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crease year at the place where intended to be sold
at retail.
‘‘(j) FOREIGN TRADE ZONES.—Notwithstanding the
Act of June 18, 1934 (19 U.S.C. 81a et seq.) or any other
provision of law—
‘‘(1) tobacco products, cigarette papers, and
cigarette tubes—
‘‘(A) on which taxes imposed by Federal
law are determined, or customs responsibilities
are liquidated, by a customs officer pursuant to
a request made under the first proviso of sec-
tion 3(a) of the Act of June 18, 1934 (19
U.S.C. 81c(a)) before January 1 of any in-
crease year, and
‘‘(B) which are entered into the customs
territory of the United States on or after Janu-
ary 1 of such increase year from a foreign trade
zone, and
‘‘(2) tobacco products, cigarette paper, and cig-
arette tubes which—
‘‘(A) are placed under the supervision of a
customs officer pursuant to the provisions of
the second proviso of section 3(a) of the Act of
June 18, 1934 (19 U.S.C. 81c(a)) before Janu-
ary 1 of such increase year, and
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(B) are entered into the customs territory
of the United States on or after January 1 of
such increase year, from a foreign trade zone,
shall be subject to the tax imposed by subsection (i)
and such tobacco products, cigarette papers, and
cigarette tubes shall, for purposes of subsection (i),
be treated as being held on January 1 of such in-
crease year for sale.
‘‘(k) IMPORTED PRODUCTS AND CIGARETTE PAPERS
AND TUBES.—The taxes imposed by this section on to-
bacco products and cigarette papers, and cigarette tubes
imported into the United States shall be in addition to
any import responsibilities imposed on such articles, un-
less such import responsibilities are imposed in lieu of in-
ternal revenue tax.
‘‘(l) INCREASE YEAR.—For purposes of this section,
the term ‘increase year’ means any calendar year after
1998.’’
(2) ROLL-YOUR-OWN TOBACCO.—Section 5702
of such Code (relating to definitions) is amended by
adding at the end the following new subsection:
‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll-
your-own tobacco’ means any tobacco which, because of
its appearance, type, packaging, or labeling, is suitable for
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use and likely to be offered to, or purchased by, consumers
as tobacco for making cigarettes.’’
(3) TECHNICAL AMENDMENTS.—
(A) Subsection (c) of section 5702 of such
Code is amended by striking ‘‘and pipe to-
bacco’’ and inserting ‘‘pipe tobacco, and roll-
your-own tobacco’’.
(B) Subsection (d) of section 5702 of such
Code is amended—
(i) in the material preceding para-
graph (1), by striking ‘‘or pipe tobacco’’
and inserting ‘‘pipe tobacco, or roll-your-
own tobacco’’, and
(ii) by striking paragraph (1) and in-
serting the following new paragraph:
‘‘(1) a person who produces cigars, cigarettes,
smokeless tobacco, pipe tobacco, or roll-your-own to-
bacco solely for the person’s own personal consump-
tion or use, and’’.
(C) The chapter heading for chapter 52 of
such Code is amended to read as follows:
‘‘CHAPTER 52—TOBACCO PRODUCTS AND
CIGARETTE PAPERS AND TUBES’’.
(D) The table of chapters for subtitle E of
such Code is amended by striking the item re-
124
lating to chapter 52 and inserting the following
new item:
‘‘CHAPTER 52. Tobacco products and cigarette papers and tubes.’’
(4) EFFECTIVE DATE.—
(A) IN GENERAL.—The amendments made
by this section shall apply to tobacco products,
cigarette papers, and cigarette tubes removed
(as defined in section 5702 of the Internal Rev-
enue Code of 1986, as amended by this section)
after December 31, 1997.
(B) TRANSITIONAL
RULE.—Any person
who—
(i) on the date of the enactment of
this Act is engaged in business as a manu-
facturer of roll-your-own tobacco or as an
importer of tobacco products or cigarette
papers and tubes, and
(ii) before January 1, 1998, submits
an application under subchapter B of
chapter 52 of such Code to engage in such
business,
may, notwithstanding such subchapter B, con-
tinue to engage in such business pending final
action on such application. Pending such final
action, all provisions of such chapter 52 shall
apply to such applicant in the same manner
125
and to the same extent as if such applicant
were a holder of a permit under such chapter
52 to engage in such business.
(b) SPECIAL RULES FOR 1998.—
(1) FLOOR STOCKS.—On tobacco products, cig-
arette papers, and cigarette tubes manufactured in
or imported into the United States which are re-
moved before January 1, 1998, and held on such
date for sale by any person, there shall be imposed
the following taxes:
(A) SMALL CIGARS.—On cigars, weighing
not more than 3 pounds per thousand,
$75.0075 per thousand.
(B) LARGE CIGARS.—On cigars, weighing
more than 3 pounds per thousand, a tax equal
to 79.6875 percent of the price for which sold,
but not more than $187.50 per thousand.
(C) SMALL
CIGARETTES.—On cigarettes,
weighing not more than 3 pounds per thousand,
$75 per thousand.
(D) LARGE
CIGARETTES.—On cigarettes,
weighing more than 3 pounds per thousand,
$157.50 per thousand; except that, if more than
61⁄2 inches in length, they shall be taxable at
the rate prescribed for cigarettes weighing not
126
more than 3 pounds per thousand, counting
each 23⁄4 inches, or fraction thereof, of the
length of each as one cigarette.
(E) CIGARETTE PAPERS.—On cigarette pa-
pers, 4.695 cents for each 50 papers or frac-
tional part thereof; except that, if cigarette pa-
pers measure more than 61⁄2 inches in length,
they shall be taxable at the rate prescribed,
counting each 23⁄4 inches, or fraction thereof,
of the length of each as one cigarette paper.
(F) CIGARETTE
TUBES.—On cigarette
tubes, 9.39 cents for each 50 tubes or fractional
part thereof; except that, if cigarette tubes
measure more than 61⁄2 inches in length, they
shall be taxable at the rate prescribed, counting
each 23⁄4 inches, or fraction thereof, of the
length of each as one cigarette tube.
(G) SNUFF.—On snuff, $19.995 per pound
and a proportionate tax at the like rate on all
fractional parts of a pound.
(H) CHEWING TOBACCO.—On chewing to-
bacco, $7.995 per pound and a proportionate
tax at the like rate on all fractional parts of a
pound.
127
(I) PIPE
TOBACCO.—On pipe tobacco,
$25.0125 per pound and a proportionate tax at
the like rate on all fractional parts of a pound.
(J) ROLL-YOUR-OWN TOBACCO.—On roll-
your-own tobacco, $26.025 per pound and a
proportionate tax at the like rate on all frac-
tional parts of a pound.
(2) FOREIGN TRADE ZONES.—Notwithstanding
the Act of June 18, 1934 (19 U.S.C. 81a et seq.)
or any other provision of law—
(A) tobacco products, cigarette papers, and
cigarette tubes—
(i) on which taxes imposed by Federal
law are determined, or customs responsibil-
ities are liquidated, by a customs officer
pursuant to a request made under the first
proviso of section 3(a) of the Act of June
18, 1934 (19 U.S.C. 81c(a)) before Janu-
ary 1, 1998, and
(ii) which are entered into the cus-
toms territory of the United States on or
after January 1, 1998 from a foreign trade
zone, and
(B) tobacco products, cigarette papers, and
cigarette tubes which—
128
(i) are placed under the supervision of
a customs officer pursuant to the provi-
sions of the second proviso of section 3(a)
of the Act of June 18, 1934 (19 U.S.C.
81c(a)) before January 1, 1998, and
(ii) are entered into the customs terri-
tory of the United States on or after Janu-
ary 1 of such increase year, from a foreign
trade zone,
shall be subject to the tax imposed by para-
graph (1) and such tobacco products, cigarette
papers, and cigarette tubes shall, for purposes
of paragraph (1) be treated as being held on
January 1, 1998 for sale.
(3) CIGARS, CIGARETTES, CIGARETTE
PAPER,
CIGARETTE
TUBES, 
SNUFF, 
CHEWING
TOBACCO,
PIPE TOBACCO, ROLL-YOUR-OWN TOBACCO, AND TO-
BACCO PRODUCTS.—For purposes of this subsection,
the terms ‘‘cigar’’, ‘‘cigarette’’, ‘‘cigarette paper’’,
‘‘cigarette tubes’’, ‘‘snuff’’, ‘‘chewing tobacco’’, ‘‘pipe
tobacco’’, ‘‘roll-your-own tobacco’’, and ‘‘tobacco
products’’ shall have the meaning given to such
terms by subsections (a), (b), (e), and (g), para-
graphs (2) and (3) of subsection (n), subsection (o),
129
subsection (p), and subsection (c) of section 5702 of
the Internal Revenue Code of 1986, respectively.
SEC. 302. ASSISTANCE TO STATES ADVERSELY AFFECTED
BY THE TOBACCO TAX.
(a) ESTABLISHMENT OF TRUST FUND.—
(1) IN GENERAL.—Subchapter A of chapter 98
of the Internal Revenue Code of 1986 (relating to
trust fund code) is amended by adding at the end
the following new section:
‘‘SEC. 9512. TOBACCO ALTERNATIVES TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘Tobacco Alternatives Trust Fund’
(hereafter referred to in this section as the ‘Trust Fund’),
consisting of such amounts as may be appropriated or
credited to the Trust Fund as provided in this section or
section 9602(b).
‘‘(b) TRANSFERS TO TRUST FUND.—The Secretary
shall transfer to the Trust Fund an amount equivalent
to 2 percent of the net increase in revenues received in
the Treasury attributable to the amendments made to sec-
tion 5701 by subsections (b) and (c) of section 301 and
the provisions contained in section 301(d) of the Healthy
Mothers, Healthy Children Act of 1997, as estimated by
the Secretary.
130
‘‘(c) DISTRIBUTION OF AMOUNTS IN TRUST FUND.—
‘‘(1) IN
GENERAL.—Amounts in the Trust
Fund shall be available to the Secretary of Agri-
culture, as provided by appropriation Acts, for mak-
ing grants to States that have submitted an applica-
tion in accordance with paragraph (2) for the pur-
poses of—
‘‘(A) making direct payments to tobacco
farmers and workers,
‘‘(B) providing assistance to farmers in
converting from tobacco to other crops and im-
proving the access of such farmers to markets
for other crops,
‘‘(C) providing infrastructure and business-
related financing in areas with significant num-
bers of tobacco-related jobs,
‘‘(D) providing job training for tobacco
farmers and workers, and
‘‘(E) establishing other economic develop-
ment projects (upon approval of the Secretary
of Agriculture) in areas with significant num-
bers of tobacco-related jobs.
‘‘(2) APPLICATION.—Each State desiring to re-
ceive a grant under this subsection shall submit an