’’; and 

13 (B) by inserting before the semicolon at 

14 the end the following: ‘‘; and (D) counseling 

15 and pharmacotherapy for cessation of tobacco 

16 use (as defined in section 1861(ddd)) for preg17 nant women’’. 

18 (3) REMOVAL OF COST-SHARING FOR TOBACCO

19 CESSATION COUNSELING AND PHARMACOTHERAPY

20 SERVICES FOR PREGNANT WOMEN.—Section 1916 of 

21 the Social Security Act (42 U.S.C. 1396o) is amend22 ed in each of subsections (a)(2)(B) and (b)(2)(B), 

23 by inserting ‘‘, and counseling for cessation of to24 bacco use (as defined in section 1861(ddd))’’ after 

25 ‘‘complicate the pregnancy’’. 
251 

•S 2558 IS 

1 (c) COVERAGE UNDER FEHBP.—The last sentence 

2 of section 8904(a) of title 5, United States Code, is 

3 amended by striking ‘‘both for costs associated with care 

4 in a general hospital and for other health services of a 

5 catastrophic nature’’ and inserting ‘‘for costs associated 

6 with care in a general hospital, for other health services 

7 of a catastrophic nature, and for counseling and 

8 pharmacotherapy for cessation of tobacco use (as defined 

9 in section 1861(ddd)(1) of the Social Security Act)’’. 

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

11 this section shall take effect as if included in the enact12 ment of the Medicare Prescription Drug, Improvement, 

13 and Modernization Act of 2003 (Public Law 108–173; 117 

14 Stat. 2066) and shall apply to services furnished on and 

15 after January 1, 2005. 

16 SEC. 404. PREVENTIVE HEALTH SERVICES FOR WOMEN. 

17 Section 1509 of the Public Health Service Act (42 

18 U.S.C. 300n–4a) is amended to read as follows: 

19 ‘‘SEC. 1509. ESTABLISHMENT OF PROGRAM FOR ADDI20 TIONAL PREVENTIVE HEALTH SERVICES. 

21 ‘‘(a) IN GENERAL.—The Secretary, acting through 

22 the Director of the Centers for Disease Control and Pre23 vention, may, through a competitive review process, award 

24 grants to States that have received grants under section 
252 

•S 2558 IS 

1 1501 for a fiscal year, to enable such State to carry out 

2 programs— 

3 ‘‘(1) to provide preventive health services, in ad4 dition to the services authorized in such section 

5 1501, for diseases such as cardiovascular diseases, 

6 osteoporosis, and obesity; 

7 ‘‘(2) to provide screenings, such as screening 

8 for blood pressure, cholesterol, and osteoporosis, and 

9 other services that the Secretary, acting through the 

10 Director of the Centers for Disease Control and Pre11 vention, determines to be appropriate and feasible; 

12 ‘‘(3) for health education, counseling, and inter13 ventions for behavioral risk factors, such as physical 

14 inactivity and poor nutrition, and diseases referred 

15 to in paragraph (1); 

16 ‘‘(4) to provide appropriate referrals for medical 

17 treatment of women receiving services pursuant to 

18 paragraph (1) through (3), and ensuring, to the ex19 tent practicable, the provision of appropriate follow20 up services; and 

21 ‘‘(5) to evaluate the activities conducted under 

22 paragraphs (1) through (4) through appropriate sur23 veillance, research, or program monitoring activities. 

24 ‘‘(b) STATUS AS PARTICIPANT IN PROGRAM REGARD25 ING BREAST AND CERVICAL CANCER.—The Secretary 
253 

•S 2558 IS 

1 may not make a grant to a State under subsection (a) 

2 unless the State involved agrees that services under the 

3 grant will be provided in conjunction with entities that are 

4 screening women for breast or cervical cancer pursuant 

5 to a grant under section 1501. 

6 ‘‘(c) APPLICABILITY OF PROVISIONS.—The provi7 sions of this title shall apply to a grant under subsection 

8 (a) to the same extent and in the same manner as such 

9 provisions apply to a grant under section 1501. 

10 ‘‘(d) FUNDING.— 

11 ‘‘(1) IN GENERAL.—There is authorized to be 

12 appropriated such sums as may be necessary to 

13 carry out this section for fiscal year 2004 and for 

14 each subsequent fiscal year. 

15 ‘‘(2) LIMITATION REGARDING FUNDING WITH

16 RESPECT TO BREAST AND CERVICAL CANCER.—No 

17 additional resources shall be appropriated for a fis18 cal year under paragraph (1) unless the amount ap19 propriated under section 1510(a) for such fiscal year 

20 is at least $173,920,000.’’. 
254 

•S 2558 IS 

1 TITLE V—HELP (HEALTHY LIFE2 STYLES AND PREVENTION) 

3 AMERICA TRUST FUND 

4 SEC. 501. HELP (HEALTHY LIFESTYLES AND PREVENTION) 

5 AMERICA TRUST FUND. 

6 (a) CREATION OF TRUST FUND.—There is estab7 lished in the Treasury of the United States a trust fund 

8 to be known as the ‘HeLP (Healthy Lifestyles and Preven9 tion) America Trust Fund’ (referred to in this section as 

10 the ‘Trust Fund’), consisting of such amounts as may be 

11 appropriated or credited to the Trust Fund as provided 

12 in this section. 

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

14 appropriated to the Trust Fund an amount equivalent 

15 to— 

16 (1) the increase in revenues received in the 

17 Treasury as the result of the amendment made by 

18 section 304 of this Act, 

19 (2) the increase in revenues received in the 

20 Treasury as the result of the amendments made by 

21 title VII of this Act, and 

22 (3) the receipts paid by tobacco companies 

23 under subtitle B of title III of this Act. 

24 (c) DISTRIBUTION OF AMOUNTS IN TRUST FUND.— 
255 

•S 2558 IS 

1 (1) MANDATORY EXPENDITURES.—On a fiscal 

2 year basis (beginning with fiscal year 2005) and 

3 without further appropriation the Secretary of the 

4 Treasury shall distribute from amounts in the Trust 

5 Fund such amounts as are necessary to provide for 

6 the Federal expenditures attributable to the fol7 lowing: 

8 (A) Smoking cessation drugs under title 

9 XIX of the Social Security Act as identified by 

10 the Secretary of Health and Human Services. 

11 (B) Coverage of smoking cessation under 

12 the Federal Employee Health Benefits Program 

13 under chapter 89 of title 5, United States Code. 

14 (C) The amendments made to the medi15 care program under title XVIII of the Social 

16 Security Act by sections 401 and 402 of this 

17 Act. 

18 Such amounts shall be in addition to any other 

19 amounts appropriated for such purposes. 

20 (2) DISCRETIONARY EXPENDITURES.—Amounts 

21 in the Trust Fund not to exceed $1,600,000,000 

22 shall be available, as provided in appropriation Acts, 

23 for each fiscal year (beginning with fiscal year 2005) 

24 only for purposes of making expenditures to carry 

25 out the following: 
256 

•S 2558 IS 

1 (A) Fruit and vegetable program under 

2 section 18(g) of the Richard B. Russell Na3 tional School Lunch Act. 

4 (B) Healthy school and child care nutrition 

5 under section 18(h) of the Richard B. Russell 

6 National School Lunch Act. 

7 (C) Mental health services in schools under 

8 paragraphs (7) and (8) of section 5541(c) of 

9 the Elementary and Secondary Education Act 

10 of 1965. 

11 (D) Healthy workforce grants under part 

12 R of title III of the Public Health Service Act. 

13 (E) Community grants to prevent and re14 duce the incidence of chronic disease under sec15 tion 399P of the Public Health Service Act. 

16 (F) Living well with a disability and work17 ing well with a disability programs under sec18 tions 399Q and 399R of the Public Health 

19 Service Act. 

20 (G) Complete streets incentive program 

21 under section 133(g) of title 23, United States 

22 Code. 

23 (H) Mental health surveillance measures 

24 under section 506C of the Public Health Serv25 ice Act. 
257 

•S 2558 IS 

1 (I) Federal-State tobacco counter-adver2 tising programs under section 399S of the Pub3 lic Health Service Act. 

4 (J) Preventive health services for women, 

5 including well-integrated screening and evalua6 tion for women across the Nation, under section 

7 1509 of the Public Health Service Act. 

8 (K) Carol M. White Physical Education 

9 Program under subpart 10 of part D of title V 

10 of the Elementary and Secondary Education 

11 Act of 1965. 

12 (L) Research regarding obesity under sec13 tion 601 of this Act. 

14 (M) Expanded Food and Nutrition Edu15 cation Program under section 3175 of title 23, 

16 United States Code. 

17 (N) The following programs under the au18 thority of the Secretary of Health and Human 

19 Services through the Centers for Disease Con20 trol and Prevention: 

21 (i) Nutrition and physical activity 

22 grants. 

23 (ii) Coordinated school health. 

24 (iii) Verb Campaign. 

25 (iv) Prevention research centers. 
258 

•S 2558 IS 

1 (v) 5-a-day programs. 

2 (vi) Steps to a healthier United 

3 States. 

4 (d) APPLICATION OF CERTAIN RULES.—For pur5 poses of this section, rules similar to the rules of sections 

6 9601 and 9602 of the Internal Revenue Code of 1986 shall 

7 apply. 

8 TITLE VI—RESEARCH 

9 SEC. 601. EXPANSION OF RESEARCH REGARDING OBESITY. 

10 The Secretary of Health and Human Services shall, 

11 based on the conclusions of the United States Preventive 

12 Services Task Force on Obesity, conduct research on obe13 sity prevention, treatment, and control with regard to the 

14 following: 

15 (1) The effectiveness of physical activity and di16 etary counseling with children and adolescents in the 

17 primary care setting to prevent, treat, and control 

18 obesity. 

19 (2) The cost-effectiveness of intensive dietary 

20 and physical activity counseling to prevent, treat, 

21 and control obesity in a variety of populations. 

22 (3) The effectiveness of dietary and physical ac23 tivity counseling among children and adolescents, 

24 low income populations, and minority groups in the 
259 

•S 2558 IS 

1 primary care setting to prevent, treat, and control 

2 obesity. 

3 (4) The effectiveness of the assessment of obe4 sity by a primary care physician and subsequent re5 ferral for obesity counseling to a nonaffiliated obe6 sity expert or specialist. 

7 TITLE VII—PROVISIONS DE8 SIGNED TO CURTAIL TAX 

9 SHELTERS 

10 SEC. 700. AMENDMENT OF 1986 CODE. 

11 Except as otherwise expressly provided, whenever in 

12 this title an amendment or repeal is expressed in terms 

13 of an amendment to, or repeal of, a section or other provi14 sion, the reference shall be considered to be made to a 

15 section or other provision of the Internal Revenue Code 

16 of 1986. 

17 SEC. 701. CLARIFICATION OF ECONOMIC SUBSTANCE DOC18 TRINE. 

19 (a) IN GENERAL.—Section 7701 is amended by re20 designating subsection (n) as subsection (o) and by insert21 ing after subsection (m) the following new subsection: 

22 ‘‘(n) CLARIFICATION OF ECONOMIC SUBSTANCE

23 DOCTRINE; ETC.— 

24 ‘‘(1) GENERAL RULES.— 
260 

•S 2558 IS 

1 ‘‘(A) IN GENERAL.—In any case in which 

2 a court determines that the economic substance 

3 doctrine is relevant for purposes of this title to 

4 a transaction (or series of transactions), such 

5 transaction (or series of transactions) shall have 

6 economic substance only if the requirements of 

7 this paragraph are met. 

8 ‘‘(B) DEFINITION OF ECONOMIC SUB9 STANCE.—For purposes of subparagraph (A)— 

10 ‘‘(i) IN GENERAL.—A transaction has 

11 economic substance only if— 

12 ‘‘(I) the transaction changes in a 

13 meaningful way (apart from Federal 

14 tax effects) the taxpayer’s economic 

15 position, and 

16 ‘‘(II) the taxpayer has a substan17 tial nontax purpose for entering into 

18 such transaction and the transaction 

19 is a reasonable means of accom20 plishing such purpose. 

21 In applying subclause (II), a purpose of 

22 achieving a financial accounting benefit 

23 shall not be taken into account in deter24 mining whether a transaction has a sub25 stantial nontax purpose if the origin of 
261 

•S 2558 IS 

1 such financial accounting benefit is a re2 duction of income tax. 

3 ‘‘(ii) SPECIAL RULE WHERE TAX4 PAYER RELIES ON PROFIT POTENTIAL.—A 

5 transaction shall not be treated as having 

6 economic substance by reason of having a 

7 potential for profit unless— 

8 ‘‘(I) the present value of the rea9 sonably expected pre-tax profit from 

10 the transaction is substantial in rela11 tion to the present value of the ex12 pected net tax benefits that would be 

13 allowed if the transaction were re14 spected, and 

15 ‘‘(II) the reasonably expected 

16 pre-tax profit from the transaction ex17 ceeds a risk-free rate of return. 

18 ‘‘(C) TREATMENT OF FEES AND FOREIGN

19 TAXES.—Fees and other transaction expenses 

20 and foreign taxes shall be taken into account as 

21 expenses in determining pre-tax profit under 

22 subparagraph (B)(ii). 

23 ‘‘(2) SPECIAL RULES FOR TRANSACTIONS WITH

24 TAX-INDIFFERENT PARTIES.— 
262 

•S 2558 IS 

1 ‘‘(A) SPECIAL RULES FOR FINANCING

2 TRANSACTIONS.—The form of a transaction 

3 which is in substance the borrowing of money 

4 or the acquisition of financial capital directly or 

5 indirectly from a tax-indifferent party shall not 

6 be respected if the present value of the deduc7 tions to be claimed with respect to the trans8 action is substantially in excess of the present 

9 value of the anticipated economic returns of the 

10 person lending the money or providing the fi11 nancial capital. A public offering shall be treat12 ed as a borrowing, or an acquisition of financial 

13 capital, from a tax-indifferent party if it is rea14 sonably expected that at least 50 percent of the 

15 offering will be placed with tax-indifferent par16 ties. 

17 ‘‘(B) ARTIFICIAL INCOME SHIFTING AND

18 BASIS ADJUSTMENTS.—The form of a trans19 action with a tax-indifferent party shall not be 

20 respected if— 

21 ‘‘(i) it results in an allocation of in22 come or gain to the tax-indifferent party in 

23 excess of such party’s economic income or 

24 gain, or 
263 

•S 2558 IS 

1 ‘‘(ii) it results in a basis adjustment 

2 or shifting of basis on account of over3 stating the income or gain of the tax-indif4 ferent party. 

5 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 

6 purposes of this subsection— 

7 ‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.— 

8 The term ‘economic substance doctrine’ means 

9 the common law doctrine under which tax bene10 fits under subtitle A with respect to a trans11 action are not allowable if the transaction does 

12 not have economic substance or lacks a business 

13 purpose. 

14 ‘‘(B) TAX-INDIFFERENT PARTY.—The 

15 term ‘tax-indifferent party’ means any person 

16 or entity not subject to tax imposed by subtitle 

17 A. A person shall be treated as a tax-indifferent 

18 party with respect to a transaction if the items 

19 taken into account with respect to the trans20 action have no substantial impact on such per21 son’s liability under subtitle A. 

22 ‘‘(C) EXCEPTION FOR PERSONAL TRANS23 ACTIONS OF INDIVIDUALS.—In the case of an 

24 individual, this subsection shall apply only to 

25 transactions entered into in connection with a 
264 

•S 2558 IS 

1 trade or business or an activity engaged in for 

2 the production of income. 

3 ‘‘(D) TREATMENT OF LESSORS.—In apply4 ing paragraph (1)(B)(ii) to the lessor of tan5 gible property subject to a lease, the expected 

6 net tax benefits with respect to the leased prop7 erty shall not be taken into account. 

8 ‘‘(4) OTHER COMMON LAW DOCTRINES NOT AF9 FECTED.—Except as specifically provided in this 

10 subsection, the provisions of this subsection shall not 

11 be construed as altering or supplanting any other 

12 rule of law, and the requirements of this subsection 

13 shall be construed as being in addition to any such 

14 other rule of law. 

15 ‘‘(5) REGULATIONS.—The Secretary shall pre16 scribe such regulations as may be necessary or ap17 propriate to carry out the purposes of this sub18 section. Such regulations may include exemptions 

19 from the application of this subsection.’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to transactions entered into after 

22 the date of the enactment of this Act. 
265 

•S 2558 IS 

1 SEC. 702. PENALTY FOR FAILING TO DISCLOSE REPORT2 ABLE TRANSACTION. 

3 (a) IN GENERAL.—Part I of subchapter B of chapter 

4 68 (relating to assessable penalties) is amended by insert5 ing after section 6707 the following new section: 

6 ‘‘SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORT7 ABLE TRANSACTION INFORMATION WITH RE8 TURN OR STATEMENT. 

9 ‘‘(a) IMPOSITION OF PENALTY.—Any person who 

10 fails to include on any return or statement any informa11 tion with respect to a reportable transaction which is re12 quired under section 6011 to be included with such return 

13 or statement shall pay a penalty in the amount determined 

14 under subsection (b). 

15 ‘‘(b) AMOUNT OF PENALTY.— 

16 ‘‘(1) IN GENERAL.—Except as provided in para17 graphs (2) and (3), the amount of the penalty under 

18 subsection (a) shall be $50,000. 

19 ‘‘(2) LISTED TRANSACTION.—The amount of 

20 the penalty under subsection (a) with respect to a 

21 listed transaction shall be $100,000. 

22 ‘‘(3) INCREASE IN PENALTY FOR LARGE ENTI23 TIES AND HIGH NET WORTH INDIVIDUALS.— 

24 ‘‘(A) IN GENERAL.—In the case of a fail25 ure under subsection (a) by— 

26 ‘‘(i) a large entity, or 
266 

•S 2558 IS 

1 ‘‘(ii) a high net worth individual, 

2 the penalty under paragraph (1) or (2) shall be 

3 twice the amount determined without regard to 

4 this paragraph. 

5 ‘‘(B) LARGE ENTITY.—For purposes of 

6 subparagraph (A), the term ‘large entity’ 

7 means, with respect to any taxable year, a per8 son (other than a natural person) with gross re9 ceipts in excess of $10,000,000 for the taxable 

10 year in which the reportable transaction occurs 

11 or the preceding taxable year. Rules similar to 

12 the rules of paragraph (2) and subparagraphs 

13 (B), (C), and (D) of paragraph (3) of section 

14 448(c) shall apply for purposes of this subpara15 graph. 

16 ‘‘(C) HIGH NET WORTH INDIVIDUAL.—For 

17 purposes of subparagraph (A), the term ‘high 

18 net worth individual’ means, with respect to a 

19 reportable transaction, a natural person whose 

20 net worth exceeds $2,000,000 immediately be21 fore the transaction. 

22 ‘‘(c) DEFINITIONS.—For purposes of this section— 

23 ‘‘(1) REPORTABLE TRANSACTION.—The term 

24 ‘reportable transaction’ means any transaction with 

25 respect to which information is required to be in-
267 

•S 2558 IS 

1 cluded with a return or statement because, as deter2 mined under regulations prescribed under section 

3 6011, such transaction is of a type which the Sec4 retary determines as having a potential for tax 

5 avoidance or evasion. 

6 ‘‘(2) LISTED TRANSACTION.—Except as pro7 vided in regulations, the term ‘listed transaction’ 

8 means a reportable transaction which is the same as, 

9 or substantially similar to, a transaction specifically 

10 identified by the Secretary as a tax avoidance trans11 action for purposes of section 6011. 

12 ‘‘(d) AUTHORITY TO RESCIND PENALTY.— 

13 ‘‘(1) IN GENERAL.—The Commissioner of In14 ternal Revenue may rescind all or any portion of any 

15 penalty imposed by this section with respect to any 

16 violation if— 

17 ‘‘(A) the violation is with respect to a re18 portable transaction other than a listed trans19 action, 

20 ‘‘(B) the person on whom the penalty is 

21 imposed has a history of complying with the re22 quirements of this title, 

23 ‘‘(C) it is shown that the violation is due 

24 to an unintentional mistake of fact; 
268 

•S 2558 IS 

1 ‘‘(D) imposing the penalty would be 

2 against equity and good conscience, and 

3 ‘‘(E) rescinding the penalty would promote 

4 compliance with the requirements of this title 

5 and effective tax administration. 

6 ‘‘(2) DISCRETION.—The exercise of authority 

7 under paragraph (1) shall be at the sole discretion 

8 of the Commissioner and may be delegated only to 

9 the head of the Office of Tax Shelter Analysis. The 

10 Commissioner, in the Commissioner’s sole discretion, 

11 may establish a procedure to determine if a penalty 

12 should be referred to the Commissioner or the head 

13 of such Office for a determination under paragraph 

14 (1). 

15 ‘‘(3) NO APPEAL.—Notwithstanding any other 

16 provision of law, any determination under this sub17 section may not be reviewed in any administrative or 

18 judicial proceeding. 

19 ‘‘(4) RECORDS.—If a penalty is rescinded under 

20 paragraph (1), the Commissioner shall place in the 

21 file in the Office of the Commissioner the opinion of 

22 the Commissioner or the head of the Office of Tax 

23 Shelter Analysis with respect to the determination, 

24 including— 
269 

•S 2558 IS 

1 ‘‘(A) the facts and circumstances of the 

2 transaction, 

3 ‘‘(B) the reasons for the rescission, and 

4 ‘‘(C) the amount of the penalty rescinded. 

5 ‘‘(5) REPORT.—The Commissioner shall each 

6 year report to the Committee on Ways and Means 

7 of the House of Representatives and the Committee 

8 on Finance of the Senate— 

9 ‘‘(A) a summary of the total number and 

10 aggregate amount of penalties imposed, and re11 scinded, under this section, and 

12 ‘‘(B) a description of each penalty re13 scinded under this subsection and the reasons 

14 therefor. 

15 ‘‘(e) PENALTY REPORTED TO SEC.—In the case of 

16 a person— 

17 ‘‘(1) which is required to file periodic reports 

18 under section 13 or 15(d) of the Securities Ex19 change Act of 1934 or is required to be consolidated 

20 with another person for purposes of such reports, 

21 and 

22 ‘‘(2) which— 

23 ‘‘(A) is required to pay a penalty under 

24 this section with respect to a listed transaction, 
270 

•S 2558 IS 

1 ‘‘(B) is required to pay a penalty under 

2 section 6662A with respect to any reportable 

3 transaction at a rate prescribed under section 

4 6662A(c), or 

5 ‘‘(C) is required to pay a penalty under 

6 section 6662B with respect to any noneconomic 

7 substance transaction, 

8 the requirement to pay such penalty shall be disclosed in 

9 such reports filed by such person for such periods as the 

10 Secretary shall specify. Failure to make a disclosure in 

11 accordance with the preceding sentence shall be treated 

12 as a failure to which the penalty under subsection (b)(2) 

13 applies. 

14 ‘‘(f) COORDINATION WITH OTHER PENALTIES.—The 

15 penalty imposed by this section is in addition to any pen16 alty imposed under this title.’’. 

17 (b) DISCLOSURE BY SECRETARY.— 

18 (1) IN GENERAL.—Section 6103 is amended by 

19 redesignating subsection (q) as subsection (r) and by 

20 inserting after subsection (p) the following new sub21 section: 

22 ‘‘(q) DISCLOSURE RELATING TO PAYMENTS OF CER23 TAIN PENALTIES.—Notwithstanding any other provision 

24 of this section, the Secretary shall make public the name 
271 

•S 2558 IS 

1 of any person required to pay a penalty described in sec2 tion 6707A(e)(2) and the amount of the penalty.’’. 

3 (2) RECORDS.—Section 6103(p)(3)(A) is 

4 amended by striking ‘‘or (n)’’ and inserting ‘‘(n), or 

5 (q)’’. 

6 (c) CONFORMING AMENDMENT.—The table of sec7 tions for part I of subchapter B of chapter 68 is amended 

8 by inserting after the item relating to section 6707 the 

9 following: 

‘‘Sec. 6707A. Penalty for failure to include reportable transaction 

information with return or statement.’’. 

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

11 this section shall apply to returns and statements the due 

12 date for which is after the date of the enactment of this 

13 Act. 

14 SEC. 703. ACCURACY-RELATED PENALTY FOR LISTED 

15 TRANSACTIONS AND OTHER REPORTABLE 

16 TRANSACTIONS HAVING A SIGNIFICANT TAX 

17 AVOIDANCE PURPOSE. 

18 (a) IN GENERAL.—Subchapter A of chapter 68 is 

19 amended by inserting after section 6662 the following new 

20 section: 
272 

•S 2558 IS 

1 ‘‘SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PEN2 ALTY ON UNDERSTATEMENTS WITH RESPECT 

3 TO REPORTABLE TRANSACTIONS. 

4 ‘‘(a) IMPOSITION OF PENALTY.—If a taxpayer has a 

5 reportable transaction understatement for any taxable 

6 year, there shall be added to the tax an amount equal to 

7 20 percent of the amount of such understatement. 

8 ‘‘(b) REPORTABLE TRANSACTION UNDERSTATE9 MENT.—For purposes of this section— 

10 ‘‘(1) IN GENERAL.—The term ‘reportable trans11 action understatement’ means the sum of— 

12 ‘‘(A) the product of— 

13 ‘‘(i) the amount of the increase (if 

14 any) in taxable income which results from 

15 a difference between the proper tax treat16 ment of an item to which this section ap17 plies and the taxpayer’s treatment of such 

18 item (as shown on the taxpayer’s return of 

19 tax), and 

20 ‘‘(ii) the highest rate of tax imposed 

21 by section 1 (section 11 in the case of a 

22 taxpayer which is a corporation), and 

23 ‘‘(B) the amount of the decrease (if any) 

24 in the aggregate amount of credits determined 

25 under subtitle A which results from a difference 

26 between the taxpayer’s treatment of an item to 
273 

•S 2558 IS 

1 which this section applies (as shown on the tax2 payer’s return of tax) and the proper tax treat3 ment of such item. 

4 For purposes of subparagraph (A), any reduction of 

5 the excess of deductions allowed for the taxable year 

6 over gross income for such year, and any reduction 

7 in the amount of capital losses which would (without 

8 regard to section 1211) be allowed for such year, 

9 shall be treated as an increase in taxable income. 

10 ‘‘(2) ITEMS TO WHICH SECTION APPLIES.—This 

11 section shall apply to any item which is attributable 

12 to— 

13 ‘‘(A) any listed transaction, and 

14 ‘‘(B) any reportable transaction (other 

15 than a listed transaction) if a significant pur16 pose of such transaction is the avoidance or 

17 evasion of Federal income tax. 

18 ‘‘(c) HIGHER PENALTY FOR NONDISCLOSED LISTED

19 AND OTHER AVOIDANCE TRANSACTIONS.— 

20 ‘‘(1) IN GENERAL.—Subsection (a) shall be ap21 plied by substituting ‘30 percent’ for ‘20 percent’ 

22 with respect to the portion of any reportable trans23 action understatement with respect to which the re24 quirement of section 6664(d)(2)(A) is not met. 
274 

•S 2558 IS 

1 ‘‘(2) RULES APPLICABLE TO ASSERTION AND

2 COMPROMISE OF PENALTY.— 

3 ‘‘(A) IN GENERAL.—Only upon the ap4 proval by the Chief Counsel for the Internal 

5 Revenue Service or the Chief Counsel’s delegate 

6 at the national office of the Internal Revenue 

7 Service may a penalty to which paragraph (1) 

8 applies be included in a 1st letter of proposed 

9 deficiency which allows the taxpayer an oppor10 tunity for administrative review in the Internal 

11 Revenue Service Office of Appeals. If such a 

12 letter is provided to the taxpayer, only the Com13 missioner of Internal Revenue may compromise 

14 all or any portion of such penalty. 

15 ‘‘(B) APPLICABLE RULES.—The rules of 

16 paragraphs (2), (3), (4), and (5) of section 

17 6707A(d) shall apply for purposes of subpara18 graph (A). 

19 ‘‘(d) DEFINITIONS OF REPORTABLE AND LISTED

20 TRANSACTIONS.—For purposes of this section, the terms 

21 ‘reportable transaction’ and ‘listed transaction’ have the 

22 respective meanings given to such terms by section 

23 6707A(c). 

24 ‘‘(e) SPECIAL RULES.— 
275 

•S 2558 IS 

1 ‘‘(1) COORDINATION WITH PENALTIES, ETC., 

2 ON OTHER UNDERSTATEMENTS.—In the case of an 

3 understatement (as defined in section 6662(d)(2))— 

4 ‘‘(A) the amount of such understatement 

5 (determined without regard to this paragraph) 

6 shall be increased by the aggregate amount of 

7 reportable transaction understatements and 

8 noneconomic substance transaction understate9 ments for purposes of determining whether 

10 such understatement is a substantial under11 statement under section 6662(d)(1), and 

12 ‘‘(B) the addition to tax under section 

13 6662(a) shall apply only to the excess of the 

14 amount of the substantial understatement (if 

15 any) after the application of subparagraph (A) 

16 over the aggregate amount of reportable trans17 action understatements and noneconomic sub18 stance transaction understatements. 

19 ‘‘(2) COORDINATION WITH OTHER PEN20 ALTIES.— 

21 ‘‘(A) APPLICATION OF FRAUD PENALTY.— 

22 References to an underpayment in section 6663 

23 shall be treated as including references to a re24 portable transaction understatement and a non25 economic substance transaction understatement. 
276 

•S 2558 IS 

1 ‘‘(B) NO DOUBLE PENALTY.—This section 

2 shall not apply to any portion of an understate3 ment on which a penalty is imposed under sec4 tion 6662B or 6663. 

5 ‘‘(3) SPECIAL RULE FOR AMENDED RE6 TURNS.—Except as provided in regulations, in no 

7 event shall any tax treatment included with an 

8 amendment or supplement to a return of tax be 

9 taken into account in determining the amount of any 

10 reportable transaction understatement or non11 economic substance transaction understatement if 

12 the amendment or supplement is filed after the ear13 lier of the date the taxpayer is first contacted by the 

14 Secretary regarding the examination of the return or 

15 such other date as is specified by the Secretary. 

16 ‘‘(4) NONECONOMIC SUBSTANCE TRANSACTION

17 UNDERSTATEMENT.—For purposes of this sub18 section, the term ‘noneconomic substance trans19 action understatement’ has the meaning given such 

20 term by section 6662B(c). 

21 ‘‘(5) CROSS REFERENCE.— 

‘‘For reporting of section 6662A(c) penalty to the 

Securities and Exchange Commission, see section 

6707A(e).’’. 

22 (b) DETERMINATION OF OTHER UNDERSTATE23 MENTS.—Subparagraph (A) of section 6662(d)(2) is 
277 

•S 2558 IS 

1 amended by adding at the end the following flush sen2 tence: 

3 ‘‘The excess under the preceding sentence shall 

4 be determined without regard to items to which 

5 section 6662A applies and without regard to 

6 items with respect to which a penalty is im7 posed by section 6662B.’’. 

8 (c) REASONABLE CAUSE EXCEPTION.— 

9 (1) IN GENERAL.—Section 6664 is amended by 

10 adding at the end the following new subsection: 

11 ‘‘(d) REASONABLE CAUSE EXCEPTION FOR REPORT12 ABLE TRANSACTION UNDERSTATEMENTS.— 

13 ‘‘(1) IN GENERAL.—No penalty shall be im14 posed under section 6662A with respect to any por15 tion of a reportable transaction understatement if it 

16 is shown that there was a reasonable cause for such 

17 portion and that the taxpayer acted in good faith 

18 with respect to such portion. 

19 ‘‘(2) SPECIAL RULES.—Paragraph (1) shall not 

20 apply to any reportable transaction understatement 

21 unless— 

22 ‘‘(A) the relevant facts affecting the tax 

23 treatment of the item are adequately disclosed 

24 in accordance with the regulations prescribed 

25 under section 6011, 
278 

•S 2558 IS 

1 ‘‘(B) there is or was substantial authority 

2 for such treatment, and 

3 ‘‘(C) the taxpayer reasonably believed that 

4 such treatment was more likely than not the 

5 proper treatment. 

6 A taxpayer failing to adequately disclose in accord7 ance with section 6011 shall be treated as meeting 

8 the requirements of subparagraph (A) if the penalty 

9 for such failure was rescinded under section 

10 6707A(d). 

11 ‘‘(3) RULES RELATING TO REASONABLE BE12 LIEF.—For purposes of paragraph (2)(C)— 

13 ‘‘(A) IN GENERAL.—A taxpayer shall be 

14 treated as having a reasonable belief with re15 spect to the tax treatment of an item only if 

16 such belief— 

17 ‘‘(i) is based on the facts and law that 

18 exist at the time the return of tax which 

19 includes such tax treatment is filed, and 

20 ‘‘(ii) relates solely to the taxpayer’s 

21 chances of success on the merits of such 

22 treatment and does not take into account 

23 the possibility that a return will not be au24 dited, such treatment will not be raised on 
279 

•S 2558 IS 

1 audit, or such treatment will be resolved 

2 through settlement if it is raised. 

3 ‘‘(B) CERTAIN OPINIONS MAY NOT BE RE4 LIED UPON.— 

5 ‘‘(i) IN GENERAL.—An opinion of a 

6 tax advisor may not be relied upon to es7 tablish the reasonable belief of a taxpayer 

8 if— 

9 ‘‘(I) the tax advisor is described 

10 in clause (ii), or 

11 ‘‘(II) the opinion is described in 

12 clause (iii). 

13 ‘‘(ii) DISQUALIFIED TAX ADVISORS.— 

14 A tax advisor is described in this clause if 

15 the tax advisor— 

16 ‘‘(I) is a material advisor (within 

17 the meaning of section 6111(b)(1)) 

18 who participates in the organization, 

19 management, promotion, or sale of 

20 the transaction or who is related 

21 (within the meaning of section 267(b) 

22 or 707(b)(1)) to any person who so 

23 participates, 
280 

•S 2558 IS 

1 ‘‘(II) is compensated directly or 

2 indirectly by a material advisor with 

3 respect to the transaction, 

4 ‘‘(III) has a fee arrangement 

5 with respect to the transaction which 

6 is contingent on all or part of the in7 tended tax benefits from the trans8 action being sustained, 

9 ‘‘(IV) has an arrangement with 

10 respect to the transaction which pro11 vides that contractual disputes be12 tween the taxpayer and the advisor 

13 are to be settled by arbitration or 

14 which limits damages by reference to 

15 fees paid to the advisor for such 

16 transaction, or 

17 ‘‘(V) as determined under regula18 tions prescribed by the Secretary, has 

19 a disqualifying financial interest with 

20 respect to the transaction. 

21 ‘‘(iii) DISQUALIFIED OPINIONS.—For 

22 purposes of clause (i), an opinion is dis23 qualified if the opinion— 
281 

•S 2558 IS 

1 ‘‘(I) is based on unreasonable 

2 factual or legal assumptions (includ3 ing assumptions as to future events), 

4 ‘‘(II) unreasonably relies on rep5 resentations, statements, findings, or 

6 agreements of the taxpayer or any 

7 other person, 

8 ‘‘(III) does not identify and con9 sider all relevant facts, 

10 ‘‘(IV) is not signed by all individ11 uals who are principal authors of the 

12 opinion, or 

13 ‘‘(V) fails to meet any other re14 quirement as the Secretary may pre15 scribe.’’. 

16 (2) CONFORMING AMENDMENT.—The heading 

17 for subsection (c) of section 6664 is amended by in18 serting ‘‘FOR UNDERPAYMENTS’’ after ‘‘EXCEP19 TION’’. 

20 (d) CONFORMING AMENDMENTS.— 

21 (1) Subparagraph (C) of section 461(i)(3) is 

22 amended by striking ‘‘section 6662(d)(2)(C)(iii)’’ 

23 and inserting ‘‘section 1274(b)(3)(C)’’. 

24 (2) Paragraph (3) of section 1274(b) is amend25 ed— 
282 

•S 2558 IS 

1 (A) by striking ‘‘(as defined in section 

2 6662(d)(2)(C)(iii))’’ in subparagraph (B)(i), 

3 and 

4 (B) by adding at the end the following new 

5 subparagraph: 

6 ‘‘(C) TAX SHELTER.—For purposes of sub7 paragraph (B), the term ‘tax shelter’ means— 

8 ‘‘(i) a partnership or other entity, 

9 ‘‘(ii) any investment plan or arrange10 ment, or 

11 ‘‘(iii) any other plan or arrangement, 

12 if a significant purpose of such partnership, en13 tity, plan, or arrangement is the avoidance or 

14 evasion of Federal income tax.’’. 

15 (3) Section 6662(d)(2) is amended by striking 

16 subparagraphs (C) and (D). 

17 (4) Section 6664(c)(1) is amended by striking 

18 ‘‘this part’’ and inserting ‘‘section 6662 or 6663’’. 

19 (5) Subsection (b) of section 7525 is amended 

20 by striking ‘‘section 6662(d)(2)(C)(iii)’’ and insert21 ing ‘‘section 1274(b)(3)(C)’’. 

22 (6)(A) The heading for section 6662 is amend23 ed to read as follows: 
283 

•S 2558 IS 

1 ‘‘SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY 

2 ON UNDERPAYMENTS.’’. 

3 (B) The table of sections for part II of sub4 chapter A of chapter 68 is amended by striking the 

5 item relating to section 6662 and inserting the fol6 lowing new items: 

‘‘Sec. 6662. Imposition of accuracy-related penalty on underpayments. 

‘‘Sec. 6662A. Imposition of accuracy-related penalty on understatements with respect to reportable transactions.’’. 

7 (e) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to taxable years ending after the 

9 date of the enactment of this Act. 

10 SEC. 704. PENALTY FOR UNDERSTATEMENTS ATTRIB11 UTABLE TO TRANSACTIONS LACKING ECO12 NOMIC SUBSTANCE, ETC. 

13 (a) IN GENERAL.—Subchapter A of chapter 68 is 

14 amended by inserting after section 6662A the following 

15 new section: 

16 ‘‘SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIB17 UTABLE TO TRANSACTIONS LACKING ECO18 NOMIC SUBSTANCE, ETC. 

19 ‘‘(a) IMPOSITION OF PENALTY.—If a taxpayer has an 

20 noneconomic substance transaction understatement for 

21 any taxable year, there shall be added to the tax an 

22 amount equal to 40 percent of the amount of such under23 statement. 
284 

•S 2558 IS 

1 ‘‘(b) REDUCTION OF PENALTY FOR DISCLOSED

2 TRANSACTIONS.—Subsection (a) shall be applied by sub3 stituting ‘20 percent’ for ‘40 percent’ with respect to the 

4 portion of any noneconomic substance transaction under5 statement with respect to which the relevant facts affect6 ing the tax treatment of the item are adequately disclosed 

7 in the return or a statement attached to the return. 

8 ‘‘(c) NONECONOMIC SUBSTANCE TRANSACTION UN9 DERSTATEMENT.—For purposes of this section— 

10 ‘‘(1) IN GENERAL.—The term ‘noneconomic 

11 substance transaction understatement’ means any 

12 amount which would be an understatement under 

13 section 6662A(b)(1) if section 6662A were applied 

14 by taking into account items attributable to non15 economic substance transactions rather than items 

16 to which section 6662A would apply without regard 

17 to this paragraph. 

18 ‘‘(2) NONECONOMIC SUBSTANCE TRANS19 ACTION.—The term ‘noneconomic substance trans20 action’ means any transaction if— 

21 ‘‘(A) there is a lack of economic substance 

22 (within the meaning of section 7701(n)(1)) for 

23 the transaction giving rise to the claimed ben24 efit or the transaction was not respected under 

25 section 7701(n)(2), or 
285 

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1 ‘‘(B) the transaction fails to meet the re2 quirements of any similar rule of law. 

3 ‘‘(d) RULES APPLICABLE TO COMPROMISE OF PEN4 ALTY.— 

5 ‘‘(1) IN GENERAL.—If the 1st letter of pro6 posed deficiency which allows the taxpayer an oppor7 tunity for administrative review in the Internal Rev8 enue Service Office of Appeals has been sent with 

9 respect to a penalty to which this section applies, 

10 only the Commissioner of Internal Revenue may 

11 compromise all or any portion of such penalty. 

12 ‘‘(2) APPLICABLE RULES.—The rules of para13 graphs (2), (3), (4), and (5) of section 6707A(d) 

14 shall apply for purposes of paragraph (1). 

15 ‘‘(e) COORDINATION WITH OTHER PENALTIES.—Ex16 cept as otherwise provided in this part, the penalty im17 posed by this section shall be in addition to any other pen18 alty imposed by this title. 

19 ‘‘(f) CROSS REFERENCES.— 

‘‘(1) For coordination of penalty with understatements under section 6662 and other special rules, 

see section 6662A(e). 

‘‘(2) For reporting of penalty imposed under this 

section to the Securities and Exchange Commission, 

see section 6707A(e).’’. 

20 (b) CLERICAL AMENDMENT.—The table of sections 

21 for part II of subchapter A of chapter 68 is amended by 
286 

•S 2558 IS 

1 inserting after the item relating to section 6662A the fol2 lowing new item: 

‘‘Sec. 6662B. Penalty for understatements attributable to transactions lacking economic substance, etc.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to transactions entered into after 

5 the date of the enactment of this Act. 

6 SEC. 705. MODIFICATIONS OF SUBSTANTIAL UNDERSTATE7 MENT PENALTY FOR NONREPORTABLE 

8 TRANSACTIONS. 

9 (a) SUBSTANTIAL UNDERSTATEMENT OF CORPORA10 TIONS.—Section 6662(d)(1)(B) (relating to special rule 

11 for corporations) is amended to read as follows: 

12 ‘‘(B) SPECIAL RULE FOR CORPORA13 TIONS.—In the case of a corporation other than 

14 an S corporation or a personal holding company 

15 (as defined in section 542), there is a substan16 tial understatement of income tax for any tax17 able year if the amount of the understatement 

18 for the taxable year exceeds the lesser of— 

19 ‘‘(i) 10 percent of the tax required to 

20 be shown on the return for the taxable 

21 year (or, if greater, $10,000), or 

22 ‘‘(ii) $10,000,000.’’. 
287 

•S 2558 IS 

1 (b) REDUCTION FOR UNDERSTATEMENT OF TAX2 PAYER DUE TO POSITION OF TAXPAYER OR DISCLOSED

3 ITEM.— 

4 (1) IN GENERAL.—Section 6662(d)(2)(B)(i) 

5 (relating to substantial authority) is amended to 

6 read as follows: 

7 ‘‘(i) the tax treatment of any item by 

8 the taxpayer if the taxpayer had reason9 able belief that the tax treatment was more 

10 likely than not the proper treatment, or’’. 

11 (2) CONFORMING AMENDMENT.—Section 

12 6662(d) is amended by adding at the end the fol13 lowing new paragraph: 

14 ‘‘(3) SECRETARIAL LIST.—For purposes of this 

15 subsection, section 6664(d)(2), and section 

16 6694(a)(1), the Secretary may prescribe a list of po17 sitions for which the Secretary believes there is not 

18 substantial authority or there is no reasonable belief 

19 that the tax treatment is more likely than not the 

20 proper tax treatment. Such list (and any revisions 

21 thereof) shall be published in the Federal Register 

22 or the Internal Revenue Bulletin.’’. 

23 (c) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to taxable years beginning after 

25 the date of the enactment of this Act. 
288 

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1 SEC. 706. TAX SHELTER EXCEPTION TO CONFIDENTIALITY 

2 PRIVILEGES RELATING TO TAXPAYER COM3 MUNICATIONS. 

4 (a) IN GENERAL.—Section 7525(b) (relating to sec5 tion not to apply to communications regarding corporate 

6 tax shelters) is amended to read as follows: 

7 ‘‘(b) SECTION NOT TO APPLY TO COMMUNICATIONS

8 REGARDING TAX SHELTERS.—The privilege under sub9 section (a) shall not apply to any written communication 

10 which is— 

11 ‘‘(1) between a federally authorized tax practi12 tioner and— 

13 ‘‘(A) any person, 

14 ‘‘(B) any director, officer, employee, agent, 

15 or representative of the person, or 

16 ‘‘(C) any other person holding a capital or 

17 profits interest in the person, and 

18 ‘‘(2) in connection with the promotion of the di19 rect or indirect participation of the person in any 

20 tax shelter (as defined in section 1274(b)(3)(C)).’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to communications made on or 

23 after the date of the enactment of this Act. 

24 SEC. 707. DISCLOSURE OF REPORTABLE TRANSACTIONS. 

25 (a) IN GENERAL.—Section 6111 (relating to registra26 tion of tax shelters) is amended to read as follows: 
289 

•S 2558 IS 

1 ‘‘SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS. 

2 ‘‘(a) IN GENERAL.—Each material advisor with re3 spect to any reportable transaction shall make a return 

4 (in such form as the Secretary may prescribe) setting 

5 forth— 

6 ‘‘(1) information identifying and describing the 

7 transaction, 

8 ‘‘(2) information describing any potential tax 

9 benefits expected to result from the transaction, and 

10 ‘‘(3) such other information as the Secretary 

11 may prescribe. 

12 Such return shall be filed not later than the date specified 

13 by the Secretary. 

14 ‘‘(b) DEFINITIONS.—For purposes of this section— 

15 ‘‘(1) MATERIAL ADVISOR.— 

16 ‘‘(A) IN GENERAL.—The term ‘material 

17 advisor’ means any person— 

18 ‘‘(i) who provides any material aid, 

19 assistance, or advice with respect to orga20 nizing, managing, promoting, selling, im21 plementing, insuring, or carrying out any 

22 reportable transaction, and 

23 ‘‘(ii) who directly or indirectly derives 

24 gross income in excess of the threshold 

25 amount for such aid, assistance, or advice. 
290 

•S 2558 IS 

1 ‘‘(B) THRESHOLD AMOUNT.—For purposes 

2 of subparagraph (A), the threshold amount is— 

3 ‘‘(i) $50,000 in the case of a report4 able transaction substantially all of the tax 

5 benefits from which are provided to nat6 ural persons, and 

7 ‘‘(ii) $250,000 in any other case. 

8 ‘‘(2) REPORTABLE TRANSACTION.—The term 

9 ‘reportable transaction’ has the meaning given to 

10 such term by section 6707A(c). 

11 ‘‘(c) REGULATIONS.—The Secretary may prescribe 

12 regulations which provide— 

13 ‘‘(1) that only 1 person shall be required to 

14 meet the requirements of subsection (a) in cases in 

15 which 2 or more persons would otherwise be re16 quired to meet such requirements, 

17 ‘‘(2) exemptions from the requirements of this 

18 section, and 

19 ‘‘(3) such rules as may be necessary or appro20 priate to carry out the purposes of this section.’’. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) The item relating to section 6111 in the 

23 table of sections for subchapter B of chapter 61 is 

24 amended to read as follows: 

‘‘Sec. 6111. Disclosure of reportable transactions.’’. 
291 

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1 (2)(A) So much of section 6112 as precedes 

2 subsection (c) thereof is amended to read as follows: 

3 ‘‘SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANS4 ACTIONS MUST KEEP LISTS OF ADVISEES. 

5 ‘‘(a) IN GENERAL.—Each material advisor (as de6 fined in section 6111) with respect to any reportable 

7 transaction (as defined in section 6707A(c)) shall main8 tain, in such manner as the Secretary may by regulations 

9 prescribe, a list— 

10 ‘‘(1) identifying each person with respect to 

11 whom such advisor acted as such a material advisor 

12 with respect to such transaction, and 

13 ‘‘(2) containing such other information as the 

14 Secretary may by regulations require. 

15 This section shall apply without regard to whether a mate16 rial advisor is required to file a return under section 6111 

17 with respect to such transaction.’’. 

18 (B) Section 6112 is amended by redesignating 

19 subsection (c) as subsection (b). 

20 (C) Section 6112(b), as redesignated by sub21 paragraph (B), is amended— 

22 (i) by inserting ‘‘written’’ before ‘‘request’’ 

23 in paragraph (1)(A), and 

24 (ii) by striking ‘‘shall prescribe’’ in para25 graph (2) and inserting ‘‘may prescribe’’. 
292 

•S 2558 IS 

1 (D) The item relating to section 6112 in the 

2 table of sections for subchapter B of chapter 61 is 

3 amended to read as follows: 

‘‘Sec. 6112. Material advisors of reportable transactions must 

keep lists of advisees.’’. 

4 (3)(A) The heading for section 6708 is amend5 ed to read as follows: 

6 ‘‘SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES 

7 WITH RESPECT TO REPORTABLE TRANS8 ACTIONS.’’. 

9 (B) The item relating to section 6708 in the 

10 table of sections for part I of subchapter B of chap11 ter 68 is amended to read as follows: 

‘‘Sec. 6708. Failure to maintain lists of advisees with respect to 

reportable transactions.’’. 

12 (c) REQUIRED DISCLOSURE NOT SUBJECT TO CLAIM

13 OF CONFIDENTIALITY.—Subparagraph (A) of section 

14 6112(b)(1), as redesignated by subsection (b)(2)(B), is 

15 amended by adding at the end the following new flush sen16 tence: 

17 ‘‘For purposes of this section, the identity of any 

18 person on such list shall not be privileged.’’. 

19 (d) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as provided in para21 graph (2), the amendments made by this section 

22 shall apply to transactions with respect to which ma23 terial aid, assistance, or advice referred to in section 
293 

•S 2558 IS 

1 6111(b)(1)(A)(i) of the Internal Revenue Code of 

2 1986 (as added by this section) is provided after the 

3 date of the enactment of this Act. 

4 (2) NO CLAIM OF CONFIDENTIALITY AGAINST

5 DISCLOSURE.—The amendment made by subsection 

6 (c) shall take effect as if included in the amend7 ments made by section 142 of the Deficit Reduction 

8 Act of 1984. 

9 SEC. 708. MODIFICATIONS TO PENALTY FOR FAILURE TO 

10 REGISTER TAX SHELTERS. 

11 (a) IN GENERAL.—Section 6707 (relating to failure 

12 to furnish information regarding tax shelters) is amended 

13 to read as follows: 

14 ‘‘SEC. 6707. FAILURE TO FURNISH INFORMATION REGARD15 ING REPORTABLE TRANSACTIONS. 

16 ‘‘(a) IN GENERAL.—If a person who is required to 

17 file a return under section 6111(a) with respect to any 

18 reportable transaction— 

19 ‘‘(1) fails to file such return on or before the 

20 date prescribed therefor, or 

21 ‘‘(2) files false or incomplete information with 

22 the Secretary with respect to such transaction, 

23 such person shall pay a penalty with respect to such return 

24 in the amount determined under subsection (b). 

25 ‘‘(b) AMOUNT OF PENALTY.— 
294 

•S 2558 IS 

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), the penalty imposed under subsection (a) 

3 with respect to any failure shall be $50,000. 

4 ‘‘(2) LISTED TRANSACTIONS.—The penalty im5 posed under subsection (a) with respect to any listed 

6 transaction shall be an amount equal to the greater 

7 of— 

8 ‘‘(A) $200,000, or 

9 ‘‘(B) 50 percent of the gross income de10 rived by such person with respect to aid, assist11 ance, or advice which is provided with respect 

12 to the listed transaction before the date the re13 turn including the transaction is filed under 

14 section 6111. 

15 Subparagraph (B) shall be applied by substituting 

16 ‘75 percent’ for ‘50 percent’ in the case of an inten17 tional failure or act described in subsection (a). 

18 ‘‘(c) CERTAIN RULES TO APPLY.—The provisions of 

19 section 6707A(d) shall apply to any penalty imposed under 

20 this section. 

21 ‘‘(d) REPORTABLE AND LISTED TRANSACTIONS.— 

22 The terms ‘reportable transaction’ and ‘listed transaction’ 

23 have the respective meanings given to such terms by sec24 tion 6707A(c).’’. 
295 

•S 2558 IS 

1 (b) CLERICAL AMENDMENT.—The item relating to 

2 section 6707 in the table of sections for part I of sub3 chapter B of chapter 68 is amended by striking ‘‘tax shel4 ters’’ and inserting ‘‘reportable transactions’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to returns the due date for which 

7 is after the date of the enactment of this Act. 

8 SEC. 709. MODIFICATION OF PENALTY FOR FAILURE TO 

9 MAINTAIN LISTS OF INVESTORS. 

10 (a) IN GENERAL.—Subsection (a) of section 6708 is 

11 amended to read as follows: 

12 ‘‘(a) IMPOSITION OF PENALTY.— 

13 ‘‘(1) IN GENERAL.—If any person who is re14 quired to maintain a list under section 6112(a) fails 

15 to make such list available upon written request to 

16 the Secretary in accordance with section 

17 6112(b)(1)(A) within 20 business days after the 

18 date of the Secretary’s request, such person shall 

19 pay a penalty of $10,000 for each day of such fail20 ure after such 20th day. 

21 ‘‘(2) REASONABLE CAUSE EXCEPTION.—No 

22 penalty shall be imposed by paragraph (1) with re23 spect to the failure on any day if such failure is due 

24 to reasonable cause.’’. 
296 

•S 2558 IS 

1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to requests made after the date 

3 of the enactment of this Act. 

4 SEC. 710. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN 

5 CONDUCT RELATED TO TAX SHELTERS AND 

6 REPORTABLE TRANSACTIONS. 

7 (a) IN GENERAL.—Section 7408 (relating to action 

8 to enjoin promoters of abusive tax shelters, etc.) is amend9 ed by redesignating subsection (c) as subsection (d) and 

10 by striking subsections (a) and (b) and inserting the fol11 lowing new subsections: 

12 ‘‘(a) AUTHORITY TO SEEK INJUNCTION.—A civil ac13 tion in the name of the United States to enjoin any person 

14 from further engaging in specified conduct may be com15 menced at the request of the Secretary. Any action under 

16 this section shall be brought in the district court of the 

17 United States for the district in which such person resides, 

18 has his principal place of business, or has engaged in spec19 ified conduct. The court may exercise its jurisdiction over 

20 such action (as provided in section 7402(a)) separate and 

21 apart from any other action brought by the United States 

22 against such person. 

23 ‘‘(b) ADJUDICATION AND DECREE.—In any action 

24 under subsection (a), if the court finds— 
297 

•S 2558 IS 

1 ‘‘(1) that the person has engaged in any speci2 fied conduct, and 

3 ‘‘(2) that injunctive relief is appropriate to pre4 vent recurrence of such conduct, 

5 the court may enjoin such person from engaging in such 

6 conduct or in any other activity subject to penalty under 

7 this title. 

8 ‘‘(c) SPECIFIED CONDUCT.—For purposes of this 

9 section, the term ‘specified conduct’ means any action, or 

10 failure to take action, which is— 

11 ‘‘(1) subject to penalty under section 6700, 

12 6701, 6707, or 6708, or 

13 ‘‘(2) in violation of any requirement under reg14 ulations issued under section 320 of title 31, United 

15 States Code.’’. 

16 (b) CONFORMING AMENDMENTS.— 

17 (1) The heading for section 7408 is amended to 

18 read as follows: 

19 ‘‘SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RE20 LATED TO TAX SHELTERS AND REPORTABLE 

21 TRANSACTIONS.’’. 

22 (2) The table of sections for subchapter A of 

23 chapter 67 is amended by striking the item relating 

24 to section 7408 and inserting the following new 

25 item: 
298 

•S 2558 IS 

‘‘Sec. 7408. Actions to enjoin specified conduct related to tax shelters and 

reportable transactions.’’. 

1 (c) EFFECTIVE DATE.—The amendment made by 

2 this section shall take effect on the day after the date of 

3 the enactment of this Act. 

4 SEC. 711. PENALTY FOR PROMOTING ABUSIVE TAX SHEL5 TERS. 

6 (a) PENALTY FOR PROMOTING ABUSIVE TAX SHEL7 TERS.—Section 6700 (relating to promoting abusive tax 

8 shelters, etc.) is amended— 

9 (1) by redesignating subsections (b) and (c) as 

10 subsections (d) and (e), respectively, 

11 (2) by striking ‘‘a penalty’’ and all that follows 

12 through the period in the first sentence of subsection 

13 (a) and inserting ‘‘a penalty determined under sub14 section (b)’’, and 

15 (3) by inserting after subsection (a) the fol16 lowing new subsections: 

17 ‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN18 ALTY; LIABILITY FOR PENALTY.— 

19 ‘‘(1) AMOUNT OF PENALTY.—The amount of 

20 the penalty imposed by subsection (a) shall not ex21 ceed 100 percent of the gross income derived (or to 

22 be derived) from such activity by the person or per23 sons subject to such penalty. 
299 

•S 2558 IS 

1 ‘‘(2) CALCULATION OF PENALTY.—The penalty 

2 amount determined under paragraph (1) shall be 

3 calculated with respect to each instance of an activ4 ity described in subsection (a), each instance in 

5 which income was derived by the person or persons 

6 subject to such penalty, and each person who par7 ticipated in such an activity. 

8 ‘‘(3) LIABILITY FOR PENALTY.—If more than 1 

9 person is liable under subsection (a) with respect to 

10 such activity, all such persons shall be jointly and 

11 severally liable for the penalty under such sub12 section. 

13 ‘‘(c) PENALTY NOT DEDUCTIBLE.—The payment of 

14 any penalty imposed under this section or the payment 

15 of any amount to settle or avoid the imposition of such 

16 penalty shall not be deductible by the person who is sub17 ject to such penalty or who makes such payment.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to activities after the date of the 

20 enactment of this Act. 
300 

•S 2558 IS 

1 SEC. 712. STATUTE OF LIMITATIONS FOR TAXABLE YEARS 

2 FOR WHICH REQUIRED LISTED TRANS3 ACTIONS NOT REPORTED. 

4 (a) IN GENERAL.—Section 6501(c) (relating to ex5 ceptions) is amended by adding at the end the following 

6 new paragraph: 

7 ‘‘(10) LISTED TRANSACTIONS.—If a taxpayer 

8 fails to include on any return or statement for any 

9 taxable year any information with respect to a listed 

10 transaction (as defined in section 6707A(c)(2)) 

11 which is required under section 6011 to be included 

12 with such return or statement, the time for assess13 ment of any tax imposed by this title with respect 

14 to such transaction shall not expire before the date 

15 which is 1 year after the earlier of— 

16 ‘‘(A) the date on which the Secretary is 

17 furnished the information so required; or 

18 ‘‘(B) the date that a material advisor (as 

19 defined in section 6111) meets the requirements 

20 of section 6112 with respect to a request by the 

21 Secretary under section 6112(b) relating to 

22 such transaction with respect to such tax23 payer.’’. 

24 (b) EFFECTIVE DATE.—The amendment made by 

25 this section shall apply to taxable years with respect to 
301 

•S 2558 IS 

1 which the period for assessing a deficiency did not expire 

2 before the date of the enactment of this Act. 

3 SEC. 713. DENIAL OF DEDUCTION FOR INTEREST ON UN4 DERPAYMENTS ATTRIBUTABLE TO NONDIS5 CLOSED REPORTABLE AND NONECONOMIC 

6 SUBSTANCE TRANSACTIONS. 

7 (a) IN GENERAL.—Section 163 (relating to deduction 

8 for interest) is amended by redesignating subsection (m) 

9 as subsection (n) and by inserting after subsection (l) the 

10 following new subsection: 

11 ‘‘(m) INTEREST ON UNPAID TAXES ATTRIBUTABLE

12 TO NONDISCLOSED REPORTABLE TRANSACTIONS AND

13 NONECONOMIC SUBSTANCE TRANSACTIONS.—No deduc14 tion shall be allowed under this chapter for any interest 

15 paid or accrued under section 6601 on any underpayment 

16 of tax which is attributable to— 

17 ‘‘(1) the portion of any reportable transaction 

18 understatement (as defined in section 6662A(b)) 

19 with respect to which the requirement of section 

20 6664(d)(2)(A) is not met, or 

21 ‘‘(2) any noneconomic substance transaction 

22 understatement (as defined in section 6662B(c)).’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to transactions in taxable years 

25 beginning after the date of the enactment of this Act. 
302 

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1 SEC. 714. PENALTY FOR AIDING AND ABETTING THE UN2 DERSTATEMENT OF TAX LIABILITY. 

3 (a) IN GENERAL.—Section 6701(a) (relating to impo4 sition of penalty) is amended— 

5 (1) by inserting ‘‘the tax liability or’’ after ‘‘re6 spect to,’’ in paragraph (1), 

7 (2) by inserting ‘‘aid, assistance, procurement, 

8 or advice with respect to such’’ before ‘‘portion’’ 

9 both places it appears in paragraphs (2) and (3), 

10 and 

11 (3) by inserting ‘‘instance of aid, assistance, 

12 procurement, or advice or each such’’ before ‘‘docu13 ment’’ in the matter following paragraph (3). 

14 (b) AMOUNT OF PENALTY.—Subsection (b) of section 

15 6701 (relating to penalties for aiding and abetting under16 statement of tax liability) is amended to read as follows: 

17 ‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN18 ALTY; LIABILITY FOR PENALTY.— 

19 ‘‘(1) AMOUNT OF PENALTY.—The amount of 

20 the penalty imposed by subsection (a) shall not ex21 ceed 100 percent of the gross income derived (or to 

22 be derived) from such aid, assistance, procurement, 

23 or advice provided by the person or persons subject 

24 to such penalty. 

25 ‘‘(2) CALCULATION OF PENALTY.—The penalty 

26 amount determined under paragraph (1) shall be 
303 

•S 2558 IS 

1 calculated with respect to each instance of aid, as2 sistance, procurement, or advice described in sub3 section (a), each instance in which income was de4 rived by the person or persons subject to such pen5 alty, and each person who made such an understate6 ment of the liability for tax. 

7 ‘‘(3) LIABILITY FOR PENALTY.—If more than 1 

8 person is liable under subsection (a) with respect to 

9 providing such aid, assistance, procurement, or ad10 vice, all such persons shall be jointly and severally 

11 liable for the penalty under such subsection.’’. 

12 (c) PENALTY NOT DEDUCTIBLE.—Section 6701 is 

13 amended by adding at the end the following new sub14 section: 

15 ‘‘(g) PENALTY NOT DEDUCTIBLE.—The payment of 

16 any penalty imposed under this section or the payment 

17 of any amount to settle or avoid the imposition of such 

18 penalty shall not be deductible by the person who is sub19 ject to such penalty or who makes such payment.’’. 

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

21 this section shall apply to activities after the date of the 

22 enactment of this Act. 

Æ