I 
108TH CONGRESS 
1ST SESSION 
H. R. 986
To replace the existing Federal tobacco program with a federally chartered 
corporation to ensure the stability of the price and supply of domestically 
produced tobacco, to compensate quota holders for the loss of tobacco 
quota asset value, to provide transition assistance for active tobacco 
producers, to increase the competitiveness of domestically produced to-
bacco, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 27, 2003
Mr. GOODE (for himself, Mr. LEWIS of Kentucky, and Mr. JONES of North 
Carolina) introduced the following bill; which was referred to the Com-
mittee on Agriculture, and in addition to the Committee on Ways and 
Means, for a period to be subsequently determined by the Speaker, in 
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned 
A BILL 
To replace the existing Federal tobacco program with a fed-
erally chartered corporation to ensure the stability of 
the price and supply of domestically produced tobacco, 
to compensate quota holders for the loss of tobacco quota 
asset value, to provide transition assistance for active 
tobacco producers, to increase the competitiveness of do-
mestically produced tobacco, 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; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Tobacco Market Transition Act’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
Sec. 2. Definitions. 
Sec. 3. Purposes. 
TITLE I—TOBACCO COMMUNITY REVITALIZATION TRUST FUND 
Sec. 101. Tobacco Community Revitalization Trust Fund. 
TITLE II—TOBACCO MARKET TRANSITION ASSISTANCE 
Sec. 201. Compensation to quota holders for loss of tobacco quota asset value. 
Sec. 202. Transition payments for active tobacco producers. 
Sec. 203. Tobacco loan associations. 
Sec. 204. Transition payments for other persons involved in tobacco production 
and marketing. 
Sec. 205. Tax treatment of compensation and transition payments. 
TITLE III—ESTABLISHMENT OF PRIVATE TOBACCO PRODUCTION 
ADJUSTMENT AND QUALITY ASSURANCE PROGRAMS 
Sec. 301. Establishment and duties of Tobacco Production Control Corporation. 
Sec. 302. Board of directors of Corporation. 
Sec. 303. Board meetings. 
Sec. 304. Staff. 
Sec. 305. General powers of Corporation. 
Sec. 306. Corporation relationship with tobacco loan associations. 
Sec. 307. Tobacco base price levels. 
Sec. 308. Penalties. 
Sec. 309. Program referenda. 
TITLE IV—TERMINATION OF CURRENT TOBACCO PROGRAMS 
Sec. 401. Termination of marketing quota programs and repeal of related pro-
visions. 
Sec. 402. Termination of tobacco price support loan and no net cost provisions 
and repeal of related provisions. 
Sec. 403. Continued availability of Federal crop insurance.
SEC. 2. DEFINITIONS. 
In this Act: 
(1) ACTIVE
TOBACCO
PRODUCER.—The term 
‘‘active tobacco producer’’ means a person that—
(A) is the actual producer, as determined 
by the Secretary, of tobacco on a farm where 
tobacco is produced pursuant to a tobacco farm 
marketing quota or farm acreage allotment es-
tablished under the Agricultural Adjustment 
Act of 1938 (7 U.S.C. 1281 et seq.) for the 
2002 or 2003 crop year; and 
(B) planted the crop, or is considered to 
have planted the crop under that Act, in 2001, 
2002, or 2003. 
(2) ASSOCIATION.—The term ‘‘Association’’ 
means a producer-owned cooperative marketing asso-
ciation. 
(3) CORPORATION.—The term ‘‘Corporation’’ 
means the Tobacco Production Control Corporation 
established by section 301. 
(4) QUOTA HOLDER.—The term ‘‘quota holder’’ 
means an owner, as of January 1, 2003, of a to-
bacco farm marketing quota or a farm acreage allot-
ment established under the Agricultural Adjustment 
Act of 1938 (7 U.S.C. 1281 et seq.) for the 2002 
marketing year. 
(5) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Agriculture.
(6) TRUST
FUND.—The term ‘‘Trust Fund’’ 
means the Tobacco Community Revitalization Trust 
Fund established by section 101. 
SEC. 3. PURPOSES. 
It is the purpose of this Act—
(1) to terminate the existing Federal tobacco 
program and establish federally chartered corpora-
tion to ensure the stability of the price and supply 
of domestically produced tobacco; 
(2) to compensate quota holders for the loss of 
tobacco quota asset value as a result of the termi-
nation of the existing Federal tobacco program; 
(3) to provide transition assistance to active to-
bacco producers; and 
(4) to make domestically produced tobacco 
more competitive with tobacco produced in other 
countries by reducing the operating costs of tobacco 
producers through the elimination of expenses asso-
ciated with buying or leasing tobacco quota. 
TITLE I—TOBACCO COMMUNITY 
REVITALIZATION TRUST FUND 
SEC. 101. TOBACCO COMMUNITY REVITALIZATION TRUST 
FUND. 
(a) IN GENERAL.—
(1) ESTABLISHMENT.—There is established in 
the Treasury of the United States a trust fund to 
be known as the ‘‘Tobacco Community Revitalization 
Trust Fund’’. 
(2) CONTENTS.—The Trust Fund shall consist 
of such amounts as may be appropriated or credited 
to the Trust Fund, including funds held in a No Net 
Cost Tobacco Fund or No Net Cost Tobacco Ac-
count that are transferred to the Trust Fund under 
section 203(c). 
(b) ADMINISTRATION.—The Trust Fund shall be ad-
ministered by the Tobacco Production Control Corpora-
tion. 
(c) EXPENDITURES FROM TRUST FUND.—Amounts 
in the Trust Fund shall be available for making expendi-
tures to defray—
(1) the costs of providing compensation to 
quota holders for the loss of tobacco quota asset 
value under section 201; 
(2) the costs of making transition payments to 
active tobacco producers under section 202; 
(3) the costs of forgiving loans and transferring 
title to inventories of tobacco and funds to the Com-
modity Credit Corporation under section 203;
(4) the costs of making transition payments to 
other persons directly involved in tobacco production 
and marketing under section 204; 
(5) the costs of carrying out the duties of the 
Corporation and the Associations, including assuring 
the quality and controlling the production and mar-
keting of domestic tobacco and otherwise carrying 
out title III; and 
(6) the costs to the Secretary and the Corpora-
tion of enforcing title III. 
TITLE II—TOBACCO MARKET 
TRANSITION ASSISTANCE 
SEC. 201. COMPENSATION TO QUOTA HOLDERS FOR LOSS 
OF TOBACCO QUOTA ASSET VALUE. 
(a) PAYMENT AUTHORITY.—Using amounts in the 
Trust Fund, the Corporation shall make payments for to-
bacco quota to eligible quota holders. 
(b) ELIGIBILITY.—To be eligible to receive payments 
under this section, a quota holder shall prepare and sub-
mit to the Corporation an application at such time, in such 
manner, and containing such information as the Corpora-
tion may require, including information sufficient to dem-
onstrate to the satisfaction of the Corporation that the 
person was a quota holder on January 1, 2003. 
(c) BASE QUOTA LEVEL.—
(1) IN GENERAL.—For each eligible quota hold-
er that submits an application under subsection (b), 
the Secretary shall determine and provide to the 
Corporation the base quota level of the quota holder. 
(2) LEVEL.—For each kind of tobacco for 
which the marketing quota is expressed in pounds, 
the base quota level for a quota holder shall be equal 
to, at the election of the quota holder—
(A) the tobacco farm marketing quota es-
tablished under the Agriculture Adjustment Act 
of 1938 for the 2002 marketing year for quota 
tobacco on the farm owned by the quota holder; 
or 
(B) the average of the tobacco farm mar-
keting quota established under the Agriculture 
Adjustment Act of 1938 for the 1997, 1998, 
and 1999 marketing years for quota tobacco on 
the farm owned by the quota holder. 
(3) MARKETING QUOTAS OTHER THAN POUND-
AGE QUOTAS.—For each kind of tobacco for which 
there is a marketing quota or allotment (on an acre-
age basis), the base quota level for each eligible 
quota holder shall be determined in accordance with 
this subsection (based on a poundage conversion) in
an amount equal to the product obtained by multi-
plying—
(A) the tobacco farm marketing quota or 
allotment established under the Agriculture Ad-
justment Act of 1938 for the 2002 marketing 
year (or, at the election of the quota holder, the 
average of the tobacco farm marketing quota or 
allotment established under such for the 1997, 
1998, and 1999 marketing years, for the quota 
holder’s farm; by 
(B) the average yield per acre for the 
quota holder’s farm for the kind of tobacco for 
that marketing year or those marketing years, 
whichever applies. 
(d) PAYMENT
AMOUNT.—The Corporation shall 
make payments to each eligible quota holder in a total 
amount equal to the product obtained by multiplying—
(1) $8 per pound; by 
(2) the base quota level established for the 
quota holder under subsection (c). 
(e) TIME FOR PAYMENT.—The amount determined 
under subsection (d) for a quota holder shall be paid in 
five equal installments during each of the 2003 through 
2007 crops of tobacco.
SEC. 202. TRANSITION PAYMENTS FOR ACTIVE TOBACCO 
PRODUCERS. 
(a) PAYMENT AUTHORITY.—Using amounts in the 
Trust Fund, the Corporation shall make transition pay-
ments to eligible active tobacco producers. 
(b) ELIGIBILITY.—To be eligible to receive payments 
under this section, an active tobacco producer shall pre-
pare and submit to the Corporation an application at such 
time, in such manner, and containing such information as 
the Corporation may require, including information suffi-
cient to demonstrate to the satisfaction of the Corporation 
that, the person planted, or is considered to have planted, 
a 2001, 2002, or 2003 crop of tobacco. 
(c) PAYMENT QUANTITY.—
(1) IN GENERAL.—For each eligible active to-
bacco producer that submits an application under 
subsection (b), the Secretary shall determine and 
provide to the Corporation, the production quantity 
of the producer eligible for payments under this sec-
tion. 
(2) ELIGIBLE
PRODUCTION
QUANTITY.—The 
production quantity eligible for payment for an ac-
tive tobacco producer shall be equal to, at the elec-
tion of the active tobacco producer—
(A) the quantity, in pounds, of quota to-
bacco subject to the quota produced by the pro-
ducer under the Agriculture Adjustment Act of 
1938 for the 2002 marketing year; or 
(B) the average quantity, in pounds, of 
quota tobacco subject to the quota produced by 
the producer under the Agriculture Adjustment 
Act of 1938 for the 1997, 1998, and 1999 mar-
keting years. 
(3) MARKETING QUOTAS OTHER THAN POUND-
AGE QUOTAS.—For each kind of tobacco for which 
there is a marketing quota or allotment on an acre-
age basis, the production quantity eligible for pay-
ment for each active tobacco producer shall be equal 
to, at the election of the active tobacco producer—
(A) the actual pounds marketed for the 
2002 crop year; or 
(B) the average of the actual pounds mar-
keted for the 1997, 1998, and 1999 crop years. 
(d) PAYMENT
AMOUNT.—The Corporation shall 
make payments to each active tobacco producer in a total 
amount equal to the product obtained by multiplying—
(1) $4 per pound; by 
(2) the production base established for the ac-
tive producer under subsection (c). 
(e) TIME FOR PAYMENT.—The amount determined 
under subsection (d) for an active tobacco producer shall
be paid in five equal installments during each of the 2003 
through 2007 crops of tobacco. 
(f) DEATH OF ACTIVE TOBACCO PRODUCER.—If an 
active tobacco producer who is entitled to payments under 
this section dies and is survived by a spouse or one or 
more dependents, the right to receive the payments shall 
transfer to the surviving spouse or, if there is no surviving 
spouse, to the estate of the producer. 
SEC. 203. TOBACCO LOAN ASSOCIATIONS. 
(a) PRIOR LOANS.—The Secretary shall forgive each 
loan made to an Association under section 106A or 106B 
of the Agricultural Act of 1949 (7 U.S.C. 1445 1, 1445 
2) that is outstanding on the date of enactment of this 
Act. 
(b) TRANSFER OF TITLE FOR LOAN INVENTORIES.—
The Secretary shall transfer to the Commodity Credit Cor-
poration the title to all inventories of tobacco held by the 
Secretary to secure loans made to the Association under 
section 106A or 106B of the Agricultural Act of 1949 (7 
U.S.C. 1445 1, 1445 2). 
(c) NO NET COST TOBACCO FUNDS.—Notwith-
standing sections 106A(f) and 106B(g) of the Agricultural 
Act of 1949 (7 U.S.C. 1445–1(f) and 1445–2(g)), all 
funds held in a No Net Cost Tobacco Fund or No Net 
Cost Tobacco Account on behalf of an Association under
section 106A or 106B of that Act (7 U.S.C. 1445–1, 
1445–2) on the day before the date of enactment of this 
Act shall be transferred to the Trust Fund. 
SEC. 204. TRANSITION PAYMENTS FOR OTHER PERSONS IN-
VOLVED 
IN 
TOBACCO 
PRODUCTION 
AND 
MARKETING. 
(a) PAYMENTS
FOR OTHER PERSONS.—The Cor-
poration shall consider the feasibility of making transition 
payments to tobacco graders, inspectors, checkers, auc-
tioneers, equipment dealers, warehousemen, and other 
persons who are adversely and directly affected by the ter-
mination of the Federal tobacco program. 
(b) RULES.—Payment amounts under this section 
shall be established by and made according to the rules 
issued by the Corporation.
SEC. 205. TAX TREATMENT OF COMPENSATION AND TRAN-
SITION PAYMENTS. 
(a) IN GENERAL.—Part II of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
items specifically included in gross income) is amended by 
adding at the end the following new section: 
‘‘SEC. 91. TOBACCO QUOTA HOLDER COMPENSATION AND 
TRANSITION PAYMENTS. 
‘‘(a) COMPENSATION TO QUOTA HOLDERS FOR LOSS 
OF TOBACCO QUOTA ASSET VALUE.—Any amount re-
(b) DUTIES.—
(1) IN GENERAL.—Effective for the 2003 and 
each subsequent crop of each kind of tobacco, the 
Corporation shall be responsible for the promulga-
tion of rules governing the production, marketing, 
importation, exportation, and consumer quality as-
surances for each kind of tobacco. 
(2) MAJORITY VOTE REQUIRED.—The promul-
gation of rules under this section and other decisions 
of the Corporation under this section shall require at 
least a majority vote of the Board of Directors of 
the Corporation. 
(c) PRODUCTION AND MARKETING LICENSES.—
(1) IN GENERAL.—The Corporation shall estab-
lish a licensing system that provides for the orderly 
production and marketing of tobacco in the United 
States. The Corporation shall issue marketing li-
censes to tobacco marketing facilities and tobacco 
purchasing entities. 
(2) INITIAL LICENSE.—The Corporation shall 
issue a license to each active tobacco producer, or 
other person that meets requirements established by 
the Corporation, initially based upon the eligible pro-
duction quantity determined for each active tobacco 
producer under section 202(c).