I
103D CONGRESS
2D SESSION
H. R. 4089
To amend the Internal Revenue Code of 1986 to increase the tax on tobacco
products, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 17, 1994
Mr. STARK (for himself, Mr. DURBIN, Mr. HANSEN, Mr. WAXMAN, Mr.
SYNAR, Mr. EVANS, Mr. OBERSTAR, Mr. ANDREWS of Texas, Mr.
MEEHAN, Mr. VISCLOSKY, Ms. HARMAN, Ms. ROYBAL-ALLARD, and Mr.
MARKEY) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to increase
the tax on tobacco products, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Tobacco Health Tax and Agricultural Assistance Act of
1994’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment 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 provi-
sion of the Internal Revenue Code of 1986.
SEC. 
2. 
INCREASE 
IN 
EXCISE 
TAXES 
ON 
TOBACCO
PRODUCTS.
(a) CIGARETTES.—Subsection (b) of section 5701 is
amended—
(1) by striking ‘‘$12 per thousand ($10 per
thousand on cigarettes removed during 1991 or
1992)’’ in paragraph (1) and inserting ‘‘$100.00 per
thousand’’,
(2) by striking ‘‘$25.20 per thousand ($21 per
thousand on cigarettes removed during 1991 or
1992)’’ in paragraph (2) and inserting ‘‘$210.00 per
thousand’’, and
(3) by adding at the end thereof the following
new paragraph:
‘‘(3) ADDITIONAL TAX ON PACKS CONTAINING
FEWER
THAN
CIGARETTES.—On any pack of
cigarettes containing fewer than 20 cigarettes, the
excess of $2 over the tax imposed by paragraphs (1)
and (2) on the cigarettes in such pack.’’
(b) CIGARS.—Subsection (a) of section 5701 is
amended—
(1) by striking ‘‘$1.125 cents per thousand
(93.75 cents per thousand on cigars removed during
1991 or 1992)’’ in paragraph (1) and inserting
‘‘$89.14 per thousand’’, and
(2) by striking ‘‘equal to’’ and all that follows
in paragraph (2) and inserting ‘‘equal to 105.8 per-
cent of the price for which sold but not more than
$250.03 per thousand.’’
(c) CIGARETTE PAPERS.—Subsection (c) of section
5701 is amended by striking ‘‘0.75 cent (0.625 cent on
cigarette papers removed during 1991 or 1992)’’ and in-
serting ‘‘6.24 cents’’.
(d) CIGARETTE TUBES.—Subsection (d) of section
5701 is amended by striking ‘‘1.5 cents (1.25 cents on
cigarette tubes removed during 1991 or 1992)’’ and in-
serting ‘‘12.5 cents’’.
(e) SMOKELESS TOBACCO.—Subsection (e) of section
5701 is amended—
(1) by striking ‘‘36 cents (30 cents on snuff re-
moved during 1991 or 1992)’’ in paragraph (1) and
inserting ‘‘$29.70’’, and
(2) by striking ‘‘12 cents (10 cents on chewing
tobacco removed during 1991 or 1992)’’ in para-
graph (2) and inserting ‘‘$29.46’’.
(f) PIPE TOBACCO.—Subsection (f) of section 5701
is amended by striking ‘‘67.5 cents (56.25 cents on pipe
tobacco removed during 1991 or 1992)’’ and inserting
‘‘$30.01’’.
(g) INFLATION ADJUSTMENT
OF TOBACCO TAX
RATES.—Section 5701 is amended by adding at the end
thereof the following new subsection:
‘‘(i) INFLATION ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of articles re-
moved in any calendar year after 1994, each rate of
tax contained in this section shall be increased by an
amount equal to—
‘‘(A) such rate, multiplied by
‘‘(B) the greater of—
‘‘(i) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the removal occurs by
substituting ‘calendar year 1993’ for ‘cal-
endar year 1992’ in subparagraph (B)
thereof, or
‘‘(ii) the cost-of-living adjustment
which would be determined under clause
(i) if only changes in the tobacco and
smoking 
products 
component 
of 
the
(B) the prior tax (if any) imposed under
section 5701 or 7652 of such Code on such
article.
(2) AUTHORITY TO EXEMPT CIGARETTES HELD
IN VENDING MACHINES.—To the extent provided in
regulations prescribed by the Secretary, no tax shall
be imposed by paragraph (1) on cigarettes held for
retail sale on October 1, 1994, by any person in any
vending machine. If the Secretary provides such a
benefit with respect to any person, the Secretary
may reduce the $500 amount in paragraph (3) with
respect to such person.
(3) 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) for which such person is liable.
(4) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY FOR TAX.—A person hold-
ing on October 1, 1994, articles to which any
tax imposed by paragraph (1) applies shall be
liable for such tax.
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such
manner as the Secretary shall prescribe by reg-
ulations.
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore December 31, 1994.
(5) ARTICLES
IN
FOREIGN
TRADE
ZONES.—
Notwithstanding the Act of June 18, 1934 (48 Stat.
998, 19 U.S.C. 81a) and any other provision of law,
any article which is located in a foreign trade zone
on October 1, 1994, shall be subject to the tax im-
posed by paragraph (1) if—
(A) internal revenue taxes have been deter-
mined, or customs duties liquidated, with re-
spect to such article before such date pursuant
to a request made under the 1st proviso of sec-
tion 3(a) of such Act, or
(B) such article is held on such date under
the supervision of a customs officer pursuant to
the 2d proviso of such section 3(a).
(6) DEFINITIONS.—For purposes of this sub-
section:
(A) IN GENERAL.—Terms used in this sub-
section which are also used in section 5702 of
the Internal Revenue Code of 1986 shall have
the respective meanings such terms have in
such section, and the term ‘‘tobacco products’’
shall include articles first subject to the tax im-
posed by section 5701 of such Code by reason
of the amendments made by this Act.
(B) SECRETARY.—The term ‘‘Secretary’’
means the Secretary of the Treasury or his
delegate.
(7) CONTROLLED
GROUPS.—Rules similar to
the rules of section 5061(e)(3) of such Code shall
apply for purposes of this subsection.
(8) 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 para-
graph (1) as the person to whom a credit or refund
under such provisions may be allowed or made.
SEC. 3. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVI-
SIONS.
(a) EXEMPTION FOR EXPORTED TOBACCO PROD-
UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY
ONLY TO ARTICLES MARKED FOR EXPORT.—
(1) Subsection (b) of section 5704 is amended
by adding at the end thereof the following new sen-
tence: ‘‘Tobacco products and cigarette papers and
tubes may not be transferred or removed under this
subsection unless such products or papers and tubes
bear such marks, labels, or notices as the Secretary
shall by regulations prescribe.’’
(2) Section 5761 is amended by redesignating
subsections (c) and (d) as subsections (d) and (e),
respectively, and by inserting after subsection (b)
the following new subsection:
‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE
PAPERS AND TUBES FOR EXPORT.—Except as provided
in subsections (b) and (d) of section 5704—
‘‘(1) every person who sells, relands, or receives
within the jurisdiction of the United States any to-
bacco products or cigarette papers or tubes which
have been labeled or shipped for exportation under
this chapter,
‘‘(2) every person who sells or receives such to-
bacco products or cigarette papers or tubes, and
‘‘(3) every person who aids or abets in such
selling, relanding, or receiving,
shall, in addition to the tax and any other penalty provided
in this title, be liable for a penalty equal to the greater
of $1,000 or 5 times the amount of the tax imposed by
this chapter. All tobacco products and cigarette papers
and tubes relanded within the jurisdiction of the United
States shall be forfeited to the United States.’’
(3) Subsection (a) of section 5761 is amended
by striking ‘‘subsection (b)’’ and inserting ‘‘sub-
section (b) or (c)’’.
(4) Subsection (d) of section 5761, as redesig-
nated by paragraph (2), is amended by striking
‘‘The penalty imposed by subsection (b)’’ and insert-
ing ‘‘The penalties imposed by subsections (b) and
(c)’’.
(5)(A) Subpart F of chapter 52 is amended by
adding at the end thereof the following new section:
‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE-
VIOUSLY EXPORTED TOBACCO PRODUCTS.
‘‘(a) IN GENERAL.—Tobacco products and cigarette
papers and tubes previously exported from the United
States may be imported or brought into the United States
only as provided in section 5704(d).
‘‘(b) CROSS REFERENCE.—
‘‘For penalty for the sale of cigarettes in the Unit-
ed States which are labeled for export, see section
5761(d).’’
(B) The table of sections for subpart F of chap-
ter 52 is amended by adding at the end thereof the
following new item:
‘‘Sec. 5754. Restriction on importation of previously exported to-
bacco products.’’
(b) IMPORTERS REQUIRED TO BE QUALIFIED.—
(1) Sections 5712, 5713(a), 5721, 5722,
5762(a)(1), and 5763 (b) and (c) are each amended
by inserting ‘‘or importer’’ after ‘‘manufacturer’’.
(2) The heading of subsection (b) of section
5763 is amended by inserting ‘‘QUALIFIED IMPORT-
ERS,’’ after ‘‘MANUFACTURERS,’’.
(3) The heading for subchapter B of chapter 52
is amended by inserting ‘‘and Importers’’ after
‘‘Manufacturers’’.
(4) The item relating to subchapter B in the
table of subchapters for chapter 52 is amended by
inserting ‘‘and importers’’ after ‘‘manufacturers’’.
(c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES
OF CIGARETTE MANUFACTURERS.—
(1) Subsection (a) of section 5704 is amend-
ed—
(A) by striking ‘‘EMPLOYEE USE OR’’ in
the heading, and
(B) by striking ‘‘for use or consumption by
employees or’’ in the text.
(2) Subsection (e) of section 5723 is amended
by striking ‘‘for use or consumption by their employ-
ees, or for experimental purposes’’ and inserting
‘‘for experimental purposes’’.
(d) REPEAL OF TAX-EXEMPT SALES TO UNITED
STATES.—Subsection (b) of section 5704 is amended by
striking ‘‘and manufacturers may similarly remove such
articles for use of the United States;’’.
(e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS
SUBJECT TO TAX.—Subsection (c) of section 5701 is
amended by striking ‘‘On each book or set of cigarette
papers containing more than 25 papers,’’ and inserting
‘‘On cigarette papers,’’.
(f) STORAGE OF TOBACCO PRODUCTS.—Subsection
(k) of section 5702 is amended by inserting ‘‘under section
5704’’ after ‘‘internal revenue bond’’.
(g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC-
TURING
ACTIVITY
REQUIREMENTS.—Section 5712 is
amended by striking ‘‘or’’ at the end of paragraph (1),
by redesignating paragraph (2) as paragraph (3), and by
inserting after paragraph (1) the following new paragraph:
‘‘(2) the activity proposed to be carried out at
such premises does not meet such minimum capacity
or activity requirements as the Secretary may pre-
scribe, or’’.
(h) LIMITATION ON COVER OVER OF TAX ON TO-
BACCO PRODUCTS.—Section 7652 is amended by adding
at the end thereof the following new subsection:
‘‘(h) LIMITATION ON COVER OVER OF TAX ON TO-
BACCO PRODUCTS.—For purposes of this section, with re-
spect to taxes imposed under section 5701 or this section
on any tobacco product or cigarette paper or tube, the
amount covered into the treasuries of Puerto Rico and the
Virgin Islands shall not exceed the rate of tax under sec-
tion 5701 in effect on the article on the day before the
date of the enactment of the Tobacco Tax Act of 1994.’’
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to articles removed (as defined in
section 5702(k) of the Internal Revenue Code of 1986,
as amended by this Act) after September 30, 1994.
SEC. 4. IMPOSITION OF EXCISE TAX ON MANUFACTURE
OR IMPORTATION OF ROLL-YOUR-OWN TO-
BACCO.
(a) IN GENERAL.—Section 5701 (relating to rate of
tax) is amended by redesignating subsection (g) as sub-
section (h) and by inserting after subsection (f) the follow-
ing new subsection:
‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own
tobacco, manufactured in or imported into the United
States, there shall be imposed a tax of $29.34 per pound
(and a proportionate tax at the like rate on all fractional
parts of a pound).’’
(b) ROLL-YOUR-OWN TOBACCO.—Section 5702 (re-
lating to definitions) is amended by adding at the end
thereof 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
use and likely to be offered to, or purchased by, consumers
as tobacco for making cigarettes.’’
(c) TECHNICAL AMENDMENTS.—
(1) Subsection (c) of section 5702 is amended
by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe
tobacco, and roll-your-own tobacco’’.
(2) Subsection (d) of section 5702 is amend-
ed—
(A) in the material preceding paragraph
(1), by striking ‘‘or pipe tobacco’’ and inserting
‘‘pipe tobacco, or roll-your-own tobacco’’, and
(B) by striking paragraph (1) and insert-
ing the following new paragraph:
‘‘(1) a person who produces cigars, cigarettes,
smokeless tobacco, pipe tobacco, or roll-your-own to-
bacco solely for his own personal consumption or
use, and’’.
(3) The chapter heading for chapter 52 is
amended to read as follows:
‘‘CHAPTER 52—TOBACCO PRODUCTS AND
CIGARETTE PAPERS AND TUBES’’.
(4) The table of chapters for subtitle E is
amended by striking the item relating to chapter 52
and inserting the following new item:
‘‘Chapter 52. Tobacco products and cigarette papers and tubes.’’
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to roll-your-own tobacco re-
moved (as defined in section 5702(k) of the Internal
Revenue Code of 1986, as amended by this Act)
after September 30, 1994.
(2) TRANSITIONAL RULE.—Any person who—
(A) on the date of the enactment of this
Act is engaged in business as a manufacturer of
roll-your-own tobacco or as an importer of to-
bacco products or cigarette papers and tubes,
and
(B) before October 1, 1994, submits an
application under subchapter B of chapter 52
of such Code to engage in such business,
may, notwithstanding such subchapter B, continue
to engage in such business pending final action on
such application. Pending such final action, all pro-
visions of such chapter 52 shall apply to such appli-
cant in the same manner and to the same extent as
if such applicant were a holder of a permit under
such chapter 52 to engage in such business.
SEC. 5. ESTABLISHMENT OF TOBACCO CONVERSION AND
HEALTH EDUCATION TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 (re-
lating to trust fund code) is amended by adding at the
end thereof the following new section:
‘‘SEC. 9512. TOBACCO CONVERSION AND HEALTH EDU-
CATION 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 Conversion and Health Edu-
cation Trust Fund’, consisting of such amounts as may
be appropriated or credited to such Trust Fund as pro-
vided in this section or section 9602(b).
‘‘(b) TRANSFERS TO TRUST FUND.—
‘‘(1) IN
GENERAL.—There is hereby appro-
priated to the Tobacco Conversion and Health Edu-
cation Trust Fund amounts equivalent to 3 percent
(2 percent on and after October 1, 1999) of the net
revenue received in the Treasury from the 1994 to-
bacco tax increases.
‘‘(2) NET REVENUES.—For purposes of para-
graph (1), the net revenue received in the Treasury
from the 1994 tobacco tax increases is the amount
estimated by the Secretary based on the excess of—
‘‘(A) the additional taxes received in the
Treasury under section 5701 by reason of the
amendments made by the Tobacco Health Tax
and Agricultural Assistance Act of 1994 or
under section 2(i) of such Act, over
‘‘(B) the decrease in the tax imposed by
chapter 1 resulting from such taxes.
‘‘(c) TOBACCO CONVERSION ACCOUNT.—
‘‘(1) IN GENERAL.—There is established in the
Tobacco Conversion and Health Education Trust
Fund a separate account to be known as the ‘To-
bacco Conversion Account’ consisting of such
amounts as may be transferred or credited to such
account as provided in this section or section
9602(b).
‘‘(2) TRANSFERS TO ACCOUNT.—The Secretary
of the Treasury shall transfer to the Tobacco Con-
version Account two-thirds of the amounts appro-
priated to the Tobacco Conversion and Health Edu-
cation Trust Fund under subsection (b)(1) for peri-
ods before October 1, 1999.
‘‘(3) 
EXPENDITURES
FROM
ACCOUNT.—
Amounts in the Tobacco Conversion Account shall
be available, as provided in appropriation Acts, for
making expenditures for purposes of—
‘‘(A) assisting farmers in converting from
tobacco to other crops, and
‘‘(B) providing grants to communities, and
persons involved in the production or manufac-
ture of tobacco or tobacco products, that are
adversely affected by the tax increases con-
tained in the Tobacco Health Tax and Agricul-
tural Assistance Act of 1994.
The grants referred to in subparagraph (B) shall in-
clude grants to assist in attracting nontobacco
sources of income and grants to farmers who retire
tobacco allotments.
‘‘(d) HEALTH EDUCATION ACCOUNT.—
‘‘(1) IN GENERAL.—There is established in the
Tobacco Conversion and Health Education Trust
Fund a separate account to be known as the ‘Health
Education Account’, consisting of such amounts as
may be transferred or credited to such account as
provided in this section or section 9602(b).
‘‘(2) TRANSFERS TO ACCOUNT.—The Secretary
of the Treasury shall transfer to the Health Edu-
cation Account one-third (100 percent on and after
October 1, 1999) of the amounts appropriated to the
Tobacco Conversion and Health Education Trust
Fund under subsection (b)(1).
‘‘(3) 
EXPENDITURES
FROM
ACCOUNT.—
Amounts in the Health Education Account shall be
available, as provided in appropriation Acts, to the
Secretary of Health and Human Services for making
expenditures to increase public awareness of health
risks, including tobacco use.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter A is amended by adding at the end
thereof the following new item:
‘‘Sec. 9512. Tobacco Conversion and Health Education Trust
Fund.’’
Æ
HR 4089 IH——2