I 

117TH CONGRESS 

1ST SESSION H. R. 2786 

To amend the Internal Revenue Code of 1986 to provide tax rate parity 

among all tobacco products, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 22, 2021 

Mr. KRISHNAMOORTHI (for himself and Ms. DELAURO) introduced the 

following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

tax rate parity among all tobacco products, and for other 

purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Tobacco Tax Equity 

5 Act of 2021’’. 


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1 SEC. 2. INCREASING EXCISE TAXES ON CIGARETTES AND 

2 ESTABLISHING EXCISE TAX EQUITY AMONG 

3 ALL TOBACCO PRODUCT TAX RATES. 

4 (a) TAX PARITY FOR ROLL-YOUR-OWN TOBACCO.— 

5 Section 5701(g) of the Internal Revenue Code of 1986 is 

6 amended by striking ‘‘$24.78’’ and inserting ‘‘$49.56’’. 

7 (b) TAX PARITY FOR PIPE TOBACCO.—Section 

8 5701(f) of the Internal Revenue Code of 1986 is amended 

9 by striking ‘‘$2.8311 cents’’ and inserting ‘‘$49.56’’. 

10 (c) TAX PARITY FOR SMOKELESS TOBACCO.— 

11 (1) Section 5701(e) of the Internal Revenue 

12 Code of 1986 is amended— 

13 (A) in paragraph (1), by striking ‘‘$1.51’’ 

14 and inserting ‘‘$26.84’’; 

15 (B) in paragraph (2), by striking ‘‘50.33 

16 cents’’ and inserting ‘‘$10.74’’; and 

17 (C) by adding at the end the following: 

18 ‘‘(3) SMOKELESS TOBACCO SOLD IN DISCRETE

19 SINGLE-USE UNITS.—On discrete single-use units, 

20 $100.66 per thousand.’’. 

21 (2) Section 5702(m) of such Code is amend22 ed— 

23 (A) in paragraph (1), by striking ‘‘or chew24 ing tobacco’’ and inserting ‘‘, chewing tobacco, 

25 or discrete single-use unit’’; 


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1 (B) in paragraphs (2) and (3), by inserting 

2 ‘‘that is not a discrete single-use unit’’ before 

3 the period in each such paragraph; and 

4 (C) by adding at the end the following: 

5 ‘‘(4) DISCRETE SINGLE-USE UNIT.—The term 

6 ‘discrete single-use unit’ means any product con7 taining, made from, or derived from tobacco or nico8 tine that— 

9 ‘‘(A) is not intended to be smoked; and 

10 ‘‘(B) is in the form of a lozenge, tablet, 

11 pill, pouch, dissolvable strip, or other discrete 

12 single-use or single-dose unit.’’. 

13 (d) TAX PARITY FOR SMALL CIGARS.—Paragraph 

14 (1) of section 5701(a) of the Internal Revenue Code of 

15 1986 is amended by striking ‘‘$50.33’’ and inserting 

16 ‘‘$100.66’’. 

17 (e) TAX PARITY FOR LARGE CIGARS.— 

18 (1) IN GENERAL.—Paragraph (2) of section 

19 5701(a) of the Internal Revenue Code of 1986 is 

20 amended by striking ‘‘52.75 percent’’ and all that 

21 follows through the period and inserting the fol22 lowing: ‘‘$49.56 per pound and a proportionate tax 

23 at the like rate on all fractional parts of a pound but 

24 not less than 10.066 cents per cigar.’’. 


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1 (2) GUIDANCE.—The Secretary of the Treas2 ury, or the Secretary’s delegate, may issue guidance 

3 regarding the appropriate method for determining 

4 the weight of large cigars for purposes of calculating 

5 the applicable tax under section 5701(a)(2) of the 

6 Internal Revenue Code of 1986. 

7 (f) TAX PARITY FOR ROLL-YOUR-OWN TOBACCO

8 AND CERTAIN PROCESSED TOBACCO.—Subsection (o) of 

9 section 5702 of the Internal Revenue Code of 1986 is 

10 amended by inserting ‘‘, and includes processed tobacco 

11 that is removed for delivery or delivered to a person other 

12 than a person with a permit provided under section 5713, 

13 but does not include removals of processed tobacco for ex14 portation’’ after ‘‘wrappers thereof’’. 

15 (g) CLARIFYING TAX RATE FOR OTHER TOBACCO

16 PRODUCTS.— 

17 (1) IN GENERAL.—Section 5701 of the Internal 

18 Revenue Code of 1986 is amended by adding at the 

19 end the following new subsection: 

20 ‘‘(i) OTHER TOBACCO PRODUCTS.—Any product not 

21 otherwise described under this section that has been deter22 mined to be a tobacco product by the Food and Drug Ad23 ministration through its authorities under the Family 

24 Smoking Prevention and Tobacco Control Act shall be 

25 taxed at a level of tax equivalent to the tax rate for cigaVerDate Sep 11 2014 01:24 Jun 08, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2786.IH H2786

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1 rettes on an estimated per use basis as determined by the 

2 Secretary.’’. 

3 (2) ESTABLISHING PER USE BASIS.—For pur4 poses of section 5701(i) of the Internal Revenue 

5 Code of 1986, not later than 12 months after the 

6 later of the date of the enactment of this Act or the 

7 date that a product has been determined to be a to8 bacco product by the Food and Drug Administra9 tion, the Secretary of the Treasury (or the Secretary 

10 of the Treasury’s delegate) shall issue final regula11 tions establishing the level of tax for such product 

12 that is equivalent to the tax rate for cigarettes on 

13 an estimated per use basis. 

14 (h) CLARIFYING DEFINITION OF TOBACCO PROD15 UCTS.— 

16 (1) IN GENERAL.—Subsection (c) of section 

17 5702 of the Internal Revenue Code of 1986 is 

18 amended to read as follows: 

19 ‘‘(c) TOBACCO PRODUCTS.—The term ‘tobacco prod20 ucts’ means— 

21 ‘‘(1) cigars, cigarettes, smokeless tobacco, pipe 

22 tobacco, and roll-your-own tobacco, and 

23 ‘‘(2) any other product subject to tax pursuant 

24 to section 5701(i).’’. 


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1 (2) CONFORMING AMENDMENTS.—Subsection 

2 (d) of section 5702 of such Code is amended by 

3 striking ‘‘cigars, cigarettes, smokeless tobacco, pipe 

4 tobacco, or roll-your-own tobacco’’ each place it ap5 pears and inserting ‘‘tobacco products’’. 

6 (i) INCREASING TAX ON CIGARETTES.— 

7 (1) SMALL CIGARETTES.—Section 5701(b)(1) 

8 of such Code is amended by striking ‘‘$50.33’’ and 

9 inserting ‘‘$100.66’’. 

10 (2) LARGE CIGARETTES.—Section 5701(b)(2) 

11 of such Code is amended by striking ‘‘$105.69’’ and 

12 inserting ‘‘$211.38’’. 

13 (j) TAX RATES ADJUSTED FOR INFLATION.—Section 

14 5701 of such Code, as amended by subsection (g), is 

15 amended by adding at the end the following new sub16 section: 

17 ‘‘(j) INFLATION ADJUSTMENT.— 

18 ‘‘(1) IN GENERAL.—In the case of any calendar 

19 year beginning after 2021, the dollar amounts pro20 vided under this chapter shall each be increased by 

21 an amount equal to— 

22 ‘‘(A) such dollar amount, multiplied by 

23 ‘‘(B) the cost-of-living adjustment deter24 mined under section 1(f)(3) for the calendar 

25 year, determined by substituting ‘calendar year 


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1 2020’ for ‘calendar year 2016’ in subparagraph 

2 (A)(ii) thereof. 

3 ‘‘(2) ROUNDING.—If any amount as adjusted 

4 under paragraph (1) is not a multiple of $0.01, such 

5 amount shall be rounded to the next highest multiple 

6 of $0.01.’’. 

7 (k) FLOOR STOCKS TAXES.— 

8 (1) IMPOSITION OF TAX.—On tobacco products 

9 manufactured in or imported into the United States 

10 which are removed before any tax increase date and 

11 held on such date for sale by any person, there is 

12 hereby imposed a tax in an amount equal to the ex13 cess of— 

14 (A) the tax which would be imposed under 

15 section 5701 of the Internal Revenue Code of 

16 1986 on the article if the article had been re17 moved on such date, over 

18 (B) the prior tax (if any) imposed under 

19 section 5701 of such Code on such article. 

20 (2) CREDIT AGAINST TAX.—Each person shall 

21 be allowed as a credit against the taxes imposed by 

22 paragraph (1) an amount equal to $500. Such credit 

23 shall not exceed the amount of taxes imposed by 

24 paragraph (1) on such date for which such person 

25 is liable. 


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1 (3) LIABILITY FOR TAX AND METHOD OF PAY2 MENT.— 

3 (A) LIABILITY FOR TAX.—A person hold4 ing tobacco products on any tax increase date 

5 to which any tax imposed by paragraph (1) ap6 plies shall be liable for such tax. 

7 (B) METHOD OF PAYMENT.—The tax im8 posed by paragraph (1) shall be paid in such 

9 manner as the Secretary shall prescribe by reg10 ulations. 

11 (C) TIME FOR PAYMENT.—The tax im12 posed by paragraph (1) shall be paid on or be13 fore the date that is 120 days after the effective 

14 date of the tax rate increase. 

15 (4) ARTICLES IN FOREIGN TRADE ZONES.— 

16 Notwithstanding the Act of June 18, 1934 (com17 monly known as the Foreign Trade Zone Act, 48 

18 Stat. 998, 19 U.S.C. 81a et seq.), or any other pro19 vision of law, any article which is located in a for20 eign trade zone on any tax increase date shall be 

21 subject to the tax imposed by paragraph (1) if— 

22 (A) internal revenue taxes have been deter23 mined, or customs duties liquidated, with re24 spect to such article before such date pursuant 


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1 to a request made under the first proviso of 

2 section 3(a) of such Act, or 

3 (B) such article is held on such date under 

4 the supervision of an officer of the United 

5 States Customs and Border Protection of the 

6 Department of Homeland Security pursuant to 

7 the second proviso of such section 3(a). 

8 (5) DEFINITIONS.—For purposes of this sub9 section— 

10 (A) IN GENERAL.—Any term used in this 

11 subsection which is also used in section 5702 of 

12 such Code shall have the same meaning as such 

13 term has in such section. 

14 (B) TAX INCREASE DATE.—The term ‘‘tax 

15 increase date’’ means the effective date of any 

16 increase in any tobacco product excise tax rate 

17 pursuant to the amendments made by this sec18 tion (other than subsection (j) thereof). 

19 (C) SECRETARY.—The term ‘‘Secretary’’ 

20 means the Secretary of the Treasury or the 

21 Secretary’s delegate. 

22 (6) CONTROLLED GROUPS.—Rules similar to 

23 the rules of section 5061(e)(3) of such Code shall 

24 apply for purposes of this subsection. 


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1 (7) OTHER LAWS APPLICABLE.—All provisions 

2 of law, including penalties, applicable with respect to 

3 the taxes imposed by section 5701 of such Code 

4 shall, insofar as applicable and not inconsistent with 

5 the provisions of this subsection, apply to the floor 

6 stocks taxes imposed by paragraph (1), to the same 

7 extent as if such taxes were imposed by such section 

8 5701. The Secretary may treat any person who bore 

9 the ultimate burden of the tax imposed by para10 graph (1) as the person to whom a credit or refund 

11 under such provisions may be allowed or made. 

12 (l) EFFECTIVE DATES.— 

13 (1) IN GENERAL.—Except as provided in para14 graphs (2) through (4), the amendments made by 

15 this section shall apply to articles removed (as de16 fined in section 5702(j) of the Internal Revenue 

17 Code of 1986) after the last day of the month which 

18 includes the date of the enactment of this Act. 

19 (2) DISCRETE SINGLE-USE UNITS AND PROC20 ESSED TOBACCO.—The amendments made by sub21 sections (c)(1)(C), (c)(2), and (f) shall apply to arti22 cles removed (as defined in section 5702(j) of the 

23 Internal Revenue Code of 1986) after the date that 

24 is 6 months after the date of the enactment of this 

25 Act. 


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1 (3) LARGE CIGARS.—The amendments made by 

2 subsection (e) shall apply to articles removed after 

3 December 31, 2021. 

4 (4) OTHER TOBACCO PRODUCTS.—The amend5 ments made by subsection (g)(1) shall apply to prod6 ucts removed after the last day of the month which 

7 includes the date that the Secretary of the Treasury 

8 (or the Secretary of the Treasury’s delegate) issues 

9 final regulations establishing the level of tax for 

10 such product. 

Æ 


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