I
105TH CONGRESS
1ST SESSION
H. R. 3027
To amend the Internal Revenue Code of 1986 to increase the tax rate
on tobacco products, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 12, 1997
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 increase
the tax rate 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. INCREASE IN EXCISE TAX RATE ON TOBACCO
PRODUCTS IN ADDITION TO SUCH INCREASE
CONTAINED IN THE BALANCED BUDGET ACT
OF 1997.
(a) CIGARETTES.—Subsection (b) of section 5701 of
the Internal Revenue Code of 1986 is amended—
(1) by striking ‘‘$12 per thousand ($10 per
thousand on cigarettes removed during 1991 or
1992);’’ in paragraph (1) and inserting ‘‘the applica-
ble rate per thousand determined in accordance with
the following table:
‘‘In the case of cigarettes removed
The applicable
during:
rate is:
1998 .........................................................................................
$12.00
1999 .........................................................................................
$37.00
2000 .........................................................................................
$67.00
2001 .........................................................................................
$92.00
2002 .........................................................................................
$94.50.’’;
and
(2) by striking paragraph (2) and inserting the
following:
‘‘(2) LARGE CIGARETTES.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), on cigarettes, weighing more
than 3 pounds per thousand, the applicable rate
per thousand determined in accordance with the
following table:
‘‘In the case of cigarettes removed
The applicable
during:
rate is:
1998 .........................................................................................
$25.20
1999 .........................................................................................
$77.70
2000 .........................................................................................
$140.70
2001 .........................................................................................
$193.20
2002 .........................................................................................
$198.45.
‘‘(B) EXCEPTION.—On cigarettes more
than 61⁄2 inches in length, at the rate pre-
scribed for cigarettes weighing not more than 3
pounds per thousand, counting each 23⁄4 inches,
or fraction thereof, of the length of each as one
cigarette.’’
(b) CIGARS.—Subsection (a) of section 5701 of such
Code 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 ‘‘the
applicable rate per thousand determined in accord-
ance with the following table:
‘‘In the case of cigars removed
The applicable
during:
rate is:
1998 ..................................................................................
$1.125 cents
1999 ..................................................................................
$3.4687 cents
2000 ..................................................................................
$6.2822 cents
2001 ..................................................................................
$8.6264 cents
2002 ..................................................................................
$8.8588 cents.’’;
and
(2) by striking paragraph (2) and inserting the
following:
‘‘(2) LARGE CIGARS.—On cigars, weighing more
than 3 pounds per thousand, the applicable percent-
age of the price for which sold but not more that the
applicable rate per thousand determined in accord-
ance with the following table:
In the case of
cigars re-
moved dur-
ing:
The applicable
percentage is:
The applicable rate
is:
1998
12.750%
$30.00
1999
39.312%
$92.50
2000
71.189%
$167.50
2001
97.753%
$230.00
2002
100.407%
$236.25.’’
(c) CIGARETTE PAPERS.—Subsection (c) of section
5701 of such Code is amended to read as follows:
‘‘(c) CIGARETTE PAPERS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), on each book or set of cigarette papers
containing more than 25 papers, manufactured in or
imported into the United States, there shall be im-
posed a tax of the applicable rate for each 50 papers
or fractional part thereof as determined in accord-
ance with the following table:
‘‘In the case of cigarette papers
The applicable
removed during:
rate is:
1998 .........................................................................................
.75 cent
1999 .........................................................................................
2.31 cents
2000 .........................................................................................
4.18 cents
2001 .........................................................................................
5.74 cents
2002 .........................................................................................
5.91 cents.
‘‘(2) EXCEPTION.—If cigarette papers measure
more than 61⁄2 inches in length, such cigarette pa-
pers shall be taxable at the rate prescribed, counting
each 23⁄4 inches, or fraction thereof, of the length of
each as one cigarette paper.’’
(d) CIGARETTE TUBES.—Subsection (d) of section
5701 of such Code is amended to read as follows:
‘‘(d) CIGARETTE TUBES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), on cigarette tubes, manufactured in or
imported into the United States, there shall be im-
posed a tax of the applicable rate for each 50 tubes
or fractional part thereof as determined in accord-
ance with the following table:
‘‘In the case of cigarette tubes
The applicable
removed during:
rate is:
1998 .........................................................................................
1.50 cents
1999 .........................................................................................
4.62 cents
2000 .........................................................................................
8.39 cents
2001 .........................................................................................
11.53 cents
2002 .........................................................................................
11.82 cents.
‘‘(2) EXCEPTION.—If cigarette tubes measure
more than 61⁄2 inches in length, such cigarette tubes
shall be taxable at the rate prescribed, counting each
23⁄4 inches, or fraction thereof, of the length of each
as one cigarette tube.’’
(e) SMOKELESS TOBACCO.—Paragraphs (1) and (2)
of subsection (e) of section 5701 of such Code is amended
to read as follows:
‘‘(1) SNUFF.—On snuff, the applicable rate per
pound determined in accordance with the following
table (and a proportionate tax at the like rate on all
fractional parts of a pound):
‘‘In the case of snuff removed
The applicable
during:
rate is:
1998 .........................................................................................
36 cents
1999 .........................................................................................
$7.03
2000 .........................................................................................
$13.84
2001 .........................................................................................
$20.51
2002 .........................................................................................
$20.58.
‘‘(2) CHEWING TOBACCO.—On chewing tobacco,
the applicable rate per pound determined in accord-
ance with the following table (and a proportionate
tax at the like rate on all fractional parts of a
pound):
‘‘In the case of chewing tobacco
The applicable
removed during:
rate is:
1998 .........................................................................................
12 cents
1999 .........................................................................................
$2.79
2000 .........................................................................................
$5.50
2001 .........................................................................................
$8.17
2002 .........................................................................................
$8.19.’’
(f) PIPE TOBACCO.—Subsection (f) of section 5701
of such Code is amended to read as follows:
‘‘(f) PIPE TOBACCO.—On pipe tobacco, manufac-
tured in or imported into the United States, there shall
be imposed a tax of the applicable rate per pound deter-
mined in accordance with the following table (and a pro-
portionate tax at the like rate on all fractional parts of
a pound):
‘‘In the case of pipe tobacco
The applicable
removed during:
rate is:
1998 ..................................................................................
67.5 cents
1999 ..................................................................................
$2.0812 cents
2000 ..................................................................................
$3.7705 cents
2001 ..................................................................................
$5.1774 cents
2002 ..................................................................................
$5.3157 cents.’’
(g) IMPOSITION OF EXCISE TAX ON MANUFACTURE
OR IMPORTATION OF ROLL-YOUR-OWN TOBACCO.—
(1) IN GENERAL.—Section 5701 of such Code
(relating to rate of tax) is amended by redesignating
subsection (g) as subsection (h) and by inserting
after subsection (f) the following 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 the applicable rate
per pound determined in accordance with the following
table (and a proportionate tax at the like rate on all frac-
tional parts of a pound):
‘‘In the case of roll-your-own
The applicable
tobacco removed during:
rate is:
1998 ..................................................................................
67.5 cents
1999 ..................................................................................
$2.0812 cents
2000 ..................................................................................
$3.7705 cents
2001 ..................................................................................
$5.1774 cents
2002 ..................................................................................
$5.3157 cents.’’
(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
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-
lating to chapter 52 and inserting the following
new item:
‘‘CHAPTER 52. Tobacco products and cigarette papers and tubes.’’
(h) INFLATION ADJUSTMENT OF RATES AND FLOOR
STOCKS TAXES.—Section 5701 of such Code, as amended
by subsection (g), is amended by redesignating subsection
(h) as subsection (j) and by inserting after subsection (g)
the following:
‘‘(h) INFLATION ADJUSTMENT.—In the case of a cal-
endar year after 2002, the dollar amount contained in the
table in each of the preceding subsections (and the per-
centage contained in the table contained in subsection
(b)(2)) applicable to the preceding calendar year (after the
application of this subsection) shall be increased by an
amount equal to—
‘‘(1) such dollar amount (or percentage), multi-
plied by
‘‘(2) the greatest of—
‘‘(A) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘the second preceding cal-
endar year’ for ‘calendar year 1992’ in subpara-
graph (B) thereof,
‘‘(B) the medical consumer price index for
such calendar year determined in the same
manner as the adjustment described in sub-
paragraph (A), or
‘‘(C) 3 percent.
‘‘(i) FLOOR STOCKS TAXES.—
‘‘(1) IMPOSITION OF TAX.—On tobacco prod-
ucts and cigarette papers and tubes manufactured in
or imported into the United States which are re-
moved before any tax increase date, and held on
such date for sale by any person, there is hereby im-
posed a tax in an amount equal to the excess of—
‘‘(A) the tax which would be imposed
under any preceding subsection of this section
on the article if the article had been removed on
such date, over
‘‘(B) the prior tax (if any) imposed under
such subsection on such article.
‘‘(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
‘‘(A) LIABILITY FOR TAX.—A person hold-
ing cigarettes 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 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 April 1 following any tax increase date.
‘‘(3) 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 any tax increase date, shall be subject to the tax
imposed by paragraph (1) if—
‘‘(A) internal revenue taxes have been de-
termined, 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 pur-
suant to the 2d proviso of such section 3(a).
‘‘(4) TAX INCREASE DATE.—The term ‘‘tax in-
crease date’’ means January 1.
‘‘(5) CONTROLLED GROUPS.—Rules similar to
the rules of section 5061(e)(3) shall apply for pur-
poses of this subsection.
‘‘(6) OTHER LAWS APPLICABLE.—All provisions
of law, including penalties, applicable with respect to
the taxes imposed by the preceding subsections of
this section shall, insofar as applicable and not in-
consistent 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 im-
posed by such subsections. 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 al-
lowed or made.’’
(j) MODIFICATIONS OF CERTAIN TOBACCO TAX PRO-
VISIONS.—
‘‘(2) every person who sells or receives such re-
landed tobacco 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, and all vessels, vehicles, and aircraft used in such
relanding or in removing such products, papers, and tubes
from the place where relanded, shall be forfeited to the
United States.’’
(C) Subsection (a) of section 5761 of such
Code is amended by striking ‘‘subsection (b)’’
and inserting ‘‘subsection (b) or (c)’’.
(D) Subsection (d) of section 5761 of such
Code, as redesignated by subparagraph (B), is
amended by striking ‘‘The penalty imposed by
subsection (b)’’ and inserting ‘‘The penalties
imposed by subsections (b) and (c)’’.
(E)(i) Subpart F of chapter 52 of such
Code is amended by adding at the end the fol-
lowing 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). For purposes of this
section, section 5704(d), section 5761, and such other pro-
visions as the Secretary may specify by regulations, ref-
erences to exportation shall be treated as including a ref-
erence to shipment to the Commonwealth of Puerto Rico.
‘‘(b) CROSS REFERENCE.—
‘‘For penalty for the sale of tobacco products and
cigarette papers and tubes in the United States
which are labeled for export, see section 5761(c).’’
(ii) The table of sections for subpart F of
chapter 52 of such Code is amended by adding
at the end the following new item:
‘‘Sec. 5754. Restriction on importation of previously exported to-
bacco products.’’
(2) IMPORTERS REQUIRED TO BE QUALIFIED.—
(A) Sections 5712, 5713(a), 5721, 5722,
5762(a)(1), and 5763 (b) and (c) of such Code
are each amended by inserting ‘‘or importer’’
after ‘‘manufacturer’’.
(B) The heading of subsection (b) of sec-
tion 5763 of such Code is amended by inserting
‘‘QUALIFIED IMPORTERS,’’ after ‘‘MANUFAC-
TURERS,’’.
or activity requirements as the Secretary may pre-
scribe, or’’.
(j) REPEAL OF DUPLICATIVE PROVISIONS.—Section
9302 (other than subsection (i)(2)) of the Balanced Budg-
et Act of 1997 is repealed.
(k) EFFECTIVE DATE.—The amendments and repeal
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 section) after December 31,
1997.
SEC. 102. TAX TREATMENT FOR CERTAIN TOBACCO-RELAT-
ED EXPENSES.
(a) IN GENERAL.—Section 275(a) of the Internal
Revenue Code of 1986 (relating to certain taxes) is
amended by inserting after paragraph (6) the following:
‘‘(7) Taxes imposed by chapter 52, but only in
an amount determined at rates in excess of the rates
of such taxes effective in 1998.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1998.
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