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(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 is
amended to read as follows:
‘‘CHAPTER 52—TOBACCO PRODUCTS AND
CIGARETTE PAPERS AND TUBES’’.
(D) 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.’’.
(h) MODIFICATIONS OF CERTAIN TOBACCO TAX PROVI-
SIONS.—
(1) EXEMPTION FOR EXPORTED TOBACCO PROD-
UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY
ONLY TO ARTICLES MARKED FOR EXPORT.—
(A) Subsection (b) of section 5704 is amend-
ed by adding at the end 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 pa-
pers and tubes bear such marks, labels, or notices
as the Secretary shall by regulations prescribe.’’.
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(B) Section 5761 is amended by redesignat-
ing subsections (c) and (d) as subsections (d)
and (e), respectively, and by inserting after sub-
section (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 re-
landed tobacco products or cigarette papers or tubes,
and
‘‘(3) every person who aids or abets in such sell-
ing, 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.’’.
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(C) Subsection (a) of section 5761 is
amended by striking ‘‘subsection (b)’’ and insert-
ing ‘‘subsection (b) or (c)’’.
(D) Subsection (d) of section 5761, as redes-
ignated by subparagraph (B), is amended by
striking ‘‘The penalty imposed by subsection (b)’’
and inserting ‘‘The penalties imposed by sub-
sections (b) and (c)’’.
(E)(i) Subpart F of chapter 52 is amended
by adding at the end 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). For purposes of this
section, section 5704(d), section 5761, and such other provi-
sions as the Secretary may specify by regulations, references
to exportation shall be treated as including a reference 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 is amended by adding at the end the
following new item:
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‘‘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) are each
amended by inserting ‘‘or importer’’ after ‘‘man-
ufacturer’’.
(B) The heading of subsection (b) of section
5763 is amended by inserting ‘‘QUALIFIED IM-
PORTERS,’’ after ‘‘MANUFACTURERS,’’.
(C) The heading for subchapter B of chapter
52 is amended by inserting ‘‘and Importers’’
after ‘‘Manufacturers’’.
(D) The item relating to subchapter B in
the table of subchapters for chapter 52 is amend-
ed by inserting ‘‘and importers’’ after ‘‘manufac-
turers’’.
(3) 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 insert-
ing ‘‘On cigarette papers,’’.
(4) STORAGE
OF
TOBACCO
PRODUCTS.—Sub-
section (k) of section 5702 is amended by inserting
‘‘under section 5704’’ after ‘‘internal revenue bond’’.
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(5) AUTHORITY TO PRESCRIBE MINIMUM MANU-
FACTURING 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’’.
(i) EFFECTIVE DATE.—
(1) IN
GENERAL.—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 section) after September 30,
1997.
(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 tobacco
products or cigarette papers and tubes, and
(B) before October 1, 1997, submits an ap-
plication under subchapter B of chapter 52 of
such Code to engage in such business,
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may, notwithstanding such subchapter B, continue 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 and to the same extent as if such
applicant were a holder of a permit under such chap-
ter 52 to engage in such business.
(j) FLOOR STOCKS TAXES.—
(1) IMPOSITION OF TAX.—On tobacco products
and cigarette papers and tubes manufactured in or
imported into the United States which are removed
before October 1, 1997, 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 of the Internal Revenue Code of
1986 on the article if the article had been re-
moved on such date, over
(B) the prior tax (if any) imposed under
section 5701 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 re-
tail sale on October 1, 1997, by any person in any
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respect to short taxable years which begin during 1998 by
reason of section 843 of the Internal Revenue Code of 1986.
Subtitle G—Foreign Provisions
SEC. 861. DEFINITION OF FOREIGN PERSONAL HOLDING
COMPANY INCOME.
(a) INCOME FROM NOTIONAL PRINCIPAL CONTRACTS
AND PAYMENTS IN LIEU OF DIVIDENDS.—
(1) IN
GENERAL.—Paragraph (1) of section
954(c) (defining foreign personal holding company
income) is amended by adding at the end the follow-
ing new subparagraphs:
‘‘(F) INCOME
FROM
NOTIONAL
PRINCIPAL
CONTRACTS.—Net income from notional prin-
cipal contracts. Any item of income, gain, deduc-
tion, or loss from a notional principal contract
entered into for purposes of hedging any item de-
scribed in any preceding subparagraph shall not
be taken into account for purposes of this sub-
paragraph but shall be taken into account under
such other subparagraph.
‘‘(G) PAYMENTS IN LIEU OF DIVIDENDS.—
Payments in lieu of dividends which are made
pursuant to an agreement to which section 1058
applies.’’.