[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 804 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 804

To amend the Internal Revenue Code of 1986 to increase the excise taxes 
on tobacco products, and to use a portion of the resulting revenues to 
 fund a trust fund for tobacco diversification, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 15, 1995

  Mr. Bradley introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to increase the excise taxes 
on tobacco products, and to use a portion of the resulting revenues to 
 fund a trust fund for tobacco diversification, 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 Consumption Reduction and 
Health Improvement Act of 1995''.

SEC. 2. INCREASE IN TAXES ON TOBACCO PRODUCTS.

    (a) In General.--
            (1) Cigars.--Subsection (a) of section 5701 of the Internal 
        Revenue Code of 1986 (relating to rate of tax on cigars) is 
        amended--
                    (A) by striking ``$1.125 cents per thousand (93.75 
                cents per thousand on cigars removed during 1991 and 
                1992)'' in paragraph (1) and inserting ``$5.8125 per 
                thousand''; and
                    (B) by striking paragraph (2) and inserting the 
                following new paragraph:
            ``(2) Large cigars.--On cigars weighing more than 3 pounds 
        per thousand, a tax equal to 65.875 percent of the price for 
        which sold but not more than $155 per thousand.''
            (2) Cigarettes.--Subsection (b) of section 5701 of such 
        Code (relating to rate of tax on cigarettes) is amended--
                    (A) by striking ``$12 per thousand ($10 per 
                thousand on cigarettes removed during 1991 and 1992)'' 
                in paragraph (1) and inserting ``$62 per thousand''; 
                and
                    (B) by striking ``$25.20 per thousand ($21 per 
                thousand on cigarettes removed during 1991 and 1992)'' 
                in paragraph (2) and inserting ``$130.20 per 
                thousand''.
            (3) Cigarette papers.--Subsection (c) of section 5701 of 
        such Code (relating to rate of tax on cigarette papers) is 
        amended by striking ``0.75 cent (0.625 cent on cigarette papers 
        removed during 1991 or 1992)'' and inserting ``3.875 cents''.
            (4) Cigarette tubes.--Subsection (d) of section 5701 of 
        such Code (relating to rate of tax on cigarette tubes) is 
        amended by striking ``1.5 cents (1.25 cents on cigarette tubes 
        removed during 1991 or 1992)'' and inserting ``7.75 cents''.
            (5) Snuff.--Paragraph (1) of section 5701(e) of such Code 
        (relating to rate of tax on smokeless tobacco) is amended by 
        striking ``36 cents (30 cents on snuff removed during 1991 or 
        1992)'' and inserting ``$16.53''.
            (6) Chewing tobacco.--Paragraph (2) of section 5701(e) of 
        such Code is amended by striking ``12 cents (10 cents on 
        chewing tobacco removed during 1991 or 1992)'' and inserting 
        ``$6.61''.
            (7) Pipe tobacco.--Subsection (f) of section 5701 of such 
        Code (relating to rate of tax on pipe tobacco) is amended by 
        striking ``67.5 cents (56.25 cents on chewing tobacco removed 
        during 1991 or 1992)'' and inserting ``$3.4875''.
            (8) Effective date.--The amendments made by this subsection 
        shall apply with respect to cigars, cigarettes, cigarette 
        paper, cigarette tubes, snuff, chewing tobacco, and pipe 
        tobacco removed after December 31, 1995.
    (b) Imposition of Excise Tax on Manufacture or Importation of Roll-
Your-Own Tobacco.--
            (1) In general.--Section 5701 of the Internal Revenue Code 
        of 1986 (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 $20.67 per pound (and a proportionate tax at the like 
rate on all fractional parts of a pound).''
            (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 tobacco'' 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 paragraph 
                        (1), by striking ``or pipe tobacco'' and 
                        inserting ``pipe tobacco, or roll-your-own 
                        tobacco'', and
                            (ii) by striking paragraph (1) and 
                        inserting the following new paragraph:
            ``(1) a person who produces cigars, cigarettes, smokeless 
        tobacco, pipe tobacco, or roll-your-own tobacco solely for the 
        person's own personal consumption 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 relating to 
                chapter 52 and inserting the following new item:

                              ``Chapter 52. Tobacco products and 
                                        cigarette papers and tubes.''
            (4) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to roll-your-own tobacco removed 
                (as defined in section 5702(p) of the Internal Revenue 
                Code of 1986, as added by this subsection) after 
                December 31, 1995.
                    (B) Transitional rule.--Any person who--
                            (i) 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
                            (ii) before January 1, 1996, 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 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 chapter 52 to 
                engage in such business.
    (c) Floor Stocks.--
            (1) Imposition of tax.--On cigars, cigarettes, cigarette 
        paper, cigarette tubes, snuff, chewing tobacco, pipe tobacco, 
        and roll-your-own tobacco manufactured in or imported into the 
        United States which is removed before January 1, 1996, and held 
        on such date for sale by any person, there shall be imposed the 
        following taxes:
                    (A) Small cigars.--On cigars, weighing not more 
                than 3 pounds per thousand, $4.6875 per thousand.
                    (B) Large cigars.--On cigars, weighing more than 3 
                pounds per thousand, a tax equal to 53.125 percent of 
                the price for which sold, but not more than $125 per 
                thousand.
                    (C) Small cigarettes.--On cigarettes, weighing not 
                more than 3 pounds per thousand, $50 per thousand.
                    (D) Large cigarettes.--On cigarettes, weighing more 
                than 3 pounds per thousand, $105 per thousand; except 
                that, if more than 6\1/2\ inches in length, they shall 
                be taxable at the rate prescribed for cigarettes 
                weighing not more than 3 pounds per thousand, counting 
                each 2\3/4\ inches, or fraction thereof, of the length 
                of each as one cigarette.
                    (E) Cigarette papers.--On cigarette papers, 3.125 
                cents for each 50 papers or fractional part thereof; 
                except that, if cigarette papers measure more than 6\1/
                2\ inches in length, they shall be taxable at the rate 
                prescribed, counting each 2\3/4\ inches, or fraction 
                thereof, of the length of each as one cigarette paper.
                    (F) Cigarette tubes.--On cigarette tubes, 6.25 
                cents for each 50 tubes or fractional part thereof; 
                except that, if cigarette tubes measure more than 6\1/
                2\ inches in length, they shall be taxable at the rate 
                prescribed, counting each 2\3/4\ inches, or fraction 
                thereof, of the length of each as one cigarette tube.
                    (G) Snuff.--On snuff, $16.17 per pound and a 
                proportionate tax at the like rate on all fractional 
                parts of a pound.
                    (H) Chewing tobacco.--On chewing tobacco, $6.49 per 
                pound and a proportionate tax at the like rate on all 
                fractional parts of a pound.
                    (I) Pipe tobacco.--On pipe tobacco, $2.8125 per 
                pound and a proportionate tax at the like rate on all 
                fractional parts of a pound.
                    (J) Roll-your-own tobacco.--On roll-your-own 
                tobacco, $20.67 per pound and a proportionate tax at 
                the like rate on all fractional parts of a pound.
            (2) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding cigars, 
                cigarettes, cigarette paper, cigarette tubes, snuff, 
                chewing tobacco, pipe tobacco, and roll-your-own 
                tobacco on January 1, 1996, 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 treated as a tax imposed under 
                section 5701 of the Internal Revenue Code of 1986 and 
                shall be due and payable on February 15, 1996, in the 
                same manner as the tax imposed under such section is 
                payable with respect to cigars, cigarettes, cigarette 
                paper, cigarette tubes, snuff, chewing tobacco, pipe 
                tobacco, and roll-your-own tobacco removed on January 
                1, 1996.
            (3) Definitions.--For purposes of this subsection, the 
        terms ``cigar'', ``cigarette'', ``cigarette paper'', 
        ``cigarette tubes'', ``snuff'', ``chewing tobacco'', ``pipe 
        tobacco'', and ``roll-your-own tobacco'' shall have the meaning 
        given to such terms by subsections (a), (b), (e), and (g), 
        paragraphs (2) and (3) of subsection (n), and subsections (o) 
        and (p) of section 5702 of the Internal Revenue Code of 1986, 
        respectively.
            (4) Exception for retail stocks.--The taxes imposed by 
        paragraph (1) shall not apply to cigars, cigarettes, cigarette 
        paper, cigarette tubes, snuff, chewing tobacco, pipe tobacco, 
        and roll-your-own tobacco in retail stocks held on January 1, 
        1996, at the place where intended to be sold at retail.
            (5) Foreign trade zones.--Notwithstanding the Act of June 
        18, 1934 (19 U.S.C. 81a et seq.) or any other provision of 
        law--
                    (A) cigars, cigarettes, cigarette paper, cigarette 
                tubes, snuff, chewing tobacco, pipe tobacco, and roll-
                your-own tobacco--
                            (i) on which taxes imposed by Federal law 
                        are determined, or customs duties are 
                        liquidated, by a customs officer pursuant to a 
                        request made under the first proviso of section 
                        3(a) of the Act of June 18, 1934 (19 U.S.C. 
                        81c(a)) before January 1, 1996, and
                            (ii) which are entered into the customs 
                        territory of the United States on or after 
                        January 1, 1996, from a foreign trade zone, and
                    (B) cigars, cigarettes, cigarette paper, cigarette 
                tubes, snuff, chewing tobacco, pipe tobacco, and roll-
                your-own tobacco which--
                            (i) are placed under the supervision of a 
                        customs officer pursuant to the provisions of 
                        the second proviso of section 3(a) of the Act 
                        of June 18, 1934 (19 U.S.C. 81c(a)) before 
                        January 1, 1996, and
                            (ii) are entered into the customs territory 
                        of the United States on or after January 1, 
                        1996, from a foreign trade zone,
        shall be subject to the tax imposed by paragraph (1) and such 
        cigars, cigarettes, cigarette paper, cigarette tubes, snuff, 
        chewing tobacco, pipe tobacco, and roll-your-own tobacco shall, 
        for purposes of paragraph (1), be treated as being held on 
        January 1, 1996, for sale.
    (d) Establishment of Trust Fund.--
            (1) In General.--Subchapter A of chapter 98 of the Internal 
        Revenue Code of 1986 (relating to trust fund code) is amended 
        by adding at the end the following new section:

``SEC. 9512. TOBACCO CONVERSION TRUST FUND.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Tobacco 
Conversion Trust Fund' (hereafter referred to in this section as the 
`Trust Fund'), consisting of such amounts as may be appropriated or 
credited to the Trust Fund as provided in this section or section 
9602(b).
    ``(b) Transfers to Trust Fund.--The Secretary shall transfer to the 
Trust Fund an amount equivalent to 3 percent of the net increase in 
revenues received in the Treasury attributable to the amendments made 
to section 5701 by subsections (a) and (b) of section 2 and the 
provisions contained in section 2(c) of the Tobacco Consumption 
Reduction and Health Improvement Act of 1995, as estimated by the 
Secretary.
    ``(c) Distribution of Amounts in Trust Fund.--Amounts in the Trust 
Fund shall be available to the Secretary of Agriculture, as provided by 
appropriation Acts, for making expenditures for purposes of--
            ``(1) providing assistance to farmers in converting from 
        tobacco to other crops and improving the access of such farmers 
        to markets for other crops, and
            ``(2) providing grants or loans to communities, and persons 
        involved in the production or manufacture of tobacco or tobacco 
        products, to support economic diversification plans that 
        provide economic alternatives to tobacco to such communities 
        and persons.
The assistance referred to in paragraph (1) may include government 
purchase of tobacco allotments for purposes of retiring such allotments 
from allotment holders and farmers who choose to terminate their 
involvement in tobacco production.''
            (2) Clerical amendment.--The table of sections for such 
        subchapter A is amended by adding at the end the following new 
        item:

                              ``Sec. 9512. Tobacco Conversion Trust 
                                        Fund.''
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