Tobacco Tax Equity Act of 2021
Bill: S.1314 | Sponsor: Sen. Durbin, Richard J. (D-IL)
Policy area: Taxation

Summary:
Tobacco Tax Equity Act of 2021
This bill increases the excise tax on cigarettes and equalizes tax rates among all other tobacco products.

To amend the Internal Revenue Code of 1986 to provide tax rate parity 
          among all tobacco products, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tobacco Tax Equity Act of 2021''.

SEC. 2. INCREASING EXCISE TAXES ON CIGARETTES AND ESTABLISHING EXCISE 
              TAX EQUITY AMONG ALL TOBACCO PRODUCT TAX RATES.

    (a) Tax Parity for Roll-Your-Own Tobacco.--Section 5701(g) of the 
Internal Revenue Code of 1986 is amended by striking ``$24.78'' and 
inserting ``$49.56''.
    (b) Tax Parity for Pipe Tobacco.--Section 5701(f) of the Internal 
Revenue Code of 1986 is amended by striking ``$2.8311 cents'' and 
inserting ``$49.56''.
    (c) Tax Parity for Smokeless Tobacco.--
            (1) Section 5701(e) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) in paragraph (1), by striking ``$1.51'' and 
                inserting ``$26.84'';
                    (B) in paragraph (2), by striking ``50.33 cents'' 
                and inserting ``$10.74''; and
                    (C) by adding at the end the following:
            ``(3) Smokeless tobacco sold in discrete single-use 
        units.--On discrete single-use units, $100.66 per thousand.''.
            (2) Section 5702(m) of such Code is amended--
                    (A) in paragraph (1), by striking ``or chewing 
                tobacco'' and inserting ``, chewing tobacco, or 
                discrete single-use unit'';
                    (B) in paragraphs (2) and (3), by inserting ``that 
                is not a discrete single-use unit'' before the period 
                in each such paragraph; and
                    (C) by adding at the end the following:
            ``(4) Discrete single-use unit.--The term `discrete single-
        use unit' means any product containing, made from, or derived 
        from tobacco or nicotine that--
                    ``(A) is not intended to be smoked; and
                    ``(B) is in the form of a lozenge, tablet, pill, 
                pouch, dissolvable strip, or other discrete single-use 
                or single-dose unit.''.
    (d) Tax Parity for Small Cigars.--Paragraph (1) of section 5701(a) 
of the Internal Revenue Code of 1986 is amended by striking ``$50.33'' 
and inserting ``$100.66''.
    (e) Tax Parity for Large Cigars.--
            (1) In general.--Paragraph (2) of section 5701(a) of the 
        Internal Revenue Code of 1986 is amended by striking ``52.75 
        percent'' and all that follows through the period and inserting 
        the following: ``$49.56 per pound and a proportionate tax at 
        the like rate on all fractional parts of a pound but not less 
        than 10.066 cents per cigar.''.
            (2) Guidance.--The Secretary of the Treasury, or the 
        Secretary's delegate, may issue guidance regarding the 
        appropriate method for determining the weight of large cigars 
        for purposes of calculating the applicable tax under section 
        5701(a)(2) of the Internal Revenue Code of 1986.
    (f) Tax Parity for Roll-Your-Own Tobacco and Certain Processed 
Tobacco.--Subsection (o) of section 5702 of the Internal Revenue Code 
of 1986 is amended by inserting ``, and includes processed tobacco that 
is removed for delivery or delivered to a person other than a person 
with a permit provided under section 5713, but does not include 
removals of processed tobacco for exportation'' after ``wrappers 
thereof''.
    (g) Clarifying Tax Rate for Other Tobacco Products.--
            (1) In general.--Section 5701 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following new 
        subsection:
    ``(i) Other Tobacco Products.--Any product not otherwise described 
under this section that has been determined to be a tobacco product by 
the Food and Drug Administration through its authorities under the 
Family Smoking Prevention and Tobacco Control Act shall be taxed at a 
level of tax equivalent to the tax rate for cigarettes on an estimated 
per use basis as determined by the Secretary.''.
            (2) Establishing per use basis.--For purposes of section 
        5701(i) of the Internal Revenue Code of 1986, not later than 12 
        months after the later of the date of the enactment of this Act 
        or the date that a product has been determined to be a tobacco 
        product by the Food and Drug Administration, the Secretary of 
        the Treasury (or the Secretary of the Treasury's delegate) 
        shall issue final regulations establishing the level of tax for 
        such product that is equivalent to the tax rate for cigarettes 
        on an estimated per use basis.
    (h) Clarifying Definition of Tobacco Products.--
            (1) In general.--Subsection (c) of section 5702 of the 
        Internal Revenue Code of 1986 is amended to read as follows:
    ``(c) Tobacco Products.--The term `tobacco products' means--
            ``(1) cigars, cigarettes, smokeless tobacco, pipe tobacco, 
        and roll-your-own tobacco, and
            ``(2) any other product subject to tax pursuant to section 
        5701(i).''.
            (2) Conforming amendments.--Subsection (d) of section 5702 
        of such Code is amended by striking ``cigars, cigarettes, 
        smokeless tobacco, pipe tobacco, or roll-your-own tobacco'' 
        each place it appears and inserting ``tobacco products''.
    (i) Increasing Tax on Cigarettes.--
            (1) Small cigarettes.--Section 5701(b)(1) of such Code is 
        amended by striking ``$50.33'' and inserting ``$100.66''.
            (2) Large cigarettes.--Section 5701(b)(2) of such Code is 
        amended by striking ``$105.69'' and inserting ``$211.38''.
    (j) Tax Rates Adjusted for Inflation.--Section 5701 of such Code, 
as amended by subsection (g), is amended by adding at the end the 
following new subsection:
    ``(j) Inflation Adjustment.--
            ``(1) In general.--In the case of any calendar year 
        beginning after 2021, the dollar amounts provided under this 
        chapter shall each be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year, determined 
                by substituting `calendar year 2020' for `calendar year 
                2016' in subparagraph (A)(ii) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $0.01, such amount shall be rounded to 
        the next highest multiple of $0.01.''.
    (k) Floor Stocks Taxes.--
            (1) Imposition of tax.--On tobacco products manufactured in 
        or imported into the United States which are removed before any 
        tax increase date 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 removed on such date, 
                over
                    (B) the prior tax (if any) imposed under section 
                5701 of such Code on such article.
            (2) 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) on such date for which such person is 
        liable.
            (3) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding tobacco 
                products 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 imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe by regulations.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) shall be paid on or before the date that is 120 
                days after the effective date of the tax rate increase.
            (4) Articles in foreign trade zones.--Notwithstanding the 
        Act of June 18, 1934 (commonly known as the Foreign Trade Zone 
        Act, 48 Stat. 998, 19 U.S.C. 81a et seq.), or 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 determined, or 
                customs duties liquidated, with respect to such article 
                before such date pursuant to a request made under the 
                first proviso of section 3(a) of such Act, or
                    (B) such article is held on such date under the 
                supervision of an officer of the United States Customs 
                and Border Protection of the Department of Homeland 
                Security pursuant to the second proviso of such section 
                3(a).
            (5) Definitions.--For purposes of this subsection--
                    (A) In general.--Any term used in this subsection 
                which is also used in section 5702 of such Code shall 
                have the same meaning as such term has in such section.
                    (B) Tax increase date.--The term ``tax increase 
                date'' means the effective date of any increase in any 
                tobacco product excise tax rate pursuant to the 
                amendments made by this section (other than subsection 
                (j) thereof).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
            (6) Controlled groups.--Rules similar to the rules of 
        section 5061(e)(3) of such Code shall apply for purposes of 
        this subsection.
            (7) 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 paragraph (1) as 
        the person to whom a credit or refund under such provisions may 
        be allowed or made.
    (l) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) 
        through (4), the amendments made by this section shall apply to 
        articles removed (as defined in section 5702(j) of the Internal 
        Revenue Code of 1986) after the last day of the month which 
        includes the date of the enactment of this Act.
            (2) Discrete single-use units and processed tobacco.--The 
        amendments made by subsections (c)(1)(C), (c)(2), and (f) shall 
        apply to articles removed (as defined in section 5702(j) of the 
        Internal Revenue Code of 1986) after the date that is 6 months 
        after the date of the enactment of this Act.
            (3) Large cigars.--The amendments made by subsection (e) 
        shall apply to articles removed after December 31, 2021.
            (4) Other tobacco products.--The amendments made by 
        subsection (g)(1) shall apply to products removed after the 
        last day of the month which includes the date that the 
        Secretary of the Treasury (or the Secretary of the Treasury's 
        delegate) issues final regulations establishing the level of 
        tax for such product.
                                 <all>