Tobacco Tax and Enforcement Reform Act

To amend the Internal Revenue Code of 1986 to reform and enforce taxation of tobacco products. 1. Short title and table of contents (a) Short title This Act may be cited as the Tobacco Tax and Enforcement Reform Act (b) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title and table of contents. TITLE I—Tobacco Tax Increase and Parity Sec. 101. Tobacco tax increase and parity. TITLE II—Amendments to Internal Revenue Code of 1986 Sec. 201. Amendment of 1986 code. Sec. 202. Machines used to manufacture or package tobacco products or processed tobacco. Sec. 203. Improved marking and labeling. Sec. 204. Wholesalers and manufacturers, importers, and sellers of tobacco production machines required to have permit. Sec. 205. Conditions of permit. Sec. 206. Records to be maintained. Sec. 207. Reports. Sec. 208. Fraudulent offenses. Sec. 209. Penalties. Sec. 210. Coordination with other government officials. Sec. 211. Definitions. Sec. 212. Conforming amendments. Sec. 213. Effective date. TITLE III—Import Fraud Sec. 301. Maximum penalty for importation of tobacco products and cigarette papers and tubes by fraudulent means. TITLE IV—Exclusions regarding Indian Tribes and Tribal matters Sec. 401. Exclusions regarding Indian Tribes and Tribal matters. I Tobacco Tax Increase and Parity 101. Tobacco tax increase and parity (a) Increase in excise tax on small cigars and cigarettes (1) Small cigars Section 5701(a)(1) $50.33 $97.65 (2) Cigarettes Section 5701(b) of such Code is amended— (A) by striking $50.33 $97.65 (B) by striking $105.69 $205.06 (b) Tax parity for pipe tobacco and roll-Your-Own tobacco (1) Pipe tobacco Section 5701(f) $2.8311 cents $48.08 (2) Roll-your-own tobacco Section 5701(g) of such Code is amended by striking $24.78 $48.08 (c) Tax parity for large cigars (1) In general Paragraph (2) of section 5701(a) 52.75 percent $24.78 per pound (and a proportionate tax at the like rate on all fractional parts of a pound) but not less than 5.033 cents per cigar. (2) Guidance The Secretary of the Treasury or the Secretary of the Treasury's delegate may issue guidance regarding the appropriate method for determining the weight of large cigars for purposes of calculating the applicable tax under section 5701(a)(2) (d) Tax Parity for Roll-Your-Own Tobacco and Certain Processed Tobacco Subsection (o) of section 5702 (o) Roll-Your-Own Tobacco The term roll-your-own tobacco (1) any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars, or for use as wrappers thereof, or (2) any processed tobacco which is— (A) not removed for exportation, and (B) removed or transferred to a person who has not been issued a permit pursuant to section 5713. . (e) Tax parity for smokeless tobacco (1) In general Section 5701(e) (A) in paragraph (1), by striking $1.51 $26.04 (B) in paragraph (2), by striking 50.33 cents $10.42 (C) by adding at the end the following: (3) Smokeless tobacco sold in discrete single-use units On discrete single-use units, $97.65 per each 1,000 single-use units. . (2) Discrete single-use unit Section 5702(m) of such Code is amended— (A) in paragraph (1), by striking or chewing tobacco chewing tobacco, discrete single-use unit (B) in paragraphs (2) and (3), by inserting that is not a discrete single-use unit (C) by adding at the end the following: (4) Discrete single-use unit The term discrete single-use unit (A) is not intended to be smoked, and (B) is in the form of a lozenge, tablet, pill, pouch, dissolvable strip, or other discrete single-use or single-dose unit. . (f) Other tobacco products (1) In general Section 5701 (i) Other tobacco products Any product not otherwise described under this section that has been determined to be a tobacco product by the Food and Drug Administration through its authorities under the Family Smoking Prevention and Tobacco Control Act shall be taxed at a level of tax equivalent to the tax rate for cigarettes on an estimated per use basis as determined by the Secretary. . (2) Establishing per use basis For purposes of section 5701(i) (g) Clarifying definition of tobacco products (1) In general Subsection (c) of section 5702 (c) Tobacco products The term tobacco products (1) cigars, cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco, and (2) any other product subject to tax pursuant to section 5701(i). . (2) Conforming amendments Subsection (d) of section 5702 of such Code is amended by striking cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own tobacco tobacco products (h) Inflation adjustment Section 5701 (j) Inflation adjustment (1) In general In the case of any calendar year after 2015, each amount set forth in this section shall be increased by an amount equal to— (A) such amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting calendar year 2014 calendar year 1992 (2) Rounding If any amount as adjusted under paragraph (1) is not a multiple of $0.01, such amount shall be rounded to the next highest multiple of $0.01. . (i) Floor Stocks Taxes (1) Imposition of tax On tobacco products manufactured in or imported into the United States which are removed before any tax increase date and held on such date for sale by any person, there is hereby imposed a tax in an amount equal to the excess of— (A) the tax which would be imposed under section 5701 (B) the prior tax (if any) imposed under section 5701 of such Code on such article. (2) Credit against tax Each person shall be allowed as a credit against the taxes imposed by paragraph (1) an amount equal to $500. Such credit shall not exceed the amount of taxes imposed by paragraph (1) on such date for which such person is liable. (3) Liability for tax and method of payment (A) Liability for tax A person holding tobacco products on any tax increase date to which any tax imposed by paragraph (1) applies shall be liable for such tax. (B) Method of payment The tax imposed by paragraph (1) shall be paid in such manner as the Secretary shall prescribe by regulations. (C) Time for payment The tax imposed by paragraph (1) shall be paid on or before the date that is 120 days after the effective date of the tax rate increase. (4) Articles in foreign trade zones Notwithstanding the Act of June 18, 1934 (commonly known as the Foreign Trade Zone Act, 48 Stat. 998, 19 U.S.C. 81a et seq. (A) internal revenue taxes have been determined, or customs duties liquidated, with respect to such article before such date pursuant to a request made under the 1st proviso of section 3(a) of such Act, or (B) such article is held on such date under the supervision of an officer of the United States Customs and Border Protection of the Department of Homeland Security pursuant to the 2d proviso of such section 3(a). (5) Definitions For purposes of this subsection— (A) In general Any term used in this subsection which is also used in section 5702 of such Code shall have the same meaning as such term has in such section. (B) Tax increase date The term tax increase date (C) Secretary The term Secretary (6) Controlled groups Rules similar to the rules of section 5061(e)(3) of such Code shall apply for purposes of this subsection. (7) Other laws applicable All provisions of law, including penalties, applicable with respect to the taxes imposed by section 5701 of such Code shall, insofar as applicable and not inconsistent with the provisions of this subsection, apply to the floor stocks taxes imposed by paragraph (1), to the same extent as if such taxes were imposed by such section 5701. The Secretary may treat any person who bore the ultimate burden of the tax imposed by paragraph (1) as the person to whom a credit or refund under such provisions may be allowed or made. (j) Effective Date (1) In general Except as provided in paragraphs (2) through (4), the amendments made by this section shall apply to articles removed (as defined in section 5702(j) (2) Discrete single-use units and processed tobacco The amendments made by subsections (d), (e)(1)(C), and (e)(2) shall apply to articles removed (as defined in section 5702(j) (3) Large cigars The amendments made by subsection (c) shall apply to articles removed after December 31, 2015. (4) Other tobacco products The amendments made by subsection (f)(1) shall apply to products removed after the last day of the month which includes the date that the Secretary of the Treasury (or the Secretary of the Treasury's delegate) issues final regulations establishing the level of tax for such product. II Amendments to Internal Revenue Code of 1986 201. Amendment of 1986 code Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. 202. Machines used to manufacture or package tobacco products or processed tobacco (a) In general Section 5762 (1) by redesignating subsection (b) as subsection (c), and (2) by inserting after subsection (a) the following new subsection: (b) Machines used To manufacture or package tobacco products or processed tobacco (1) Transfer of manufacturing machines to licensed persons Any tobacco production machine may be sold, leased, imported, exported, delivered, or otherwise made available only to persons— (A) lawfully engaged in— (i) the sale, lease, importation, exportation, or delivery of such machines, (ii) the manufacture or packaging of tobacco products or processed tobacco, or (iii) the application of unique identification markings onto tobacco product or processed tobacco packages pursuant to section 5723, and (B) that have all Federal, State, local, and Indian tribal government permits, registrations, and licenses required to engage in such activities. (2) Transfer of machines to persons engaged in illegal manufacture of contraband No tobacco production machine shall knowingly be manufactured for or be (directly or indirectly) sold, leased, imported, exported, delivered, or otherwise made available to any person engaged in the illegal manufacture, distribution, or sale of counterfeit or contraband tobacco products or processed tobacco, unique identification markings, or other tax-payment indicia. (3) Registration of machines (A) In general Every person having possession or custody of, or having control over, the installation of any tobacco production machine shall register such machine with the Secretary immediately on its being installed, by subscribing and filing with the Secretary a statement, in writing, setting forth the particular place where such machine is installed, the kind of machine and its capacity, the owner thereof, the owner’s place of residence, and the purpose for which the machine has been or is intended to be used. (B) Exception Under regulations prescribed by the Secretary, this paragraph shall not apply to any tobacco production machine not used or intended to be used— (i) for the manufacture or production of cigarette or cigars, or to manufacture any other tobacco product or processed tobacco, (ii) to package any tobacco product or processed tobacco, or (iii) to apply unique identification markings to any package. (4) Records (A) In general Any person selling, leasing, importing, exporting, delivering, or otherwise making available a tobacco production machine shall maintain and keep records, as the Secretary prescribes by regulation, relating to any transfers of the machine, including the name, address, other contact information, and any permit, registration, or license number of the person receiving delivery of the machine, or to whom the machine is otherwise transferred, as the case may be. (B) 5-Year holding period for records Any record required to be maintained and kept under subparagraph (A) shall be kept for the 5-year period beginning on the first date such record is required to be so maintained and kept. (C) Availability of records Such records shall be available for inspection by any internal revenue officer during business hours. (D) Safe harbor An ordinary commercial record or invoice shall satisfy the requirements of this paragraph if such record or invoice contains all of the information required under subparagraph (A). (5) Violations (A) In general Whoever knowingly violates paragraph (1), (2), or (3) shall, for each offense, be fined not more than $10,000 or an amount equal to 3 times the fair market value of the tobacco product machine involved (whichever is greater), or imprisoned not more than five years, or both. (B) Recordkeeping Whoever knowingly violates paragraph (4) shall, for each offense, be fined not more than $10,000. . (b) Tobacco production machine Section 5702 (q) Tobacco production machine The term tobacco production machine . (c) Conforming amendment Subsection (c) of section 5762 (as so redesignated) is amended by striking subsection (a) subsections (a) and (b) (d) Effective date The amendment made by this section shall apply to transfers more than 6 months after the date of the enactment of this Act. 203. Improved marking and labeling (a) In general Subsection (b) of section 5723 (b) Marks, labels, and notices (1) In general Subject to paragraphs (2), (3), and (4), every package of tobacco products, processed tobacco, or cigarette papers or tubes shall, before removal, bear the marks, labels, and notices that the Secretary by regulation prescribes. (2) Marking requirements for domestic market (A) In general Each person who is a manufacturer or importer of tobacco products or processed tobacco shall (in accordance with regulations prescribed by the Secretary) ensure that, before any product intended for sale or distribution within the United States is removed, a unique identification marking is affixed to or forms part of each package of tobacco product or processed tobacco manufactured or imported by such person for sale or distribution. (B) Markings on individual packages Any markings required to be placed on a tobacco product or processed tobacco package by this subsection shall be placed on the innermost sealed container visible from the outside of the individual package. For any tobacco product or processed tobacco package that contains multiple smaller packages of tobacco products or processed tobacco, any markings required to be so placed on tobacco product or processed tobacco packages shall be placed on all the individual tobacco product or processed tobacco packages. (C) Markings on aggregate packing modes To facilitate efficient tracking and tracing of tobacco products or processed tobacco through the distribution system, all manufacturers or importers of tobacco products or processed tobacco shall, in addition to such unique identification marking, also, in accordance with regulations prescribed by the Secretary, ensure that unique identification markings are affixed to or form part of aggregate packing modes (such as cartons, cases, and master cases for cigarettes). The Secretary shall determine the size, location, and methods for such markings. The Secretary shall establish regulations requiring that all persons within the distribution chain, up to but not including the ultimate retailer, utilize the unique identification markings on aggregate packing modes to facilitate the tracking and tracing of tobacco products or processed tobacco through the distribution system. (3) Marking requirements for exports A unique identification marking shall be affixed to or form part of each package of tobacco product or processed tobacco that is exported, or sold for export, that distinguishes it from those products or processed tobacco intended for sale or distribution within the United States. The Secretary shall by regulation prescribe the size, location, and other characteristics of such marking, and it may contain a serial number that is assigned to the country of export, except that no such serial number shall be required on tobacco products or processed tobacco sold at retail to consumers by duty free stores for consumption beyond the jurisdiction of the internal revenue laws of the United States. Such tobacco products or processed tobacco shall instead bear markings indicating the tobacco product or processed tobacco is only for duty-free sale to consumers, as prescribed through regulation by the Secretary, before the product or processed tobacco is removed. (4) Authorization of federal unique identification marking Not later than 3 years after the date of the enactment of the Tobacco Tax and Enforcement Reform Act . (b) Unique identification marking Section 5723 (f) Unique identification marking (1) In general No tobacco product or processed tobacco may be sold, offered for sale, distributed, mailed, or otherwise delivered for final sale to any consumer in the United States unless the unique identification marking that meets the requirements of this section (and any regulations prescribed thereunder) is affixed to or forms part of the package in which it is contained. (2) System specifications (A) The Secretary shall design such system to coordinate and avoid interference with State, local, and Indian tribal tax stamps and markings, facilitate collection of the tax imposed by this chapter, impede contraband tobacco trafficking, minimize counterfeit marking, allow for more effective tracking and tracing of tobacco products and processed tobacco, facilitate the enforcement of related Federal laws, and utilize such available technology as may promote the purposes of this chapter. (B) The Secretary shall prescribe the method and manner in which such unique identification markings are to be distributed, purchased, and applied to or made part of tobacco product and processed tobacco packages, and may provide for the cancellation of such markings. (C) The unique identification marking must provide (through the marking or record associated with the marking) such information as the Secretary by regulation prescribes, including: (i) A unique serial number or tracking code for each tobacco product or processed tobacco package or aggregate package. (ii) The name and address of the person purchasing the marking (and, if different, of the person ensuring the marking is affixed to or made part of the package). (iii) The name and address of the first unrelated person purchasing or otherwise receiving the tobacco product or processed tobacco from the person who ensures the marking is affixed to or made part of the package and the date of such purchase or receipt. (D) The information described in subparagraph (C) may be required to, to the extent practicable— (i) be cryptographically encrypted, and (ii) (I) be readable by a portable scanning device (or similar device) to be utilized by regulatory and law enforcement officials at the time and place of inspection, or (II) be otherwise accessible remotely at such time and place. (3) Unrelated person For purposes of this subsection, the term unrelated person . (c) Definitions Section 5723 (g) Package defined For purposes of this section, the term package (h) Unique identification marking defined For purposes of this section, the term unique identification marking . (d) Regulations The Secretary of the Treasury shall consult with the Secretary of Health and Human Services as may be appropriate to carry out the purposes of subsection (f), and paragraphs (2), (3), and (4) of subsection (b), of section 5723 204. Wholesalers and manufacturers, importers, and sellers of tobacco production machines required to have permit (a) Wholesalers Section 5712 , as a wholesaler, or processed tobacco (b) Manufacturers, importers, and sellers of tobacco production machines Section 5712 or as an export warehouse proprietor , as an export warehouse proprietor, or as a manufacturer, seller, or importer of tobacco production machines 205. Conditions of permit (a) Issuance Subsection (a) of section 5713 (a) Issuance (1) In general A person shall not engage in business as a manufacturer or importer of tobacco products or processed tobacco, as a wholesaler, as an export warehouse proprietor, or as a manufacturer, seller, lessor, or importer of tobacco production machines without a permit to engage in such business. Such permit, conditioned upon compliance with this chapter and regulations issued thereunder, shall be issued in such form and in such manner as the Secretary shall by regulation prescribe, to every person properly qualified under sections 5711 and 5712. Any entity granted such a permit is not eligible to provide any services the Secretary may elect to procure to facilitate the purposes of section 5723. Permit holders shall automatically count output and register, record, and transmit the quantities measured, in the form, conditions, and time limits established by the Secretary. A new permit may be required at such other time as the Secretary shall by regulation prescribe. (2) Conditions The Secretary shall not issue a permit under this section unless— (A) the applicant is in compliance with the requirements of— (i) this chapter, (ii) chapter 114 (iii) the Act of October 19, 1949 ( 15 U.S.C. 375 et seq. Jenkins Act (iv) the Fair and Equitable Tobacco Reform Act of 2004, and any amendments made thereby, (v) the Family Smoking Prevention and Tobacco Control Act, and any amendments made thereby, (vi) the Prevent All Cigarette Trafficking Act of 2009, and any amendments made thereby, and (vii) any related regulations thereunder, as in effect on the date of the issuance of the permit, (B) the applicant certifies that the applicant is in compliance with all other Federal, State, local, and Indian tribal laws relating to the taxation, manufacture, importation, exportation, distribution, marketing, sale, or transportation of tobacco products, processed tobacco, or tobacco production machines, as in effect on the date of the issuance of the permit, and (C) the applicant identifies in the application any violation of a law described in subparagraph (A) or (B) by the applicant resulting in a penalty under any such law during the 5-year period ending on the date of the application. . (b) Suspension or revocation Subparagraph (A) of section 5713(b)(1) or any other law described in subparagraph (A) or (B) of subsection (a)(2) this chapter 206. Records to be maintained (a) In general Section 5741 (1) by inserting (a) In general Every manufacturer (2) by inserting every wholesaler, every importer, (3) by striking such records records concerning the chain of custody of the tobacco products and processed tobacco (including the foreign country of final destination for packages marked for export) and the serial numbers, marks, labels, and notices required under section 5723, and such other records (4) by adding at the end the following new subsections: (b) Retailers Retailers shall maintain records of receipt, and any non-retail sale or delivery, of tobacco products and processed tobacco. Such records shall be available to the Secretary for inspection and audit. An ordinary commercial record or invoice shall satisfy the requirements of this subsection if such record shows the date of receipt, from whom tobacco products or processed tobacco were received, and the quantity of tobacco products or processed tobacco received (or, in the case of non-retail sale or delivery, the date of sale or delivery, to whom the tobacco products or processed tobacco were sold or delivered, and the quantity of the tobacco products or processed tobacco sold or delivered). To the extent the Secretary determines that the records maintained by retail entities licensed pursuant to section 555(b) of the Tariff Act of 1930 ( 19 U.S.C. 1555(b) (c) Records concerning marks and chain of custody Records concerning the chain of custody and the marks, labels, and notices required under section 5723 shall be available for inspection by any internal revenue officer during business hours. . (b) Consultation with Health and Human Services The Secretary of the Treasury shall consult with the Secretary of Health and Human Services as may be appropriate to carry out the purposes of section 5741 207. Reports Section 5722 (1) by inserting (a) In general Every manufacturer (2) by adding at the end the following new subsection: (b) Reports by export warehouse proprietors Prior to exportation of tobacco products or processed tobacco from the United States, the export warehouse proprietor shall submit a report (in such manner and form as the Secretary may by regulation prescribe) to enable the Secretary to identify the shipment and assure that it reaches its intended destination. . 208. Fraudulent offenses (a) In general Subsection (a) of section 5762 (1) by striking paragraph (1) and redesignating paragraphs (2) through (6) as paragraphs (1) through (5), respectively, and (2) by striking not more than $10,000 not more than $10,000 or an amount equal to 3 times the amount of the tax imposed under this chapter on the tobacco product involved (whichever is greater) (b) Offenses relating to distribution of tobacco products, etc (1) In general Section 5762 (as amended by section 202 of this Act) is amended— (A) by redesignating subsection (c) as subsection (d), and (B) by inserting after subsection (b) the following new subsection: (c) Offenses relating to distribution of tobacco products, etc It shall be unlawful— (1) for any person to engage in business as a manufacturer or importer of tobacco products, processed tobacco, or cigarette papers and tubes, as a wholesaler, or an export warehouse proprietor, or as a manufacturer, seller, or importer of tobacco production machines without filing the bond and obtaining the permit where required by this chapter or regulations thereunder, (2) for a manufacturer or importer of tobacco products, or wholesaler to knowingly ship, transport, deliver, or receive any tobacco products from or to any person other than a person who has obtained the permit required by this chapter, a retailer, or a person handling such products solely for purposes of shipment or delivery; except that an importer who has obtained the permit required by this chapter may receive, from a foreign manufacturer or a foreign distributor, foreign tobacco products that have not previously entered the United States, (3) for a manufacturer or importer of processed tobacco or a wholesaler to knowingly ship, transport, deliver, or receive any tobacco products or processed tobacco from or to any person other than a person who has obtained the permit required by this chapter, (4) for a manufacturer or importer of processed tobacco to knowingly ship, transport, sell, or deliver processed tobacco to any person other than a manufacturer of processed tobacco, a manufacturer of tobacco products, or an export warehouse proprietor, (5) for any person (other than the original manufacturer of such tobacco products or processed tobacco or an export warehouse proprietor authorized to receive any tobacco products or processed tobacco that have previously been exported and returned to the United States) to knowingly receive any tobacco products or processed tobacco that have previously been exported and returned to the United States, (6) for any export warehouse proprietor to knowingly ship, transport, sell, or deliver for sale any tobacco products or processed tobacco to any person other than the original manufacturer of such tobacco products or processed tobacco, another export warehouse proprietor, a duty free store, or a foreign purchaser, (7) for any person (other than a manufacturer, wholesaler, or an export warehouse proprietor permitted under this chapter) to knowingly ship, transport, receive, or possess, for purposes of resale, any tobacco product or processed tobacco not in packages marked pursuant to regulations issued under section 5723, other than for direct return to a manufacturer for repacking or for re-exportation or to an export warehouse proprietor for re-exportation, (8) for any manufacturer, importer, export warehouse proprietor, or wholesaler permitted under this chapter to make any false entry in, to fail to make an entry in, or to knowingly fail to maintain properly any record or report required by this chapter or the regulations promulgated thereunder with the intent to defraud the United States, (9) for any person, with the intent to defraud the United States, to alter, mutilate, destroy, obliterate, or remove any mark or label required under this chapter upon a tobacco product or processed tobacco held for sale, or to create, possess, or apply on any tobacco product or processed tobacco or its packaging any counterfeit versions of any such marks or labels, and (10) for any person to sell at retail more than 3,000 cigarettes in any single transaction (or series of related transactions), or, in the case of other tobacco products, an equivalent quantity as determined by regulation. Any person violating any of the provisions of this subsection shall, upon conviction, be fined as provided in section 3571 of title 18, United States Code, or imprisoned for not more than 5 years, or both. . (2) Conforming amendment Section 5762(d) (as so redesignated) is amended by striking and (b) , (b), and (c) (c) Other offenses Subsection (d) of section 5762 (as so redesignated) is amended by striking not more than $1,000 not more than $2,500 or an amount equal to the tax imposed under this chapter on the tobacco product or processed tobacco involved (whichever is greater) 209. Penalties (a) In general (1) Subsection (a) of section 5761 (A) by striking willfully knowingly (B) by striking $1,000 $10,000 (2) Subsection (b) of section 5761 5 percent 10 percent (b) Penalty amounts adjusted for inflation Section 5761 (f) Inflation adjustment (1) In general In the case of a calendar year beginning after 2015, the penalty dollar amounts provided under this chapter shall each be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting calendar year 2014 calendar year 1992 (2) Rounding If any amount as adjusted under paragraph (1) is not a multiple of $10, such amount shall be rounded to the next highest multiple of $10. . 210. Coordination with other government officials (a) In general Subchapter F of chapter 52 5755. Coordination with other government officials The Secretary shall make reasonable efforts to coordinate with other Federal agencies and with officials of foreign, State, local, Indian tribal, and other governments to promote the purposes of this chapter, to prevent and reduce tobacco tax evasion and contraband trafficking in tobacco products and processed tobacco, to enforce settlement agreements between tobacco companies and State or other governments and related laws, or for other law enforcement or administration purposes. . (b) Information sharing (1) In general Paragraph (1) of section 6103(o) (C) Information sharing for tobacco product law administration and enforcement purposes (i) Federal, State, local, and tribal governments Returns and return information with respect to taxes imposed by chapter 52 may be open to inspection by or disclosure to officers and employees of any Federal agency, the State Tax Administrators, or any other agency of any State, local, or Indian tribal government responsible for the administration and enforcement of laws and regulations relating to tobacco products and processed tobacco, or their legal representative, solely for use in such administration and enforcement, unless the Secretary determines that such disclosure would seriously impair Federal tax administration. (ii) Foreign governments and organizations The Secretary shall, upon written request, disclose returns and return information with respect to taxes imposed by chapter 52 to officers and employees of any agency of any foreign government, OLAF (European Anti-Fraud Office), EUROPOL, INTERPOL, or the World Customs Organization responsible for the administration and enforcement of laws and regulations relating to tobacco products and processed tobacco, or their legal representative, solely for use in such administration and enforcement, if the Secretary obtains written assurances from such government or organization that the information will be held in confidence and used only for such use. No return or return information shall be disclosed under this clause if the Secretary determines that such disclosure would seriously impair Federal tax administration. (iii) Public information The identity and business address of those persons that have a valid permit, pursuant to chapter 52, to engage in business as a manufacturer, wholesaler, or importer of tobacco products or processed tobacco, as an export warehouse proprietor, or as a manufacturer, seller, or importer of tobacco production machines (as defined in section 5702(q)) shall be made publicly available at such time and in such manner as the Secretary may prescribe. . (2) Conforming amendments (A) Subsection (a) of section 6103 (i) by striking or any local any local (ii) by inserting , or any agency described in subsection (o)(1)(C)(i) subsection (l)(7)(D) (iii) by striking or subsection (n) subsection (n), or subsection (o)(1)(C)(i) (B) Paragraph (4) of section 6103(p) (i) by striking (o)(1)(A) (o)(1)(A) or (C)(i) (ii) by striking (15), or (16), (15), or (16), or (o)(1)(C)(i), (C) Paragraph (2) of section 7213(a) (i) by striking (21) or (21), (ii) by striking or (7) or (7), or (o)(1)(C)(i) (c) Clerical amendment The table of sections for subchapter F of chapter 52 Sec. 5755. Coordination with other government officials. . 211. Definitions (a) Export warehouse proprietor Subsection (i) of section 5702 or any person engaged in the business of exporting tobacco products from the United States for purposes of sale or distribution. Any duty free store that sells, offers for sale, or otherwise distributes to any person in any single transaction (or series of related transactions) more than 3,000 cigarettes, or an equivalent quantity of other tobacco products as the Secretary shall by regulation prescribe, shall be deemed an export warehouse proprietor under this chapter (b) Retailer; wholesaler Section 5702 (r) Retailer The term retailer retailer (s) Wholesaler The term wholesaler . 212. Conforming amendments (a) Paragraph (2)(C) of section 2341 of title 18, United States Code is amended by inserting in regard to State, local, or Indian tribal government taxes, a person (b) Sections 2314 and 2315 of title 18, United States Code, are each amended— (1) by striking State (2) by striking tax stamps tax stamps or markings (c) The headings for subchapters B, C, and E of chapter 52 are each amended by inserting , processed tobacco, products (d) The items relating to subchapters B, C, and E in the table of subchapters for chapter 52 are each amended by inserting , processed tobacco, products (e) The heading for chapter 52 , processed tobacco, products (f) The item relating to chapter 52 in the table of chapters for subtitle E is amended by inserting , processed tobacco, products 213. Effective date Except as otherwise provided in this title, the amendments made by this title shall take effect 1 year after the date of the enactment of this Act. III Import Fraud 301. Maximum penalty for importation of tobacco products and cigarette papers and tubes by fraudulent means (a) Maximum penalty Section 592(c)(1) of the Tariff Act of 1930 ( 19 U.S.C. 1592(c)(1) (1) by striking A fraudulent violation of subsection (a) (A) In general Except as provided in subparagraph (B), a fraudulent violation of subsection (a) ; and (2) by adding at the end the following: (B) Tobacco products and cigarette papers and tubes In the case of importation of tobacco products and cigarette papers and tubes subject to tax under chapter 52 (i) the domestic value of the merchandise, and (ii) four times the amount of Federal excise tax that could be imposed on the merchandise, if applicable. . (b) Effective date The amendments made by subsection (a) shall take effect on the date which is 90 days after the date of the enactment of this Act, and shall apply with respect to violations of section 592 of the Tariff Act of 1930 (as so amended) that occur on or after that date. IV Exclusions regarding Indian Tribes and Tribal matters 401. Exclusions regarding Indian Tribes and Tribal matters (a) In general Nothing in this Act or the amendments made by this Act shall be construed to amend, modify, or otherwise affect— (1) any agreements, compacts, or other intergovernmental arrangements between any State or local government and any government of an Indian tribe relating to the collection of taxes on tobacco products sold in Indian country; (2) any State laws that authorize or otherwise pertain to any such intergovernmental arrangements or create special rules or procedures for the collection of State, local, or tribal taxes on tobacco products sold in Indian country; (3) any limitations under Federal or State law, including Federal common law and treaties, on State, local, and tribal tax and regulatory authority with respect to the sale, use, or distribution of tobacco products or processed tobacco by or to Indian tribes, tribal members, tribal enterprises, or in Indian country; (4) any Federal law, including Federal common law and treaties, regarding State jurisdiction, or lack thereof, over any Indian tribe, tribal member, tribal enterprise, Indian reservations, or other land held by the United States in trust for one or more Indian tribes; or (5) any State or local government authority to bring enforcement actions against persons located in Indian country. (b) Coordination of law enforcement Nothing in this Act or the amendments made by this Act (other than the amendments relating to section 6103 (1) provides for the administration of tobacco product laws or laws pertaining to interstate sales or other sales of tobacco products or processed tobacco; (2) provides for the seizure of tobacco products, processed tobacco, or other property related to a violation of such laws; or (3) establishes cooperative programs for the administration of such laws. (c) Treatment of State and local governments Nothing in this Act or the amendments made by this Act shall be construed to authorize, deputize, or commission States or local governments as instrumentalities of the United States. (d) Enforcement within Indian Country Nothing in this Act or the amendments made by this Act shall prohibit, limit, or restrict enforcement by the Attorney General of the United States of this Act or an amendment made by this Act within Indian country. (e) Ambiguity Any ambiguity between the language of this section or its application and any other provision of this Act shall be resolved in favor of this section. (f) Definitions In this section— (1) the term Indian country (2) the term tribal enterprise (3) the term Indian reservation section 168(j)(6) (4) the term Indian tribe Indian Self-Determination and Education Assistance Act 25 U.S.C. 450b(e) (5) the terms tobacco products processed tobacco section 5702

Summary: Tobacco Tax and Enforcement Reform Act - Amends the Internal Revenue Code, with respect to the taxation of tobacco products, to: increase excise taxes on small cigars, cigarettes, pipe tobacco, roll-your-own tobacco, and other tobacco products; impose an excise tax on smokeless tobacco sold in discrete single-use units; tax smokeless tobacco and other tobacco products at a level equivalent to the tax rate for cigarettes on an estimated per use basis; provide for annual inflation adjustments after 2013 to excise tax rates on cigarettes and tobacco products; restrict the sale, lease, export or import, or delivery of tobacco production machines to persons lawfully engaged in: (1) the sale, lease, export or import, or delivery of such machines; (2) the manufacture or packaging of tobacco products or processed tobacco; or (3) the application of unique identification markings onto tobacco products or processed tobacco packages; define "tobacco production machine" as a machine used to manufacture or package tobacco products or processed tobacco or to apply unique identification markings or other tax-payment indicia to packages of tobacco products or processed tobacco; require manufacturers and importers of tobacco products to affix a unique identification marking to each package of tobacco products or processed tobacco prior to sale or distribution in the United States or prior to export; direct the Secretary of the Treasury to design a system of unique identification markings that does not interfere with state, local, or tribal tax stamps and markings; require manufacturers, sellers, or importers of tobacco production machines to apply for and obtain permits to manufacture or import tobacco products; establish new criminal offenses relating to the licensing and distribution of tobacco products or processed tobacco; increase the civil penalty for tobacco-related infractions from $1,000 to $10,000; and allow sharing of tax return information with government officials for the administration of laws relating to tobacco products and processed tobacco. Requires the Secretary of the Treasury to coordinate with other federal agencies and officials to prevent and reduce tobacco tax evasion and contraband trafficking in tobacco products and processed tobacco and to enforce settlement agreements between tobacco companies and governmental entities. Amends the Tariff Act of 1930 to impose a civil penalty for the importation of tobacco products and cigarette papers and tubes by fraudulent means. Provides for the enforcement of this Act in Indian tribal areas.