[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 1491 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                S. 1491

          To increase the excise tax rate on tobacco products.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 8, 1997

Mr. Kennedy (for himself, Mr. Lautenberg, Mr. Durbin, Mr. Reed, and Mr. 
Kerry) introduced the following bill; which was read twice and referred 
                      to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
          To increase the excise tax rate on tobacco products.

    Be it enacted by the Senate and House of Representatives 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 applicable rate per thousand determined in 
        accordance with the following table:

                                                         The applicable
``In the case of cigarettes removed                            rate is:
        during:
    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:

                                                         The applicable
``In the case of cigarettes removed                            rate is:
        during:
    1998..........................................              $25.20 
    1999..........................................              $77.70 
    2000..........................................             $140.70 
    2001..........................................             $193.20 
    2002..........................................             $198.45.
                    ``(B) Exception.--On cigarettes more than 6\1/2\ 
                inches in length, 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.''
    (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 accordance with the following table:

      

           ``In the case of       The applicable rate is:               
            cigars removed                                              
            during:                                                     
             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 percentage of the price for which 
        sold but not more that the applicable rate per thousand 
        determined in accordance with the following table:

      

             In the case of cigars removed  The applicable percentage is:      The applicable rate is:          
              during:                                                                                           
                                                                                                                
                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 paragraph (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 imposed a tax of the applicable rate for each 50 
papers or fractional part thereof as determined in accordance with the 
following table:

                                                         The applicable
``In the case of cigarette papers                              rate is:
        removed during:
    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 
        6\1/2\ inches in length, such cigarette papers 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.''
    (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 paragraph (2), on 
        cigarette tubes, manufactured in or imported into the United 
        States, there shall be imposed a tax of the applicable rate for 
        each 50 tubes or fractional part thereof as determined in 
        accordance with the following table:

                                                         The applicable
``In the case of cigarette tubes                               rate is:
        removed during:
    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 6\1/
        2\ inches in length, such cigarette tubes 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.''
    (e) Smokeless Tobacco.--Paragraphs (1) and (2) of subsection (e) of 
section 5701 of such Code are 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):

                                                         The applicable
``In the case of snuff removed                                 rate is:
        during:
    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 accordance with the following 
        table (and a proportionate tax at the like rate on all 
        fractional parts of a pound):

                                                         The applicable
``In the case of chewing tobacco                               rate is:
        removed during:
    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, 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 fractional parts of a pound):

      

           ``In the case of pipe  The applicable rate is:               
            tobacco removed                                             
            during:                                                     
             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 fractional parts of a pound):

      

           ``In the case of roll- The applicable rate is:               
            your-own tobacco                                            
            removed during:                                             
             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 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.''
    (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 calendar year after 
2002, the dollar amount contained in the table in each of the preceding 
subsections (and the percentage 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), multiplied by
            ``(2) the greatest of--
                    ``(A) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `the second preceding calendar year' for 
                `calendar year 1992' in subparagraph (B) thereof,
                    ``(B) the medical consumer price index for such 
                calendar year determined in the same manner as the 
                adjustment described in subparagraph (A), or
                    ``(C) 3 percent.
    ``(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 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 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 payment.--
                    ``(A) Liability for tax.--A person holding 
                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 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 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 determined, 
                or customs duties liquidated, with respect to such 
                article before such date pursuant to a request made 
                under the 1st proviso of section 3(a) of such Act, or
                    ``(B) such article is held on such date under the 
                supervision of a customs officer pursuant to the 2d 
                proviso of such section 3(a).
            ``(4) Tax increase date.--The term ``tax increase date'' 
        means January 1.
            ``(5) Controlled groups.--Rules similar to the rules of 
        section 5061(e)(3) shall apply for purposes 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 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 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 allowed or made.''
    (i) Modifications of Certain Tobacco Tax Provisions.--
            (1) Exemption for exported tobacco products and cigarette 
        papers and tubes to apply only to articles marked for export.--
                    (A) Subsection (b) of section 5704 of such Code is 
                amended by adding at the end the following new 
                sentence: ``Tobacco products and cigarette papers and 
                tubes may not be transferred or removed under this 
                subsection unless such products or papers and tubes 
                bear such marks, labels, or notices as the Secretary 
                shall by regulations prescribe.''
                    (B) Section 5761 of such Code is amended by 
                redesignating subsections (c) and (d) as subsections 
                (d) and (e), respectively, and by inserting after 
                subsection (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 tobacco 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 relanded 
        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 following new section:

``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY 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 
provisions 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 of such Code is amended by adding at the end the 
                following new item:

                              ``Sec. 5754. Restriction on importation 
                                        of previously exported tobacco 
                                        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 section 5763 
                of such Code is amended by inserting ``Qualified 
                Importers,'' after ``Manufacturers,''.
                    (C) The heading for subchapter B of chapter 52 of 
                such Code is amended by inserting ``and Importers'' 
                after ``Manufacturers''.
                    (D) The item relating to subchapter B in the table 
                of subchapters for chapter 52 of such Code is amended 
                by inserting ``and importers'' after ``manufacturers''.
            (3) Books of 25 or fewer cigarette papers subject to tax.--
        Subsection (c) of section 5701 of such Code is amended by 
        striking ``On each book or set of cigarette papers containing 
        more than 25 papers,'' and inserting ``On cigarette papers,''.
            (4) Storage of tobacco products.--Subsection (k) of section 
        5702 of such Code is amended by inserting ``under section 
        5704'' after ``internal revenue bond''.
            (5) Authority to prescribe minimum manufacturing activity 
        requirements.--Section 5712 of such Code 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 prescribe, or''.
    (j) Repeal of Duplicative Provisions.--Section 9302 (other than 
subsection (i)(2)) of the Balanced Budget 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-RELATED 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.
                                 <all>