[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2558 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2558

  To improve the health of Americans and reduce health care costs by 
    reorienting the Nation's health care system towards prevention, 
                        wellness, and self care.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 22, 2004

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

_______________________________________________________________________

                                 A BILL


 
  To improve the health of Americans and reduce health care costs by 
    reorienting the Nation's health care system towards prevention, 
                        wellness, and self care.

    Be it enacted by the Senate and House of Representatives 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 ``Healthy Lifestyles 
and Prevention America Act'' or the ``HeLP America Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
                  TITLE I--HEALTHIER KIDS AND SCHOOLS

Sec. 101. Fruit and vegetable program. 
Sec. 102. School wellness policy; competitive foods.
Sec. 103. Healthy school nutrition environment incentive grants. 
Sec. 104. Grants for the integration of schools and mental health 
                            systems. 
             TITLE II--HEALTHIER COMMUNITIES AND WORKPLACES

             Subtitle A--Incentives for a Healthy Workforce

Sec. 201. Short title.
Sec. 202. Tax credit to employers for costs of implementing wellness 
                            programs.
Sec. 203. Income exclusion for employer-provided off-premises health 
                            club services.
Sec. 204. CDC and employer-based wellness programs.
                    Subtitle B--Healthy Communities

Sec. 211. Healthy community grants.
Sec. 212. Living well with a disability and working well with a 
                            disability programs.
Sec. 213. Enhanced standards for roads and intersection controls. 
Sec. 214. Mental health surveillance. 
           Subtitle C--Family Smoking Prevention and Control

Sec. 221. Short title.
Sec. 222. Findings.
Sec. 223. Purpose.
Sec. 224. Scope and effect.
Sec. 225. Severability.
        Chapter 1--Authority of the Food and Drug Administration

Sec. 231. Amendment of Federal Food, Drug, and Cosmetic Act.
Sec. 232. Interim final rule.
Sec. 233. Conforming and other amendments to general provisions.
Chapter 2--Tobacco Product Warnings; Constituent and Smoke Constituent 
                               Disclosure

Sec. 241. Cigarette label and advertising warnings.
Sec. 242. Authority to revise cigarette warning label Statements.
Sec. 243. State regulation of cigarette advertising and promotion.
Sec. 244. Smokeless tobacco labels and advertising warnings.
Sec. 245. Authority to revise smokeless tobacco product warning label 
                            Statements.
Sec. 246. Tar, nicotine, and other smoke constituent disclosure to the 
                            public.
       Chapter 3--Prevention of Illicit Trade in Tobacco Products

Sec. 251. Labeling, recordkeeping, records inspection.
Sec. 252. Study and report.
        TITLE III--RESPONSIBLE MARKETING AND CONSUMER AWARENESS

                     Subtitle A--General Provisions

Sec. 301. Nutrition labeling of restaurant foods. 
Sec. 302. Rulemaking authority for advertising to children. 
Sec. 303. Food advertising in schools. 
Sec. 304. Disallowance of deductions for advertising and marketing 
                            expenses relating to tobacco product use.
Sec. 305. Federal-State tobacco counter-advertising programs.
        Subtitle B--Penalties for Failure to Reduce Teen Smoking

Sec. 311. Child cigarette use surveys.
Sec. 312. Cigarette use reduction goal and noncompliance.
Sec. 313. Enforcement.
      TITLE IV--REIMBURSEMENT AND COVERAGE OF PREVENTIVE SERVICES

Sec. 401. Coverage of substance use (other than tobacco), diet, 
                            exercise, injury prevention, and dental 
                            health counseling.
Sec. 402. Preventive mental health screenings.
Sec. 403. Encouragement of cessation of tobacco use.
Sec. 404. Preventive health services for women. 
  TITLE V--HELP (HEALTHY LIFESTYLES AND PREVENTION) AMERICA TRUST FUND

Sec. 501. HELP (healthy lifestyles and prevention) America Trust Fund.
                           TITLE VI--RESEARCH

Sec. 601. Expansion of research regarding obesity. 
         TITLE VII--PROVISIONS DESIGNED TO CURTAIL TAX SHELTERS

Sec. 700. Amendment of 1986 Code.
Sec. 701. Clarification of economic substance doctrine.
Sec. 702. Penalty for failing to disclose reportable transaction.
Sec. 703. Accuracy-related penalty for listed transactions and other 
                            reportable transactions having a 
                            significant tax avoidance purpose.
Sec. 704. Penalty for understatements attributable to transactions 
                            lacking economic substance, etc.
Sec. 705. Modifications of substantial understatement penalty for 
                            nonreportable transactions.
Sec. 706. Tax shelter exception to confidentiality privileges relating 
                            to taxpayer communications.
Sec. 707. Disclosure of reportable transactions.
Sec. 708. Modifications to penalty for failure to register tax 
                            shelters.
Sec. 709. Modification of penalty for failure to maintain lists of 
                            investors.
Sec. 710. Modification of actions to enjoin certain conduct related to 
                            tax shelters and reportable transactions.
Sec. 711. Penalty for promoting abusive tax shelters.
Sec. 712. Statute of limitations for taxable years for which required 
                            listed transactions not reported.
Sec. 713. Denial of deduction for interest on underpayments 
                            attributable to nondisclosed reportable and 
                            noneconomic substance transactions.
Sec. 714. Penalty for aiding and abetting the understatement of tax 
                            liability.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Health care costs in the United States are rising 
        rapidly. On a per capita basis, the United States spends 40 
        percent more than any other country on health care as a 
        proportion of our gross domestic product.
            (2) The United States spends over $1,800,000,000,000 
        annually on health care, 75 percent of which is spent on the 
        treatment of chronic disease.
            (3) However, only 2 percent of annual health care spending 
        in the United States goes toward the prevention of chronic 
        diseases.
            (4) The high cost of chronic disease management and 
        treatment is a major contributing factor to these exploding 
        health care costs.
            (5) Reducing and preventing the incidence of chronic 
        disease is one means by which to reduce health care costs in 
        the United States.
            (6) More than 1,700,000 Americans die of a chronic disease 
        each year, accounting for nearly 70 percent of all United 
        States deaths.
            (7) In 2000, 38.2 percent of all deaths were due to tobacco 
        use, poor nutrition and physical inactivity, and alcohol 
        consumption.
            (8) The economic impact of chronic disease can be seen in 
        the annual costs associated with cardiovascular disease 
        $352,000,000,000 obesity $117,000,000,000, tobacco use 
        $75,000,000,000 and mental illness $150,000,000,000.
            (9) In 2001 obesity related health conditions carried a 
        $13,000,000,000 price tag to employers (as determined by the 
        Department of Health and Human Services).
            (10) Health promotion investments by employers on average 
        yield a return $3 for every $1 invested in a program.
            (11) Being overweight or obese increase the risk of 
        diabetes, heart disease, stroke, several types of cancer and 
        other health problems.
            (12) An estimated 65 percent of adults and 15 percent of 
        children and adolescents in the United States are overweight or 
        obese.
            (13) The rates of obesity have doubled in children and 
        tripled in teens since the 1980's.
            (14) An estimated 400,000 deaths a year are associated with 
        being overweight or obese.
            (15) Almost 40 percent of Americans are sedentary. More 
        than a third of young people in grades 9 through 12 do not 
regularly engage in vigorous-intensity physical activity.
            (16) Only 1 in 5 young people eat the recommended 5 daily 
        servings of fruits and vegetables.
            (17) More than $12,000,000,000 a year is spent on 
        advertising and marketing, mostly unhealthy food to children 
        through television, the insert Internet, movies, magazines, in-
        school marketing, kids clubs, toys, coupons, product placement 
        in movies and books.
            (18) Approximately one-quarter of walking trips take place 
        on roads without sidewalks or shoulders and bike lanes are 
        available for only about 5 percent of bike trips.
            (19) Virtually all-new users of tobacco products are under 
        the minimum legal age to purchase such products. Every day in 
        America, more than 4,000 kids try their first cigarette. 
        Another 2,000 children become new daily smokers.
            (20) In 2002, 61,000,000 Americans, 26 percent of our 
        population smoked cigarettes.
            (21) Research consistently shows that smoking cessation 
        services offered as a combination of tobacco medication therapy 
        and counseling can be one of the most cost-effective health 
        interventions and can reduce smoking-related health care costs.
            (22) Physical and mental health are interconnected. 
        Physical conditions often result in mental health 
        complications, likewise, depression can manifest itself through 
        physical symptoms.
            (23) The Surgeon General reported that mental disorders 
        collectively account for 15 percent of the overall burden of 
        disease from all causes, and slightly more than the burden 
        associated with all forms of cancer.
            (24) Major depression is the leading cause of disability in 
        the United States.
            (25) One of every 2 people who need mental health treatment 
        in the United States does not receive it and 30,000 Americans 
        die by suicide each year.
            (26) Early screening and prevention programs in the schools 
        can detect high risk children that are vulnerable to developing 
        mental illness and assist in accessing appropriate services.
            (27) People with disabilities report substantial 
        disparities in health compared with people without 
        disabilities. These disparities are caused by a number of 
        factors, including less access to health care than individuals 
        without disabilities. People with disabilities report more days 
        of pain, depression, and anxiety and they have higher rates of 
        obesity.
            (28) Evidence shows that health promotion programs with 
        exercise, nutrition, and wellness components targeting people 
        with disabilities can significantly reduce the incidence of 
        these conditions and lead to healthy outcomes for people with 
        disabilities, as well as save money by reducing the frequency 
        of medical visits.

                  TITLE I--HEALTHIER KIDS AND SCHOOLS

SEC. 101. FRUIT AND VEGETABLE PROGRAM.

    Section 18 of the Richard B. Russell National School Lunch Act (42 
U.S.C. 1769) is amended by striking subsection (g) and inserting the 
following:
    ``(g) Fruit and Vegetable Program.--
            ``(1) In general.--For the school year beginning July 2005 
        and each subsequent school year, the Secretary shall carry out 
        a program to make free fresh fruits and vegetables available to 
        each school that submits a certification of support for 
        participation in the program that is signed by the school food 
        manager, the school principal, and the district superintendent 
        (or equivalent positions, as determined by the school).
            ``(2) Program.--A school participating in the program shall 
        make fresh fruits and vegetables available to students 
        throughout the school day in 1 or more areas designated by the 
        school.
            ``(3) Notice of availability.--To be eligible to 
        participate in the fresh fruit and vegetable program under this 
        subsection, a school shall widely publicize within the school 
        the availability of free fresh fruits and vegetables under the 
        program.
            ``(4) Per student grant.--
                    ``(A) In general.--For each school year during 
                which a school participates in the program under this 
                subsection, the Secretary shall provide to the school 
                an amount equal to $75 per student, as adjusted under 
                subparagraph (B), to be used to carry out the program 
                in the school.
                    ``(B) Adjustment.--The amount of the grant for each 
                student under subparagraph (A) shall be adjusted on 
                July 1, 2006, and each subsequent July 1, to reflect 
                changes in the Consumer Price Index of the Bureau of 
                Labor Statistics for fresh fruits and vegetables, with 
                the adjustment--
                            ``(i) rounded down to the nearest dollar 
                        increment; and
                            ``(ii) based on the unrounded amounts for 
                        the preceding 12-month period.
            ``(5) Evaluation.--
                    ``(A) In general.--The Secretary, acting through 
                the Administrator of the Food and Nutrition Service, 
                shall conduct an evaluation of schools participating in 
                the program under this subsection.
                    ``(B) Content.--The evaluation shall measure, at a 
                minimum, the impact of participation in the program and 
                any changes in the school nutrition environment 
                relating to--
                            ``(i) overweight and obesity among 
                        children;
                            ``(ii) dietary intake;
                            ``(iii) nutrition education and behavior;
                            ``(iv) rates of physical activity among 
                        children; and
                            ``(v) parental and student attitudes 
                        about--
                                    ``(I) participation in the program; 
                                and
                                    ``(II) general nutrition, physical 
                                activity, and wellness.
            ``(6) Healthy cooking pilot program.--
                    ``(A) In general.--As part of the program conducted 
                under this subsection, the Secretary shall carry out a 
                pilot program under which the Secretary shall make 
                competitive grants to selected elementary and secondary 
                schools to teach children--
                            ``(i) how to eat a nutritious diet;
                            ``(ii) how to select foods to make a 
                        healthy meal; and
                            ``(iii) how to prepare healthy meals.
                    ``(B) Selection of school.--In selecting schools to 
                participate in the pilot program, the Secretary shall 
                ensure that--
                            ``(i) only schools participating in the 
                        fruit and vegetable program under this 
                        subsection are eligible to receive funds under 
                        this paragraph;
                            ``(ii) to the maximum extent practicable, 
                        at least 75 percent of schools selected are 
                        schools in which at least 50 percent of the 
                        students enrolled are eligible for free or 
                        reduced price meals under this Act; and
                            ``(iii) there is appropriate 
                        representation, as determined by the Secretary, 
                        of--
                                    ``(I) rural, urban, and suburban 
                                schools; and
                                    ``(II) elementary, middle, and 
                                secondary schools.
                    ``(C) Priority consideration.--In awarding 
                competitive grants under this paragraph, the Secretary 
                shall give priority consideration to schools that 
                submit an application that includes the participation 
                of the parents or families of the children enrolled in 
                the school.
            ``(7) Authorization of appropriations.--
                    ``(A) In general.--There are authorized to be 
                appropriated such sums as are necessary to carry out 
                this subsection, to remain available until expended.
                    ``(B) Insufficient funds.--If the funds 
                appropriated under subparagraph (A) are insufficient to 
                carry out the program under this subsection in all 
                schools that meet the requirements of paragraph (1), 
                the Secretary shall give priority to schools that have 
                the highest percentage of students enrolled that are 
                eligible for free or reduced price meals under this 
                Act.''.

SEC. 102. SCHOOL WELLNESS POLICY; COMPETITIVE FOODS.

    (a) School Wellness Policies.--
            (1) In general.--Not later than the first day of the school 
        year beginning July 2006, each local educational agency 
        participating in the programs authorized under the Richard B. 
        Russell National School Lunch Act (42 U.S.C. 1751 et seq.) and 
        the Child Nutrition Act of 1966 (42 U.S.C. 1771 et seq.) shall 
        establish a local school wellness policy that, at a minimum--
                    (A) includes goals for nutrition education, 
                physical activity, and such other school-based 
                activities designed to promote student wellness as the 
                local educational agency determines to be appropriate;
                    (B) includes nutrition guidelines that--
                            (i) are developed in consultation with 
                        representatives described in subparagraph (E);
                            (ii) are applicable to all foods available 
                        during the school day; and
                            (iii) have as objectives--
                                    (I) promotion of sound nutrition;
                                    (II) improvement of student health; 
                                and
                                    (III) reduction in childhood 
                                obesity;
                    (C) ensures that meals and supplements provided in 
                accordance with the Richard B. Russell National School 
                Lunch Act (42 U.S.C. 1751 et seq.) and the Child 
                Nutrition Act of 1966 (42 U.S.C. 1771 et seq.) conform 
                with nutritional guidelines contained in regulations 
                promulgated by the Secretary of Agriculture (referred 
                to in this section as the ``Secretary'') in accordance 
                with the programs authorized under those Acts;
                    (D) establishes a plan for ensuring implementation 
                of the local wellness policy, including designation of 
                1 or more individuals within the local educational 
                agency charged with operational responsibility for 
                ensuring that the requirements of the school wellness 
                plan are carried out; and
                    (E) involves representatives of the school food 
                authority, parents, students, the school board, school 
administrators, physical activity professionals, medical and nutrition 
professionals, and the public in the development of the school wellness 
policy.
            (2) Technical assistance and best practices to schools and 
        states.--
                    (A) In general.--The Secretary shall make available 
                to local educational agencies, school food authorities, 
                and State school food authorities guidance and 
                technical assistance for use in--
                            (i) carrying out paragraph (1); and
                            (ii) otherwise--
                                    (I) establishing healthy school 
                                food environments;
                                    (II) reducing childhood obesity; 
                                and
                                    (III) preventing diet-related 
                                chronic diseases.
                    (B) Content.--The guidance and technical assistance 
                shall include, at a minimum--
                            (i) case studies of schools and school 
                        districts that have taken steps to provide 
                        healthy options in foods sold and served at 
                        school, particularly schools and school 
                        districts that have done so without 
                        experiencing adverse effects on revenue from 
                        sales of competitive foods;
                            (ii) recommended nutritional guidelines 
                        regarding appropriate standards for the 
                        availability, sale, and service of foods of any 
                        kind throughout the school day, as provided by 
                        the Institute of Medicine under subsection 
                        (b)(3) of section 10 of the Child Nutrition Act 
                        of 1966 (42 U.S.C. 1779) (as amended by 
                        subsection (b)); and
                            (iii) such other technical assistance as is 
                        required to carry out the goals of promoting 
                        sound nutrition and establishing healthy school 
                        food environments.
                    (C) Guidance only.--The recommendations of the 
                Institute of Medicine under subsection (b)(3) of 
                section 10 of the Child Nutrition Act of 1966 (42 
                U.S.C. 1779) (as amended by subsection (b))--
                            (i) are solely for the purpose of providing 
                        guidance to schools to develop school wellness 
                        policies in accordance with paragraph (1); and
                            (ii) shall not be construed as a mandate to 
                        local educational agencies, school food 
                        authorities, or schools.
    (b) Competitive Foods in Schools.--Section 10 of the Child 
Nutrition Act of 1966 (42 U.S.C. 1779) is amended--
            (1) in subsection (a), by striking ``, including'' and all 
        that follows through ``Lunch Act''; and
            (2) by striking subsection (b) and inserting the following:
    ``(b) Competitive Foods in Schools.--
            ``(1) In general.--The regulations under subsection (a) may 
        include provisions that regulate the service of food in 
        participating schools and service institutions in competition 
        with the programs authorized under this Act and the Richard B. 
        Russell National School Lunch Act (42 U.S.C. 1751 et seq.) 
        (referred to in this subsection as `competitive foods').
            ``(2) Regulations.--The regulations promulgated under 
        paragraph (1)--
                    ``(A) shall apply to all school grounds during the 
                duration of the school day;
                    ``(B) shall not supersede or otherwise affect State 
                and local regulations on competitive foods that, as 
                determined by the Secretary, conform to the nutritional 
                goals of the regulations promulgated by the Secretary;
                    ``(C) shall require that the proceeds from the sale 
                of competitive foods in schools be used for the benefit 
                of the schools or of organizations of students approved 
                by the schools, if those sales are allowed by the 
                regulations;
                    ``(D) shall take into account the differing needs 
                of--
                            ``(i) elementary schools;
                            ``(ii) middle schools and junior high 
                        schools; and
                            ``(iii) high schools; and
                    ``(E) shall implement the recommendations of the 
                Institute of Medicine made under paragraph (3).
            ``(3) Institute of medicine recommendations.--
                    ``(A) In general.--The Secretary shall offer to 
                enter into an agreement with the Institute of Medicine 
                of the National Academy of Sciences under which the 
                Institute of Medicine, based on sound nutritional 
                science, shall make recommendations to the Secretary 
                regarding--
                            ``(i) the regulation of competitive foods; 
                        and
                            ``(ii) appropriate nutritional guidelines 
                        for competitive foods offered in schools.
                    ``(B) Regulations.--Not later than 1 year after the 
                date of receipt of final recommendations from the 
                Institute of Medicine, the Secretary shall promulgate 
                regulations to carry out this subsection in accordance 
                with the recommendations of the Institute of Medicine.
                    ``(C) Report.--Not later than 1 year after the date 
                of receipt of final recommendations from the Institute 
                of Medicine, the Secretary shall submit to the 
                Committee on Education and the Workforce of the House 
                of Representatives and the Committee on Agriculture, 
                Nutrition, and Forestry of the Senate a report that 
                describes the actions of the Secretary under 
                subparagraph (B).''.
    (c) Applicability.--This section and the amendments made by this 
section apply only to schools participating in a program authorized 
under the Richard B. Russell National School Lunch Act (42 U.S.C. 1751 
et seq.) or the Child Nutrition Act of 1966 (42 U.S.C. 1771 et seq.).

SEC. 103. HEALTHY SCHOOL NUTRITION ENVIRONMENT INCENTIVE GRANTS.

     Section 18 of the Richard B. Russell National School Lunch Act (42 
U.S.C. 1769) is amended by adding at the end the following:
    ``(h) Healthy School Nutrition Environment Incentive Grants.--
            ``(1) In general.--The Secretary shall establish a program 
        under which the Secretary shall make competitive grants to 
        selected elementary and secondary schools--
                    ``(A) to create healthy school nutrition 
                environments; and
                    ``(B) to assess the impact of the environments on 
                the health and well-being of children enrolled in the 
                schools.
            ``(2) Selection of schools.--In selecting schools to 
        receive incentive grants under this subsection, the Secretary 
        shall--
                    ``(A) ensure that not less than 75 percent of 
                schools selected to participate in the program 
                established under this subsection are schools in which 
                not less than 50 percent of the students enrolled in 
                each school are eligible for free or reduced price 
                meals under this Act;
                    ``(B) ensure that, of the schools selected to 
                participate in the program, there is appropriate 
                representation of rural, urban, and suburban schools, 
                as determined by the Secretary;
                    ``(C) ensure that, of the schools selected to 
                participate in the program, there is appropriate 
                representation of elementary, middle, and secondary 
                schools, as determined by the Secretary;
                    ``(D) ensure that schools selected to receive a 
                grant under this subsection meet the requirements of 
                paragraph (3);
                    ``(E) give priority to schools that develop 
                comprehensive plans that include the involvement of a 
                broad range of community stakeholders in achieving 
                healthy school nutrition environments; and
                    ``(F) give priority to schools that develop 
                comprehensive plans that include a strategy for 
                maintaining healthy school nutrition environments in 
                the years following the fiscal years for which the 
                schools receive grants under this subsection.
            ``(3) Requirements.--
                    ``(A) Input.--Prior to the solicitation of 
                proposals for grants under this subsection, the 
                Secretary shall solicit input from appropriate 
                nutrition, health, and education organizations 
                regarding the appropriate criteria for a healthy school 
                environment.
                    ``(B) Criteria for healthy school environments.--
                The Secretary shall, taking into account input received 
                under subparagraph (A), establish criteria for defining 
                a healthy school environment, including criteria that--
                            ``(i) provide program meals that meet 
                        nutritional standards for breakfasts and 
                        lunches established by the Secretary;
                            ``(ii) ensure that all food served 
                        (including food served in participating schools 
                        and service institutions in competition with 
                        the programs authorized under this Act and the 
                        Child Nutrition Act of 1966 (42 U.S.C. 1771 et 
                        seq.)) on school grounds during regular school 
                        hours is consistent with the nutritional 
                        standards for breakfasts and lunches 
                        established by the Secretary;
                            ``(iii) promote the consumption of fruits 
                        and vegetables;
                            ``(iv) promote physical education and 
                        provide nutrition education to students and 
                        staff;
                            ``(v) ensure that all children are included 
                        in physical education and nutrition activities, 
                        including children with disabilities and 
                        children with limited English proficiency;
                            ``(vi) ban foods of minimal nutritional 
                        value, as that term is defined in section 
                        210.11 of title 7, Code of Federal Regulations 
                        (or any successor regulation), and the 
                        marketing and advertising in schools of foods 
                        of minimal nutritional value;
                            ``(vii) integrate general wellness goals 
                        into the school curriculum; and
                            ``(viii) meet other criteria established by 
                        the Secretary.
                    ``(C) Plans.--To be eligible to receive a grant 
                under this subsection, a school shall--
                            ``(i) submit to the Secretary a healthy 
                        school nutrition environment plan that 
                        describes the actions the school will take to 
                        meet the criteria established under 
                        subparagraph (B); and
                            ``(ii) take the actions described in the 
                        plan.
            ``(4) Grants.--For each of fiscal years 2006 through 2010, 
        the Secretary shall make a grant to each school selected under 
        paragraph (2).
            ``(5) Evaluations.--
                    ``(A) In general.--The Secretary, acting through 
                the Administrator of the Food and Nutrition Service, 
                shall conduct an evaluation of a representative sample 
                of schools that receive grants under this subsection.
                    ``(B) Content.--The evaluation shall measure, at a 
                minimum, the effects of a healthy school nutrition 
                environment on--
                            ``(i) overweight children and obesity;
                            ``(ii) dietary intake;
                            ``(iii) nutrition education and behavior;
                            ``(iv) the adequacy of time to eat;
                            ``(v) physical activities;
                            ``(vi) parental and student attitudes and 
                        participation; and
                            ``(vii) related funding issues, including 
                        the cost of maintaining a healthy school 
                        nutrition environment.
                    ``(C) Reports.--The Secretary shall submit to the 
                Committee on Education and the Workforce of the House 
                of Representatives and the Committee on Agriculture, 
                Nutrition, and Forestry of the Senate--
                            ``(i) an interim report on the activities 
                        of schools evaluated under this subsection; and
                            ``(ii) a final report on the activities of 
                        schools evaluated under this subsection.
            ``(6) Funding.--
                    ``(A) In general.--On October 1, 2004, and each 
                October 1 thereafter on which this program is 
                authorized, out of any funds in the Treasury not 
                otherwise appropriated, the Secretary of the Treasury 
                shall transfer to the Secretary of Agriculture to carry 
                out this subsection $100,000,000.
                    ``(B) Receipt and acceptance.--The Secretary shall 
                be entitled to receive, shall accept, and shall use to 
                carry out this section the funds transferred under 
                subparagraph (A), without further appropriation.
                    ``(C) Availability of funds.--Funds transferred 
                under subparagraph (A) shall remain available until 
                expended.
                    ``(D) Evaluations.--Of the funds made available 
                under this paragraph, the Secretary shall use not more 
                than $5,000,000 to conduct evaluations under paragraph 
                (5).''.

SEC. 104. GRANTS FOR THE INTEGRATION OF SCHOOLS AND MENTAL HEALTH 
              SYSTEMS.

    Section 5541 of the Elementary and Secondary Education Act of 1965 
(20 U.S.C. 7269) is amended--
            (1) in subsection (c), by adding at the end the following:
            ``(7) To support schools that work with families and 
        appropriate community partners to implement school-wide 
        prevention strategies, based on mental health research, that 
        will support early and intensive interventions.
            ``(8) To provide necessary training and support to school 
        personnel on how to recognize and seek needed support for 
        children exhibiting early warning signs of behavioral and 
        academic problems.''; and
            (2) in subsection (d)--
                    (A) in paragraph (4)--
                            (i) in subparagraph (C), by striking 
                        ``and'' after the semicolon;
                            (ii) in subparagraph (D), by striking the 
                        period and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(E) mental health services provided under this 
                section by schools will be evidence-based or promising 
                early interventions.''; and
                    (B) by adding at the end the following:
            ``(7) An explanation of how the applicant will carry out 
        public education programs in support of mental health promotion 
        and prevention by collaborating with--
                    ``(A) an institution of higher education (including 
                a graduate program in psychology, social work, or 
                education at an institution of higher education); and
                    ``(B) private nonprofit community-based 
                organizations that have experience in public education 
                programs relating to mental health promotion and 
                prevention.''.

             TITLE II--HEALTHIER COMMUNITIES AND WORKPLACES

             Subtitle A--Incentives for a Healthy Workforce

SEC. 201. SHORT TITLE.

    This subtitle may be cited as the ``Healthy Workforce Act of 
2004''.

SEC. 202. TAX CREDIT TO EMPLOYERS FOR COSTS OF IMPLEMENTING WELLNESS 
              PROGRAMS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following:

``SEC. 45G. WELLNESS PROGRAM CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, the wellness 
        program credit determined under this section for any taxable 
        year is--
                    ``(A) in the case of a small business employer, an 
                amount equal to 50 percent of the costs paid or 
                incurred by the small business employer in connection 
                with a qualified small business wellness program during 
                the taxable year, and
                    ``(B) in the case of any other employer, an amount 
                equal to 50 percent of the costs paid or incurred by 
                the employer in connection with a qualified wellness 
                program during the taxable year.
            ``(2) Limitation.--The amount of credit allowed under 
        paragraph (1) for any taxable year shall not exceed the product 
        of $200 and the number of employees of the employer or small 
        business employer, as the case may be.
    ``(b) Qualified Wellness Program; Qualified Small Business Wellness 
Program.--For purposes of this section--
            ``(1) Qualified wellness program.--The term `qualified 
        wellness program' means a program which consists of all of the 
        wellness program components described in subsection (c) and 
        which is certified by the Secretary of Health and Human 
        Services, in consultation with persons who have expertise in 
        employer health promotion and wellness programs, as a qualified 
        wellness program under this section.
            ``(2) Qualified small business wellness program.--The term 
        `qualified small business wellness program' means a program 
        which consists of any 2 of the components described in 
subsection (c) and which is certified by the Secretary of Health and 
Human Services, in consultation with persons who have expertise in 
employer health promotion and wellness programs, as a qualified small 
business wellness program under this section.
    ``(c) Wellness Program Components.--For purposes of this section, 
the wellness program components described in this subsection are the 
following:
            ``(1) Health awareness component.--A health awareness 
        component which provides for the following:
                    ``(A) Health education.--The dissemination of 
                health information which addresses the specific needs 
                and health risks of employees.
                    ``(B) Health screenings.--The opportunity for 
                periodic screenings for health problems and referrals 
                for appropriate follow up measures.
            ``(2) Behavioral change component.--A behavioral change 
        component which provides for altering employee lifestyles to 
        encourage healthy living through counseling, seminars, on-line 
        programs, or self-help materials. Such component shall include 
        programs relating to--
                    ``(A) smoking,
                    ``(B) obesity,
                    ``(C) stress management,
                    ``(D) physical fitness,
                    ``(E) nutrition,
                    ``(F) substance abuse, and
                    ``(G) depression.
            ``(3) Supportive environment component.--A supportive 
        environment component which includes the following:
                    ``(A) On-site policies.--Policies and services at 
                the worksite which promote a healthy lifestyle, 
                including policies relating to--
                            ``(i) smoking at the worksite,
                            ``(ii) the nutrition of food available at 
                        the worksite through cafeterias and vending 
                        options,
                            ``(iii) minimizing stress in the workplace,
                            ``(iv) where applicable, accessible and 
                        attractive stairs, and
                            ``(v) the encouragement of physical 
                        activity during work hours.
                    ``(B) Participation incentives.--
                            ``(i) In general.--Qualified incentive 
                        benefits for each employee who participates in 
                        the health screenings described in paragraph 
                        (1)(B) or the behavioral change programs 
                        described in paragraph (2).
                            ``(ii) Qualified incentive benefit.--For 
                        purposes of clause (i), the term `qualified 
                        incentive benefit' means any benefit which is 
                        approved by the Secretary of Health and Human 
                        Services. Such benefit may include an 
                        adjustment in health insurance premiums or co-
                        pays.
                    ``(C) Employee input.--The opportunity for 
                employees to participate in the management of any 
                qualified wellness program or qualified small business 
                wellness program to which this section applies.
    ``(d) Participation Requirement.--
            ``(1) In general.--No credit shall be allowed under 
        subsection (a) unless the Secretary of Health and Human 
        Services certifies, as a part of any certification described in 
        subsection (b), that each wellness program component of the 
        qualified wellness program or qualified small business wellness 
        program applies to all qualified employees of the employer.
            ``(2) Qualified employee.--For purposes of paragraph (1), 
        the term `qualified employee' means an employee who works an 
        average of not less than 25 hours per week during the taxable 
        year.
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Employee and employer.--
                    ``(A) Partners and partnerships.--The term 
                `employee' includes a partner and the term `employer' 
                includes a partnership.
                    ``(B) Certain rules to apply.--Rules similar to the 
                rules of section 52 shall apply.
            ``(2) Small business employer.--
                    ``(A) In general.--The term `small business 
                employer' means, with respect to any taxable year, an 
                employer who employed an average of 200 or fewer 
                employees on business days during such taxable year.
                    ``(B) Controlled groups.--For purposes of 
                subparagraph (A), all persons treated as a single 
                employer under subsection (b), (c), (m), or (o) of 
                section 414 shall be treated as a single employer.
            ``(3) Certain costs not included.--Costs paid or incurred 
        by an employer or small business employer for food or health 
        insurance shall not be taken into account under subsection (a).
            ``(4) No credit where grant awarded.--No credit shall be 
        allowable under subsection (a) to any person who receives a 
        grant under section 201 of the Health Workforce Act of 2004.
    ``(f) Termination.--This section shall not apply to any amount paid 
or incurred after December 31, 2014.''.
    (b) Treatment as General Business Credit.--
            (1) In general.--Subsection (b) of section 38 of the 
        Internal Revenue Code of 1986 (relating to general business 
        credit) is amended by striking ``plus'' at the end of paragraph 
        (14), by striking the period at the end of paragraph (15) and 
        inserting ``, plus'', and by adding at the end the following:
            ``(16) the wellness program credit determined under section 
        45G.''.
            (2) Transitional rule for carrybacks.--Subsection (d) of 
        section 39 of such Code (relating to transitional rules) is 
        amended by adding at the end the following:
            ``(11) No carryback of section 45g credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the wellness program credit 
        determined under section 45G may be carried back to a taxable 
        year beginning before January 1, 2005.''.
    (c) Denial of Double Benefit.--Section 280C of the Internal Revenue 
Code of 1986 (relating to certain expenses for which credits are 
allowable) is amended by adding at the end the following new 
subsection:
    ``(d) Wellness Program Credit.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the costs paid or incurred for a qualified wellness 
        program (within the meaning of section 45G) or a qualified 
        small business wellness program (within the meaning of such 
        section) allowable as a deduction for the taxable year which is 
        equal to the amount of the credit allowable for the taxable 
        year under section 45G.
            ``(2) Similar rule where taxpayer capitalizes rather than 
        deducts expenses.--If--
                    ``(A) the amount of the credit determined for the 
                taxable year under section 45G, exceeds
                    ``(B) the amount allowable as a deduction for such 
                taxable year for a qualified wellness program or a 
                qualified small business wellness program,
        the amount chargeable to capital account for the taxable year 
        for such expenses shall be reduced by the amount of such 
        excess.
            ``(3) Controlled groups.--In the case of a corporation 
        which is a member of a controlled group of corporations (within 
        the meaning of section 41(f)(5)) or a trade or business which 
        is treated as being under common control with other trades or 
        business (within the meaning of section 41(f)(1)(B)), this 
        subsection shall be applied under rules prescribed by the 
        Secretary similar to the rules applicable under subparagraphs 
        (A) and (B) of section 41(f)(1).''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following:

``Sec. 45G. Wellness program credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.
    (f) Outreach.--
            (1) In general.--The Secretary of the Treasury, in 
        conjunction with the Director of the Centers for Disease 
        Control and members of the business community, shall institute 
        an outreach program to inform businesses about the availability 
        of the wellness program credit under section 45G of the 
        Internal Revenue Code of 1986.
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as are necessary to carry out the 
        outreach program described in paragraph (1).

SEC. 203. INCOME EXCLUSION FOR EMPLOYER-PROVIDED OFF-PREMISES HEALTH 
              CLUB SERVICES.

    (a) Treatment as Fringe Benefit.--Subparagraph (A) of section 
132(j)(4) of the Internal Revenue Code of 1986 (relating to on-premises 
gyms and other athletic facilities) is amended to read as follows:
                    ``(A) In general.--Gross income shall not include--
                            ``(i) the value of any on-premises athletic 
                        facility provided by an employer to its 
                        employees, and
                            ``(ii) fees or membership expenses paid by 
                        an employer to an athletic or fitness facility 
                        described in subparagraph (C) on behalf of its 
                        employees, but only to the extent that such 
                        fees or expenses do not exceed $900.
                The preceding sentence shall apply with respect to any 
                highly compensated employee only if access to the 
                facility is available on substantially the same terms 
                to each member of a group of employees which is defined 
                under a reasonable classification set up by the 
                employer which does not discriminate in favor of highly 
                compensated employees.''.
    (b) Athletic Facilities Described.--Paragraph (4) of section 132(j) 
of such Code is amended by adding at the end the following new 
subparagraph:
                    ``(C) Certain athletic or fitness facilities 
                described.--For purposes of subparagraph (A)(ii), an 
                athletic or fitness facility described in this 
                subparagraph is a facility--
                            ``(i) providing instruction in a program of 
                        physical exercise or offering facilities for 
                        the preservation, maintenance, encouragement, 
                        or development of physical fitness,
                            ``(ii) which is not a private club owned 
                        and operated by its members,
                            ``(iii) which does not offer golf, hunting, 
                        sailing, or riding facilities,
                            ``(iv) whose health or fitness facility is 
                        not incidental to its overall function and 
                        purpose, and
                            ``(v) which is fully compliant with the 
                        State of jurisdiction and Federal anti-
                        discriminations laws.''.
    (c) Employer Deduction for Dues to Certain Athletic Facilities.--
            (1) In general.--Paragraph (3) of section 274(a) of such 
        Code (relating to denial of deduction for club dues) is 
        amended--
                    (A) by striking ``Notwithstanding'' and inserting 
                the following:
                    ``(A) In general.--Notwithstanding'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(B) Exception for athletic facilities.--This 
                paragraph shall not apply to fees or dues paid to 
                athletic or fitness facilities (within the meaning of 
                section 132(j)(4)(C)) to the extent that such fees or 
                dues do not exceed $900 for any membership.''.
            (2) Conforming amendment.--Section 274(e)(4) of such Code 
        is amended by striking ``subsection (a)(3)'' and by inserting 
        ``subsection (a)(3)(A)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 204. CDC AND EMPLOYER-BASED WELLNESS PROGRAMS.

    (a) Amendment to Public Health Service Act.--Title III of the 
Public Health Service Act (42 U.S.C. 241 et seq.) is amended by adding 
at the end the following:

           ``PART R--CDC AND EMPLOYER-BASED WELLNESS PROGRAMS

``SEC. 399Z-1. EMPLOYER-BASED WELLNESS BEST PRACTICES.

    ``(a) In General.--The Director of the Centers for Disease Control 
and Prevention shall conduct a study that analyzes employer-based 
wellness programs and determines--
            ``(1) best practices of such programs that impact and 
        sustain behavior change in employees;
            ``(2) the impact that such programs have on reducing health 
        risk prevalence and improving absenteeism of employees; and
            ``(3) the return to employers on the investment made by 
        such employers in such programs.
    ``(b) Report.--After completing the study under subsection (a), the 
Director of the Centers for Disease Control and Prevention shall submit 
to Congress not later than 1 year after the date of enactment of this 
part--
            ``(1) a report that includes recommendations of effective 
        employer-based wellness programs; and
            ``(2) an Employer Wellness Model that is supported by the 
        Centers for Disease Control and Prevention.

``SEC. 399Z-2. WORKPLACE WELLNESS EDUCATION CAMPAIGN FOR EMPLOYERS.

    ``The Director of the Centers for Disease Control and Prevention, 
in coordination with relevant worksite health promotion organizations, 
shall conduct an educational campaign to make employers, employer 
groups, and other interested parties aware of the benefits of employer-
based wellness programs. Such campaign shall include information about 
the Employer Wellness Model described in section 399Z-1(b)(2) and 
information on developing, implementing, and maintaining a program 
based on such model.

``SEC. 399Z-3. EVALUATION OF EMPLOYER-BASED WELLNESS PROGRAMS.

    ``The Director of the Centers for Disease Control and Prevention 
shall enter into contracts with entities to--
            ``(1) provide employers with technical assistance in 
        evaluating such employers' employer-based wellness programs; 
        and
            ``(2) train employers on how to evaluate such employers' 
        employer-based wellness programs.

``SEC. 399Z-4. REQUIREMENTS BASED ON APPROPRIATED FUNDS.

    ``The Director of the Centers for Disease Control and Prevention 
shall be required to carry out the activities in sections 399Z-1, 399Z-
2, and 399Z-3 only if funds are appropriated to carry out such 
sections.''.
    (b) Grants to Help Small Businesses.--
            (1) Wellness programs.--
                    (A) In general.--The Director of the Centers for 
                Disease Control and Prevention shall award grants, on a 
                competitive basis, to hospitals, community wellness 
                providers, and other qualifying entities, as determined 
                by the Director of the Centers for Disease Control and 
                Prevention, to implement wellness programs at 
                qualifying employers.
                    (B) Criteria for programs.--The wellness programs 
                implemented pursuant to subparagraph (A) shall be 
                certified by the Secretary of Human Services, in the 
                same manner as required under section 45G of the 
                Internal Revenue Code of 1986, as a qualified wellness 
                program (within the meaning of such section) or as a 
                qualified small business wellness program (within the 
                meaning of such section).
            (2) Qualifying employer.--In this subsection, the term 
        ``qualifying employer'' means a business--
                    (A) that does not have a comprehensive employer-
                based wellness program; and
                    (B)(i) with less than 200 employees;
                    (ii) that is located in an underserved area; or
                    (iii) that is exempt from tax under section 501 of 
                the Internal Revenue Code of 1986.
            (3) Requirements based on appropriated funds.--The Director 
        of the Centers for Disease Control and Prevention shall be 
        required to award grants under this subsection only if funds 
        are appropriated to carry out this subsection.

                    Subtitle B--Healthy Communities

SEC. 211. HEALTHY COMMUNITY GRANTS.

    Part P of title III of the Public Health Service Act (42 U.S.C. 
280g et seq.) is amended by adding at the end the following:

``SEC. 399P. HEALTHY COMMUNITY GRANTS.

    ``(a) Establishment.--The Secretary, acting through the Director of 
the Centers for Disease Control and Prevention and in coordination with 
the Directors of other appropriate Federal agencies, shall award 
competitive grants to eligible entities for the purpose of planning and 
implementing programs that seek to promote individual and community 
health and to prevent the incidence of chronic disease.
    ``(b) Eligibility.--
            ``(1) In general.--To be eligible to receive a grant under 
        this section an entity shall--
                    ``(A) be--
                            ``(i) a city, county, or Indian tribe;
                            ``(ii) a local or tribal educational 
                        agency;
                            ``(iii) an accredited university, college, 
                        or community college;
                            ``(iv) a federally qualified health center;
                            ``(v) a local health department;
                            ``(vi) a health care provider;
                            ``(vii) a community-based organization; or
                            ``(viii) any other entity determined 
                        appropriate by the Secretary, including a 
                        consortia or partnership of entities described 
                        in any of clauses (i) through (vii);
                    ``(B) prepare and submit an application in 
                accordance with paragraph (2); and
                    ``(C) provide assurances that the entity will 
                contribute the non-Federal share as required under 
                paragraph (3) to the cost of the activities carried out 
                under the grant.
            ``(2) Application.--
                    ``(A) In general.--An entity desiring a grant under 
                this section shall submit an application to the 
                Secretary at such time, in such manner, and containing 
                such information as the Secretary may require, 
                including a plan that meets the requirements of 
                subparagraph (B).
                    ``(B) Plan.--A plan meets the requirements of this 
                subparagraph if such plan, at a minimum, includes 
                information regarding--
                            ``(i)(I) programs or community-based 
                        activities that the applicant proposes to carry 
                        out with funds received under this section and 
                        which seek to prevent and reduce the incidence 
                        of--
                                    ``(aa) overweight and obesity, or 
                                chronic diseases associated with 
                                overweight and obesity;
                                    ``(bb) tobacco use; or
                                    ``(cc) mental illness; or
                            ``(II) other such activities, as determined 
                        appropriate by the Secretary, that are 
                        consistent with the goals of promoting 
                        individual and community health and preventing 
                        chronic disease; and
                            ``(ii) the manner in which the applicant 
                        will evaluate the effectiveness of the program 
                        or activities carried out under this section.
            ``(3) Non-federal share.--To be eligible to receive a grant 
        under this section, an entity shall provide a non-Federal 
        contribution, in cash or in kind, to the costs of activities 
        under the grant in an amount that is equal to not less than 25 
        percent of the costs of such activities.
    ``(c) Use of Funds.--An entity that receives a grant under this 
section shall use the amount made available under the grant to carry 
out community-based activities, including--
            ``(1) activities that seek to promote individual health and 
        community wellness and to prevent and reduce the incidence of 
        health problems and chronic diseases associated with--
                    ``(A) being overweight or obese;
                    ``(B) tobacco use; or
                    ``(C) mental illness; or
            ``(2) other activities undertaken with the goals of health 
        promotion and chronic disease prevention, as determined 
        appropriate by the Secretary.
    ``(d) Priority.--In awarding grants under subsection (a), the 
Secretary shall give priority to--
            ``(1) entities that demonstrate that they have previously 
        applied successfully for funds to carry out activities that 
        seek to promote individual and community health and to prevent 
        the incidence of chronic disease and that can cite published 
        and peer-reviewed research demonstrating that the activities 
        that the entity proposes to carry out under this subsection are 
        effective;
            ``(2) entities that will carry out programs or activities 
        that seek to accomplish a goal or goals set by the State in the 
        Healthy People 2010 plan of the State;
            ``(3) entities that provide non-Federal contributions, 
        either in cash or in kind, to the costs of funding activities 
        under the grant;
            ``(4) entities that develop comprehensive plans that 
        include a strategy for extending program activities developed 
        under this section in the years following the fiscal years for 
        which they receive grants under this section;
            ``(5) entities located in communities that are medically 
        underserved, as determined by the Secretary;
            ``(6) entities located in areas where the average poverty 
        rate is 150 or higher than the average poverty rate in the 
        State involved, as determined by the Secretary; and
            ``(7) entities that submit plans that exhibit 
        multisectoral, cooperative conduct that includes the 
        involvement of a broad range of stakeholders, including--
                    ``(A) community-based organizations;
                    ``(B) local governments;
                    ``(C) local educational agencies;
                    ``(D) the private sector;
                    ``(E) State or local departments of health;
                    ``(F) accredited colleges, universities, and 
                community colleges;
                    ``(G) health care providers;
                    ``(H) State and local departments of transportation 
                and city planning; and
                    ``(I) other entities determined appropriate by the 
                Secretary.
    ``(e) Technical Assistance.--From amounts appropriated to carry out 
this section, the Secretary may reserve not more than 10 percent for 
each fiscal year to provide entities receiving grants under this 
section with technical assistance in the implementation of the plans 
required under subsection (b)(2)(B).
    ``(f) Evaluation.--From amounts appropriated to carry out this 
section, the Secretary may reserve not to exceed 5 percent for each 
fiscal year for the purpose of carrying out evaluations of the 
activities carried out under this section. Not later than 90 days after 
the completion of any such evaluation, the results of such evaluation 
shall be submitted to the relevant authorizing committees of Congress 
and to the Committee on Appropriations of the Senate and the Committee 
on Appropriations of the House of Representatives.
    ``(g) Limitation on Administrative Costs.--An entity may not use 
more than 10 percent of amounts received under a grant under this 
section for administrative expenses.
    ``(h) Supplement not Supplant.--Amounts provided under a grant 
under this section shall be used to supplement, and not supplant, other 
amounts provided for activities of the type to be carried out under 
this section.
    ``(i) Authorization of Appropriations.--There is authorized to be 
appropriated such sums as may be necessary to carry out this 
section.''.

SEC. 212. LIVING WELL WITH A DISABILITY AND WORKING WELL WITH A 
              DISABILITY PROGRAMS.

    Part P of title III of the Public Health Service Act (42 U.S.C. 
280g et seq.), as amended by section 211, is further amended by adding 
at the end the following:

``SEC. 399Q. LIVING WELL WITH A DISABILITY PROGRAMS.

    ``(a) Definitions.--In this section:
            ``(1) Center for independent living.--The term `center for 
        independent living' means a center described in part C of title 
        VII of the Rehabilitation Act of 1973 (29 U.S.C. 796f et seq.).
            ``(2) Disability.--The term `disability' has the meaning 
        given the term in section 3 of the Americans with Disabilities 
        Act of 1990 (42 U.S.C. 12102).
            ``(3) Independent living services.--The term `independent 
        living services' has the meaning given the term in section 7 of 
        the Rehabilitation Act of 1973 (29 U.S.C. 705).
    ``(b) Grants.--The Secretary, acting through the Director of the 
Centers for Disease Control and Prevention, may make grants to eligible 
entities on a competitive basis, to assist the entities in implementing 
Living Well With a Disability Programs, designed--
            ``(1) to increase health-promoting behavior, such as 
        engaging in exercise, eating nutritious food, and using stress 
        management techniques, among individuals with disabilities; and
            ``(2) to reduce the limitations of secondary conditions for 
        such individuals.
    ``(c) Eligibility.--To be eligible to receive a grant under this 
section, an entity--
            ``(1) shall be a nonprofit organization that serves 
        individuals with disabilities;
            ``(2) shall be a community-based organization that has 
        experience in providing consumer-directed independent living 
        services; and
            ``(3) may be a center for independent living.
    ``(d) Application.--To be eligible to receive a grant under this 
section for a program, an entity shall submit an application to the 
Secretary at such time, in such manner, and containing such information 
as the Secretary may require, including information on--
            ``(1) the number of individuals with disabilities who will 
        be trained in the program;
            ``(2) the entity's capacity to collect data and information 
        on outcomes of the program; and
            ``(3) the entity's experience implementing similar training 
        programs.
    ``(e) Preference and Distribution.--
            ``(1) Preference.--In making grants under this section, the 
        Secretary shall give preference to eligible entities who--
                    ``(A) are currently (as of the date of submission 
                of the application) serving individuals with 
                disabilities and implementing training and peer support 
                programs;
                    ``(B) indicate a commitment and ability to continue 
                to train participants over several years; and
                    ``(C) have not previously provided training through 
                a Living Well With a Disability Program.
            ``(2) Distribution.--In making grants under this section, 
        the Secretary shall, to the extent practicable, ensure an 
        equitable geographic distribution of the grants.
    ``(f) Curriculum, Training, and Technical Assistance.--An entity 
that receives a grant under this section may use funds made available 
through the grant to acquire a curriculum, training, or technical 
assistance for the program carried out through the grant from an entity 
qualified to implement, and train participants in, a Living Well With a 
Disability program.
    ``(g) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $2,000,000 for each of fiscal 
years 2005 through 2009.

``SEC. 399R. WORKING WELL WITH A DISABILITY PROGRAMS.

    ``(a) Definitions.--In this section, the terms `center for 
independent living', `disability', and `independent living services' 
have the meanings given the terms in section 399O.
    ``(b) Authorization.--The Secretary, acting through the Director of 
the Centers for Disease Control and Prevention, may establish a 
demonstration program promoting the health and wellness of individuals 
with disabilities in the workplace.
    ``(c) Grants.--In carrying out the program, the Secretary shall 
make grants to an eligible entity, to assist the entity in preparing 
for the implementation of, or implementing, Working Well With a 
Disability Programs, which may include--
            ``(1) gathering data on the positive effects of healthy 
        behaviors on retention and productivity of individuals with 
        disabilities who are employees or potential employees;
            ``(2) building relationships between vocational 
        rehabilitation programs and health promotion programs;
            ``(3) adapting a Living Well With a Disability program to 
        meet the needs of individuals seeking or entering employment;
            ``(4) training individuals in methods of implementing the 
        program;
            ``(5) implementing the program; and
            ``(6) measuring the impact of the program on health and 
        employment outcomes.
    ``(d) Eligibility.--To be eligible to receive a grant under this 
section, an entity shall--
            ``(1) have experience in implementing a Living Well With a 
        Disability Program; and
            ``(2) demonstrate that the entity is qualified and able to 
        adapt the program to establish a Working Well With a Disability 
        Program, and implement the program.
    ``(e) Partnership.--An entity that receives a grant under this 
section shall carry out the activities funded through the grant through 
a partnership with 1 or more entities that--
            ``(1) shall be nonprofit organizations that serve 
        individuals with disabilities;
            ``(2) shall be community-based organizations that have 
        experience in providing consumer-directed independent living 
        services; and
            ``(3) may be centers for independent living.
    ``(f) Application.--To be eligible to receive a grant under this 
section for a program, an entity shall submit an application to the 
Secretary at such time, in such manner, and containing such information 
as the Secretary may require.
    ``(g) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $1,000,000 for the period of 
fiscal years 2005 through 2007.''.

SEC. 213. ENHANCED STANDARDS FOR ROADS AND INTERSECTION CONTROLS.

     Section 133 of title 23, United States Code, is amended by adding 
at the end the following:
    ``(g) Enhanced Standards for Roads and Intersection Controls.--
            ``(1) In general.--Not later than 18 months after the date 
        of enactment of this subsection, the Secretary, in coordination 
        with the American Association of State Highway and 
        Transportation Officials and the Institute of Transportation 
        Engineers, shall develop recommended enhanced standards for the 
        design of roads and intersection controls (including associated 
        bicycle paths, bicycle lanes, and walkways) to improve 
        pedestrian and bicycle safety.
            ``(2) Accommodation of bicycles and pedestrians.--The 
        standards under paragraph (1) shall--
                    ``(A) cover all common types of facilities where 
                pedestrians or bicycles are allowed on a road or on 
                associated walkways and bicycle paths or lanes; and
                    ``(B) specify that generally, when the increased 
                cost is not excessive, as an element of good highway 
                design for new construction or reconstruction 
                facilities on which bicycles or pedestrians are 
                permitted, the design shall include appropriate 
                provisions to accommodate bicycles or pedestrians.
            ``(3) Increased apportionment.--
                    ``(A) In general.--Beginning with the first fiscal 
                year that begins after the date that is 2 years after 
                the date of enactment of this subsection, if a State 
                accepts the recommended enhanced standards for the 
                State and local units of government to meet, the State 
                shall receive a 4 percent increase in the amount of 
                funds made available to the State under this section 
                for each fiscal year, if, at least 10 days before the 
                beginning of the fiscal year, the State--
                            ``(i) agrees to follow the enhanced 
                        standards; or
                            ``(ii) establishes an alternative enhanced 
                        standard that the Secretary approves.
                    ``(B) Significant commitment.--In determining the 
                significance of the required commitment of funds under 
                subparagraph (A), the Secretary shall take into 
                consideration the effectiveness of the criteria 
                required and an estimation of increased costs.
            ``(4) Construction requirements.--The Secretary and a State 
        may establish differing requirements for the construction of 
        new facilities, for the rehabilitation of facilities, and for 
        modifications specifically to improve safety and for facilities 
        based on the level of expected pedestrian and bicycle 
        traffic.''.

SEC. 214. MENTAL HEALTH SURVEILLANCE.

    Title V of the Public Health Service Act (42 U.S.C. 290aa et seq.) 
is amended by inserting after section 506B (42 U.S.C. 290aa-5b) the 
following:

``SEC. 506C. MENTAL HEALTH SURVEILLANCE.

    ``(a) In General.--The Secretary, acting through the Administrator, 
and in consultation with the Centers for Disease Control and Prevention 
and the Director of the National Institutes of Health, shall establish 
and implement public health surveillance measures to address the mental 
and behavioral health needs of the population of the United States and 
other populations served by the Administration, that include--
            ``(1) monitoring the mental health status of the 
        population;
            ``(2) monitoring mental and behavioral health risks;
            ``(3) enhancing existing public health surveillance systems 
        to include data on mental and behavioral health status and 
        risks; and
            ``(4) monitoring the immediate and long-term impact of 
        emergencies on population mental health and behavior.
    ``(b) Report.--Not later than 1 year after the date of enactment of 
this section, the Secretary shall submit a report to Congress that 
describes the progress on the implementation of the surveillance 
measures described in subsection (a).
    ``(c) Authorization of Appropriations.--There is authorized to be 
appropriated $5,000,000 for fiscal year 2005 and $15,000,000 for each 
of the following fiscal years.''.

           Subtitle C--Family Smoking Prevention and Control

SEC. 221. SHORT TITLE.

    This subtitle may be cited as the ``Family Smoking Prevention and 
Tobacco Control Act''.

SEC. 222. FINDINGS.

    The Congress finds the following:
            (1) The use of tobacco products by the Nation's children is 
        a pediatric disease of considerable proportions that results in 
        new generations of tobacco-dependent children and adults.
            (2) A consensus exists within the scientific and medical 
        communities that tobacco products are inherently dangerous and 
        cause cancer, heart disease, and other serious adverse health 
        effects.
            (3) Nicotine is an addictive drug.
            (4) Virtually all new users of tobacco products are under 
        the minimum legal age to purchase such products.
            (5) Tobacco advertising and marketing contribute 
        significantly to the use of nicotine-containing tobacco 
        products by adolescents.
            (6) Because past efforts to restrict advertising and 
        marketing of tobacco products have failed adequately to curb 
        tobacco use by adolescents, comprehensive restrictions on the 
        sale, promotion, and distribution of such products are needed.
            (7) Federal and State governments have lacked the legal and 
        regulatory authority and resources they need to address 
        comprehensively the public health and societal problems caused 
        by the use of tobacco products.
            (8) Federal and State public health officials, the public 
        health community, and the public at large recognize that the 
        tobacco industry should be subject to ongoing oversight.
            (9) Under article I, section 8 of the Constitution, the 
        Congress is vested with the responsibility for regulating 
        interstate commerce and commerce with Indian tribes.
            (10) The sale, distribution, marketing, advertising, and 
        use of tobacco products are activities in and substantially 
        affecting interstate commerce because they are sold, marketed, 
        advertised, and distributed in interstate commerce on a 
        nationwide basis, and have a substantial effect on the Nation's 
        economy.
            (11) The sale, distribution, marketing, advertising, and 
        use of such products substantially affect interstate commerce 
        through the health care and other costs attributable to the use 
        of tobacco products.
            (12) It is in the public interest for Congress to enact 
        legislation that provides the Food and Drug Administration with 
        the authority to regulate tobacco products and the advertising 
        and promotion of such products. The benefits to the American 
        people from enacting such legislation would be significant in 
        human and economic terms.
            (13) Tobacco use is the foremost preventable cause of 
        premature death in America. It causes over 400,000 deaths in 
        the United States each year and approximately 8,600,000 
        Americans have chronic illnesses related to smoking.
            (14) Reducing the use of tobacco by minors by 50 percent 
        would prevent well over 6,500,000 of today's children from 
        becoming regular, daily smokers, saving over 2,000,000 of them 
        from premature death due to tobacco induced disease. Such a 
        reduction in youth smoking would also result in approximately 
        $75,000,000,000 in savings attributable to reduced health care 
        costs.
            (15) Advertising, marketing, and promotion of tobacco 
        products have been especially directed to attract young persons 
        to use tobacco products and these efforts have resulted in 
increased use of such products by youth. Past efforts to oversee these 
activities have not been successful in adequately preventing such 
increased use.
            (16) In 2001, the tobacco industry spent more than 
        $11,000,000,000 to attract new users, retain current users, 
        increase current consumption, and generate favorable long-term 
        attitudes toward smoking and tobacco use.
            (17) Tobacco product advertising often misleadingly 
        portrays the use of tobacco as socially acceptable and 
        healthful to minors.
            (18) Tobacco product advertising is regularly seen by 
        persons under the age of 18, and persons under the age of 18 
        are regularly exposed to tobacco product promotional efforts.
            (19) Through advertisements during and sponsorship of 
        sporting events, tobacco has become strongly associated with 
        sports and has become portrayed as an integral part of sports 
        and the healthy lifestyle associated with rigorous sporting 
        activity.
            (20) Children are exposed to substantial and unavoidable 
        tobacco advertising that leads to favorable beliefs about 
        tobacco use, plays a role in leading young people to 
        overestimate the prevalence of tobacco use, and increases the 
        number of young people who begin to use tobacco.
            (21) The use of tobacco products in motion pictures and 
        other mass media glamorizes its use for young people and 
        encourages them to use tobacco products.
            (22) Tobacco advertising expands the size of the tobacco 
        market by increasing consumption of tobacco products including 
        tobacco use by young people.
            (23) Children are more influenced by tobacco advertising 
        than adults, they smoke the most advertised brands.
            (24) Tobacco company documents indicate that young people 
        are an important and often crucial segment of the tobacco 
        market. Children, who tend to be more price-sensitive than 
        adults, are influenced by advertising and promotion practices 
        that result in drastically reduced cigarette prices.
            (25) Comprehensive advertising restrictions will have a 
        positive effect on the smoking rates of young people.
            (26) Restrictions on advertising are necessary to prevent 
        unrestricted tobacco advertising from undermining legislation 
        prohibiting access to young people and providing for education 
        about tobacco use.
            (27) International experience shows that advertising 
        regulations that are stringent and comprehensive have a greater 
        impact on overall tobacco use and young people's use than 
        weaker or less comprehensive ones.
            (28) Text only requirements, although not as stringent as a 
        ban, will help reduce underage use of tobacco products while 
        preserving the informational function of advertising.
            (29) It is in the public interest for Congress to adopt 
        legislation to address the public health crisis created by 
        actions of the tobacco industry.
            (30) The final regulations promulgated by the Secretary of 
        Health and Human Services in the August 28, 1996, issue of the 
        Federal Register (61 Fed. Reg. 44615-44618) for inclusion as 
        part 897 of title 21, Code of Federal Regulations, are 
        consistent with the First Amendment to the United States 
        Constitution and with the standards set forth in the amendments 
        made by this subtitle for the regulation of tobacco products by 
        the Food and Drug Administration and the restriction on the 
        sale and distribution, including access to and the advertising 
        and promotion of, tobacco products contained in such 
        regulations are substantially related to accomplishing the 
        public health goals of this subtitle.
            (31) The regulations described in paragraph (30) will 
        directly and materially advance the Federal Government's 
        substantial interest in reducing the number of children and 
        adolescents who use cigarettes and smokeless tobacco and in 
        preventing the life-threatening health consequences associated 
        with tobacco use. An overwhelming majority of Americans who use 
        tobacco products begin using such products while they are 
        minors and become addicted to the nicotine in those products 
        before reaching the age of 18. Tobacco advertising and 
        promotion plays a crucial role in the decision of these minors 
        to begin using tobacco products. Less restrictive and less 
        comprehensive approaches have not and will not be effective in 
        reducing the problems addressed by such regulations. The 
        reasonable restrictions on the advertising and promotion of 
        tobacco products contained in such regulations will lead to a 
        significant decrease in the number of minors using and becoming 
        addicted to those products.
            (32) The regulations described in paragraph (30) impose no 
        more extensive restrictions on communication by tobacco 
        manufacturers and sellers than are necessary to reduce the 
        number of children and adolescents who use cigarettes and 
        smokeless tobacco and to prevent the life-threatening health 
        consequences associated with tobacco use. Such regulations are 
        narrowly tailored to restrict those advertising and promotional 
        practices which are most likely to be seen or heard by youth 
        and most likely to entice them into tobacco use, while 
        affording tobacco manufacturers and sellers ample opportunity 
        to convey information about their products to adult consumers.
            (33) Tobacco dependence is a chronic disease, one that 
        typically requires repeated interventions to achieve long-term 
        or permanent abstinence.
            (34) Because the only known safe alternative to smoking is 
        cessation, interventions should target all smokers to help them 
        quit completely.
            (35) Tobacco products have been used to facilitate and 
        finance criminal activities both domestically and 
        internationally. Illicit trade of tobacco products has been 
        linked to organized crime and terrorist groups.
            (36) It is essential that the Food and Drug Administration 
        review products sold or distributed for use to reduce risks or 
exposures associated with tobacco products and that it be empowered to 
review any advertising and labeling for such products. It is also 
essential that manufacturers, prior to marketing such products, be 
required to demonstrate that such products will meet a series of 
rigorous criteria, and will benefit the health of the population as a 
whole, taking into account both users of tobacco products and persons 
who do not currently use tobacco products.
            (37) Unless tobacco products that purport to reduce the 
        risks to the public of tobacco use actually reduce such risks, 
        those products can cause substantial harm to the public health 
        to the extent that the individuals, who would otherwise not 
        consume tobacco products or would consume such products less, 
        use tobacco products purporting to reduce risk. Those who use 
        products sold or distributed as modified risk products that do 
        not in fact reduce risk, rather than quitting or reducing their 
        use of tobacco products, have a substantially increased 
        likelihood of suffering disability and premature death. The 
        costs to society of the widespread use of products sold or 
        distributed as modified risk products that do not in fact 
        reduce risk or that increase risk include thousands of 
        unnecessary deaths and injuries and huge costs to our health 
        care system.
            (38) As the National Cancer Institute has found, many 
        smokers mistakenly believe that ``low tar'' and ``light'' 
        cigarettes cause fewer health problems than other cigarettes. 
        As the National Cancer Institute has also found, mistaken 
        beliefs about the health consequences of smoking ``low tar'' 
        and ``light'' cigarettes can reduce the motivation to quit 
        smoking entirely and thereby lead to disease and death.
            (39) Recent studies have demonstrated that there has been 
        no reduction in risk on a population-wide basis from ``low 
        tar'' and ``light'' cigarettes and such products may actually 
        increase the risk of tobacco use.
            (40) The dangers of products sold or distributed as 
        modified risk tobacco products that do not in fact reduce risk 
        are so high that there is a compelling governmental interest in 
        insuring that statements about modified risk tobacco products 
        are complete, accurate, and relate to the overall disease risk 
        of the product.
            (41) As the Federal Trade Commission has found, consumers 
        have misinterpreted advertisements in which one product is 
        claimed to be less harmful than a comparable product, even in 
        the presence of disclosures and advisories intended to provide 
        clarification.
            (42) Permitting manufacturers to make unsubstantiated 
        statements concerning modified risk tobacco products, whether 
        express or implied, even if accompanied by disclaimers would be 
        detrimental to the public health.
            (43) The only way to effectively protect the public health 
        from the dangers of unsubstantiated modified risk tobacco 
        products is to empower the Food and Drug Administration to 
        require that products that tobacco manufacturers sold or 
        distributed for risk reduction be approved in advance of 
        marketing, and to require that the evidence relied on to 
        support approval of these products is rigorous.

SEC. 223. PURPOSE.

    The purposes of this subtitle are--
            (1) to provide authority to the Food and Drug 
        Administration to regulate tobacco products under the Federal 
        Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), by 
        recognizing it as the primary Federal regulatory authority with 
        respect to the manufacture, marketing, and distribution of 
        tobacco products;
            (2) to ensure that the Food and Drug Administration has the 
        authority to address issues of particular concern to public 
        health officials, especially the use of tobacco by young people 
        and dependence on tobacco;
            (3) to authorize the Food and Drug Administration to set 
        national standards controlling the manufacture of tobacco 
        products and the identity, public disclosure, and amount of 
        ingredients used in such products;
            (4) to provide new and flexible enforcement authority to 
        ensure that there is effective oversight of the tobacco 
        industry's efforts to develop, introduce, and promote less 
        harmful tobacco products;
            (5) to vest the Food and Drug Administration with the 
        authority to regulate the levels of tar, nicotine, and other 
        harmful components of tobacco products;
            (6) in order to ensure that consumers are better informed, 
        to require tobacco product manufacturers to disclose research 
        which has not previously been made available, as well as 
        research generated in the future, relating to the health and 
        dependency effects or safety of tobacco products;
            (7) to continue to permit the sale of tobacco products to 
        adults in conjunction with measures to ensure that they are not 
        sold or accessible to underage purchasers;
            (8) to impose appropriate regulatory controls on the 
        tobacco industry;
            (9) to promote cessation to reduce disease risk and the 
        social costs associated with tobacco related diseases; and
            (10) to strengthen legislation against illicit trade in 
        tobacco products.

SEC. 224. SCOPE AND EFFECT.

    (a) Intended Effect.--Nothing in this subtitle (or an amendment 
made by this subtitle) shall be construed to--
            (1) establish a precedent with regard to any other 
        industry, situation, circumstance, or legal action; or
            (2) affect any action pending in Federal, State, or Tribal 
        court, or any agreement, consent decree, or contract of any 
        kind.
    (b) Agricultural Activities.--The provisions of this subtitle (or 
an amendment made by this subtitle) which authorize the Secretary to 
take certain actions with regard to tobacco and tobacco products shall 
not be construed to affect any authority of the Secretary of 
Agriculture under existing law regarding the growing, cultivation, or 
curing of raw tobacco.

SEC. 225. SEVERABILITY.

    If any provision of this subtitle, the amendments made by this 
subtitle, or the application of any provision of this subtitle to any 
person or circumstance is held to be invalid, the remainder of this 
subtitle, the amendments made by this subtitle, and the application of 
the provisions of this subtitle to any other person or circumstance 
shall not be affected and shall continue to be enforced to the fullest 
extent possible.

        CHAPTER 1--AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

SEC. 231. AMENDMENT OF FEDERAL FOOD, DRUG, AND COSMETIC ACT.

    (a) Definition of Tobacco Products.--Section 201 of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 321) is amended by adding at 
the end the following:
    ``(nn)(1) The term `tobacco product' means any product made or 
derived from tobacco that is intended for human consumption, including 
any component, part, or accessory of a tobacco product (except for raw 
materials other than tobacco used in manufacturing a component, part, 
or accessory of a tobacco product).
    ``(2) The term `tobacco product' does not mean--
            ``(A) a product in the form of conventional food (including 
        water and chewing gum), a product represented for use as or for 
        use in a conventional food, or a product that is intended for 
        ingestion in capsule, tablet, softgel, or liquid form; or
            ``(B) an article that is approved or is regulated as a drug 
        by the Food and Drug Administration.
    ``(3) The products described in paragraph (2)(A) shall be subject 
to chapter IV or chapter V of this Act and the articles described in 
paragraph (2)(B) shall be subject to chapter V of this Act.
    ``(4) A tobacco product may not be marketed in combination with any 
other article or product regulated under this Act (including a drug, 
biologic, food, cosmetics, medical device, or a dietary supplement).''.
    (b) FDA Authority Over Tobacco Products.--The Federal Food, Drug, 
and Cosmetic Act (21 U.S.C. 301 et seq.) is amended--
            (1) by redesignating chapter IX as chapter X;
            (2) by redesignating sections 901 through 907 as sections 
        1001 through 1007; and
            (3) by inserting after section 803 the following:

                     ``CHAPTER IX--TOBACCO PRODUCTS

``SEC. 900. DEFINITIONS.

    ``In this chapter:
            ``(1) Additive.--The term `additive' means any substance 
        the intended use of which results or may reasonably be expected 
        to result, directly or indirectly, in its becoming a component 
        or otherwise affecting the characteristic of any tobacco 
        product (including any substances intended for use as a 
        flavoring, coloring or in producing, manufacturing, packing, 
        processing, preparing, treating, packaging, transporting, or 
        holding), except that such term does not include tobacco or a 
        pesticide chemical residue in or on raw tobacco or a pesticide 
        chemical.
            ``(2) Brand.--The term `brand' means a variety of tobacco 
        product distinguished by the tobacco used, tar content, 
        nicotine content, flavoring used, size, filtration, or 
packaging, logo, registered trademark or brand name, identifiable 
pattern of colors, or any combination of such attributes.
            ``(3) Cigarette.--The term `cigarette' has the meaning 
        given that term by section 3(1) of the Federal Cigarette 
        Labeling and Advertising Act (15 U.S.C. 1332(1)), but also 
        includes tobacco, in any form, that is functional in the 
        product, which, because of its appearance, the type of tobacco 
        used in the filler, or its packaging and labeling, is likely to 
        be offered to, or purchased by, consumers as a cigarette or as 
        roll-your-own tobacco.
            ``(4) Cigarette tobacco.--The term `cigarette tobacco' 
        means any product that consists of loose tobacco that is 
        intended for use by consumers in a cigarette. Unless otherwise 
        stated, the requirements for cigarettes shall also apply to 
        cigarette tobacco.
            ``(5) Commerce.--The term `commerce' has the meaning given 
        that term by section 3(2) of the Federal Cigarette Labeling and 
        Advertising Act (15 U.S.C. 1332(2)).
            ``(6) Counterfeit tobacco product.--The term `counterfeit 
        tobacco product' means a tobacco product (or the container or 
        labeling of such a product) that, without authorization, bears 
        the trademark, trade name, or other identifying mark, imprint 
        or device, or any likeness thereof, of a tobacco product listed 
        in a registration under section 905(i)(1).
            ``(7) Distributor.--The term `distributor' as regards a 
        tobacco product means any person who furthers the distribution 
        of a tobacco product, whether domestic or imported, at any 
        point from the original place of manufacture to the person who 
        sells or distributes the product to individuals for personal 
        consumption. Common carriers are not considered distributors 
        for purposes of this chapter.
            ``(8) Illicit trade.--The term `illicit trade' means any 
        practice or conduct prohibited by law which relates to 
        production, shipment, receipt, possession, distribution, sale, 
        or purchase of tobacco products including any practice or 
        conduct intended to facilitate such activity.
            ``(9) Indian tribe.--The term `Indian tribe' has the 
        meaning given such term in section 4(e) of the Indian Self 
        Determination and Education Assistance Act (25 U.S.C. 450b(e)).
            ``(10) Little cigar.--The term `little cigar' has the 
        meaning given that term by section 3(7) of the Federal 
        Cigarette Labeling and Advertising Act (15 U.S.C. 1332(7)).
            ``(11) Nicotine.--The term `nicotine' means the chemical 
        substance named 3-(1-Methyl-2-pyrrolidinyl) pyridine or 
        C[10]H[14]N[2], including any salt or complex of nicotine.
            ``(12) Package.--The term `package' means a pack, box, 
        carton, or container of any kind or, if no other container, any 
        wrapping (including cellophane), in which a tobacco product is 
        offered for sale, sold, or otherwise distributed to consumers.
            ``(13) Retailer.--The term `retailer' means any person who 
        sells tobacco products to individuals for personal consumption, 
        or who operates a facility where self-service displays of 
        tobacco products are permitted.
            ``(14) 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.
            ``(15) Smoke constituent.--The term `smoke constituent' 
        means any chemical or chemical compound in mainstream or 
        sidestream tobacco smoke that either transfers from any 
        component of the cigarette to the smoke or that is formed by 
        the combustion or heating of tobacco, additives, or other 
        component of the tobacco product.
            ``(16) Smokeless tobacco.--The term `smokeless tobacco' 
        means any tobacco product that consists of cut, ground, 
        powdered, or leaf tobacco and that is intended to be placed in 
        the oral or nasal cavity.
            ``(17) State.--The term `State' means any State of the 
        United States and, for purposes of this chapter, includes the 
        District of Columbia, the Commonwealth of Puerto Rico, Guam, 
        the Virgin Islands, American Samoa, Wake Island, Midway 
        Islands, Kingman Reef, Johnston Atoll, the Northern Mariana 
        Islands, and any other trust territory or possession of the 
        United States.
            ``(18) Tobacco product manufacturer.--Term `tobacco product 
        manufacturer' means any person, including any repacker or 
        relabeler, who--
                    ``(A) manufactures, fabricates, assembles, 
                processes, or labels a tobacco product; or
                    ``(B) imports a finished cigarette or smokeless 
                tobacco product for sale or distribution in the United 
                States.
            ``(19) United states.--The term `United States' means the 
        50 States of the United States of America and the District of 
        Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin 
        Islands, American Samoa, Wake Island, Midway Islands, Kingman 
        Reef, Johnston Atoll, the Northern Mariana Islands, and any 
        other trust territory or possession of the United States.

``SEC. 901. FDA AUTHORITY OVER TOBACCO PRODUCTS.

     ``(a) In General.--Tobacco products shall be regulated by the 
Secretary under this chapter and shall not be subject to the provisions 
of chapter V, unless--
            ``(1) such products are intended for use in the diagnosis, 
        cure, mitigation, treatment, or prevention of disease (within 
        the meaning of section 201(g)(1)(B) or section 201(h)(2)); or
            ``(2) a claim is made for such products under section 
        201(g)(1)(C) or 201(h)(3);
        other than modified risk tobacco products approved in 
        accordance with section 911.
    ``(b) Applicability.--This chapter shall apply to all tobacco 
products subject to the regulations referred to in section 232 of the 
Family Smoking Prevention and Tobacco Control Act, and to any other 
tobacco products that the Secretary by regulation deems to be subject 
to this chapter.
    ``(c) Scope.--
            ``(1) In general.--Nothing in this chapter, or any policy 
        issued or regulation promulgated thereunder, or the Family 
        Smoking Prevention and Tobacco Control Act, shall be construed 
        to affect the Secretary's authority over, or the regulation of, 
        products under this Act that are not tobacco products under 
        chapter V or any other chapter.
            ``(2) Limitation of authority.--
                    ``(A) In general.--The provisions of this chapter 
                shall not apply to tobacco leaf that is not in the 
                possession of a manufacturer of tobacco products, or to 
                the producers of tobacco leaf, including tobacco 
                growers, tobacco warehouses, and tobacco grower 
                cooperatives, nor shall any employee of the Food and 
                Drug Administration have any authority to enter onto a 
                farm owned by a producer of tobacco leaf without the 
                written consent of such producer.
                    ``(B) Exception.--Notwithstanding any other 
                provision of this subparagraph, if a producer of 
                tobacco leaf is also a tobacco product manufacturer or 
                controlled by a tobacco product manufacturer, the 
                producer shall be subject to this chapter in the 
                producer's capacity as a manufacturer.
                    ``(C) Rule of construction.--Nothing in this 
                chapter shall be construed to grant the Secretary 
authority to promulgate regulations on any matter that involves the 
production of tobacco leaf or a producer thereof, other than activities 
by a manufacturer affecting production.

``SEC. 902. ADULTERATED TOBACCO PRODUCTS.

    ``A tobacco product shall be deemed to be adulterated if--
            ``(1) it consists in whole or in part of any filthy, 
        putrid, or decomposed substance, or is otherwise contaminated 
        by any added poisonous or added deleterious substance that may 
        render the product injurious to health;
            ``(2) it has been prepared, packed, or held under 
        insanitary conditions whereby it may have been contaminated 
        with filth, or whereby it may have been rendered injurious to 
        health;
            ``(3) its package is composed, in whole or in part, of any 
        poisonous or deleterious substance which may render the 
        contents injurious to health;
            ``(4) it is, or purports to be or is represented as, a 
        tobacco product which is subject to a tobacco product standard 
        established under section 907 unless such tobacco product is in 
        all respects in conformity with such standard;
            ``(5)(A) it is required by section 910(a) to have premarket 
        approval and does not have an approved application in effect;
            ``(B) it is in violation of the order approving such an 
        application; or
            ``(6) the methods used in, or the facilities or controls 
        used for, its manufacture, packing or storage are not in 
        conformity with applicable requirements under section 906(e)(1) 
        or an applicable condition prescribed by an order under section 
        906(e)(2); or
            ``(7) it is in violation of section 911.

``SEC. 903. MISBRANDED TOBACCO PRODUCTS.

    ``(a) In General.--A tobacco product shall be deemed to be 
misbranded--
            ``(1) if its labeling is false or misleading in any 
        particular;
            ``(2) if in package form unless it bears a label 
        containing--
                    ``(A) the name and place of business of the tobacco 
                product manufacturer, packer, or distributor;
                    ``(B) an accurate statement of the quantity of the 
                contents in terms of weight, measure, or numerical 
                count;
                    ``(C) an accurate statement of the percentage of 
                the tobacco used in the product that is domestically 
                grown tobacco and the percentage that is foreign grown 
                tobacco; and
                    ``(D) the statement required under section 921(a),
        except that under subparagraph (B) reasonable variations shall 
        be permitted, and exemptions as to small packages shall be 
        established, by regulations prescribed by the Secretary;
            ``(3) if any word, statement, or other information required 
        by or under authority of this chapter to appear on the label or 
        labeling is not prominently placed thereon with such 
        conspicuousness (as compared with other words, statements or 
        designs in the labeling) and in such terms as to render it 
        likely to be read and understood by the ordinary individual 
        under customary conditions of purchase and use;
            ``(4) if it has an established name, unless its label 
        bears, to the exclusion of any other nonproprietary name, its 
        established name prominently printed in type as required by the 
        Secretary by regulation;
            ``(5) if the Secretary has issued regulations requiring 
        that its labeling bear adequate directions for use, or adequate 
        warnings against use by children, that are necessary for the 
        protection of users unless its labeling conforms in all 
        respects to such regulations;
            ``(6) if it was manufactured, prepared, propagated, 
        compounded, or processed in any State in an establishment not 
        duly registered under section 905(b), 905(c), 905(d), or 
        905(h), if it was not included in a list required by section 
        905(i), if a notice or other information respecting it was not 
        provided as required by such section or section 905(j), or if 
        it does not bear such symbols from the uniform system for 
        identification of tobacco products prescribed under section 
        905(e) as the Secretary by regulation requires;
            ``(7) if, in the case of any tobacco product distributed or 
        offered for sale in any State--
                    ``(A) its advertising is false or misleading in any 
                particular; or
                    ``(B) it is sold or distributed in violation of 
                regulations prescribed under section 906(d);
            ``(8) unless, in the case of any tobacco product 
        distributed or offered for sale in any State, the manufacturer, 
        packer, or distributor thereof includes in all advertisements 
        and other descriptive printed matter issued or caused to be 
        issued by the manufacturer, packer, or distributor with respect 
        to that tobacco product--
                    ``(A) a true statement of the tobacco product's 
                established name as described in paragraph (4), printed 
                prominently; and
                    ``(B) a brief statement of--
                            ``(i) the uses of the tobacco product and 
                        relevant warnings, precautions, side effects, 
                        and contraindications; and
                            ``(ii) in the case of specific tobacco 
                        products made subject to a finding by the 
                        Secretary after notice and opportunity for 
                        comment that such action is appropriate to 
                        protect the public health, a full description 
                        of the components of such tobacco product or 
                        the formula showing quantitatively each 
                        ingredient of such tobacco product to the 
                        extent required in regulations which shall be 
                        issued by the Secretary after an opportunity 
                        for a hearing;
            ``(9) if it is a tobacco product subject to a tobacco 
        product standard established under section 907, unless it bears 
        such labeling as may be prescribed in such tobacco product 
        standard; or
            ``(10) if there was a failure or refusal--
                    ``(A) to comply with any requirement prescribed 
                under section 904 or 908; or
                    ``(B) to furnish any material or information 
                required under section 909.
    ``(b) Prior Approval of Label Statements.--The Secretary may, by 
regulation, require prior approval of statements made on the label of a 
tobacco product. No regulation issued under this subsection may require 
prior approval by the Secretary of the content of any advertisement, 
except for modified risk tobacco products as provided in section 911. 
No advertisement of a tobacco product published after the date of 
enactment of the Family Smoking Prevention and Tobacco Control Act 
shall, with respect to the language of label statements as prescribed 
under section 4 of the Cigarette Labeling and Advertising Act and 
section 3 of the Comprehensive Smokeless Tobacco Health Education Act 
of 1986 or the regulations issued under such sections, be subject to 
the provisions of sections 12 through 15 of the Federal Trade 
Commission Act (15 U.S.C. 52 through 55).

``SEC. 904. SUBMISSION OF HEALTH INFORMATION TO THE SECRETARY.

    ``(a) Requirement.--Not later than 6 months after the date of 
enactment of the Family Smoking Prevention and Tobacco Control Act, 
each tobacco product manufacturer or importer, or agents thereof, shall 
submit to the Secretary the following information:
            ``(1) A listing of all ingredients, including tobacco, 
        substances, compounds, and additives that are, as of such date, 
        added by the manufacturer to the tobacco, paper, filter, or 
        other part of each tobacco product by brand and by quantity in 
        each brand and subbrand.
            ``(2) A description of the content, delivery, and form of 
        nicotine in each tobacco product measured in milligrams of 
        nicotine in accordance with regulations promulgated by the 
        Secretary in accordance with section 4(a)(4) of the Federal 
        Cigarette Labeling and Advertising Act.
            ``(3) A listing of all constituents, including smoke 
        constituents as applicable, identified by the Secretary as 
        harmful or potentially harmful to health in each tobacco 
        product, and as applicable in the smoke of each tobacco 
        product, by brand and by quantity in each brand and subbrand. 
        Effective beginning 2 years after the date of enactment of this 
        chapter, the manufacturer, importer, or agent shall comply with 
        regulations promulgated under section 915 in reporting 
        information under this paragraph, where applicable.
            ``(4) All documents developed after the date of enactment 
        of the Family Smoking Prevention and Tobacco Control Act that 
        relate to health, toxicological, behavioral, or physiologic 
        effects of current or future tobacco products, their 
        constituents (including smoke constituents), ingredients, 
        components, and additives.
    ``(b) Data Submission.--At the request of the Secretary, each 
tobacco product manufacturer or importer of tobacco products, or agents 
thereof, shall submit the following:
            ``(1) Any or all documents (including underlying scientific 
        information) relating to research activities, and research 
        findings, conducted, supported, or possessed by the 
        manufacturer (or agents thereof) on the health, toxicological, 
        behavioral, or physiologic effects of tobacco products and 
        their constituents (including smoke constituents), ingredients, 
        components, and additives.
            ``(2) Any or all documents (including underlying scientific 
        information) relating to research activities, and research 
        findings, conducted, supported, or possessed by the 
        manufacturer (or agents thereof) that relate to the issue of 
        whether a reduction in risk to health from tobacco products can 
        occur upon the employment of technology available or known to 
        the manufacturer.
            ``(3) Any or all documents (including underlying scientific 
        or financial information) relating to marketing research 
        involving the use of tobacco products or marketing practices 
        and the effectiveness of such practices used by tobacco 
        manufacturers and distributors.
An importer of a tobacco product not manufactured in the United States 
shall supply the information required of a tobacco product manufacturer 
under this subsection.
    ``(c) Time for Submission.--
            ``(1) In general.--At least 90 days prior to the delivery 
        for introduction into interstate commerce of a tobacco product 
        not on the market on the date of enactment of the Family 
        Smoking Prevention and Tobacco Control Act, the manufacturer of 
        such product shall provide the information required under 
        subsection (a).
            ``(2) Disclosure of additive.--If at any time a tobacco 
        product manufacturer adds to its tobacco products a new tobacco 
        additive or increases the quantity of an existing tobacco 
        additive, the manufacturer shall, except as provided in 
        paragraph (3), at least 90 days prior to such action so advise 
        the Secretary in writing.
            ``(3) Disclosure of other actions.--If at any time a 
        tobacco product manufacturer eliminates or decreases an 
        existing additive, or adds or increases an additive that has by 
        regulation been designated by the Secretary as an additive that 
        is not a human or animal carcinogen, or otherwise harmful to 
        health under intended conditions of use, the manufacturer shall 
        within 60 days of such action so advise the Secretary in 
        writing.
    ``(d) Data List.--
            ``(1) In general.--Not later than 3 years after the date of 
        enactment of the Family Smoking Prevention and Tobacco Control 
        Act, and annually thereafter, the Secretary shall publish in a 
        format that is understandable and not misleading to a 
lay person, and place on public display (in a manner determined by the 
Secretary) the list established under subsection (e).
            ``(2) Consumer research.--The Secretary shall conduct 
        periodic consumer research to ensure that the list published 
        under paragraph (1) is not misleading to lay persons. Not later 
        than 5 years after the date of enactment of the Family Smoking 
Prevention and Tobacco Control Act, the Secretary shall submit to the 
appropriate committees of Congress a report on the results of such 
research, together with recommendations on whether such publication 
should be continued or modified.
    ``(e) Data Collection.--Not later than 12 months after the date of 
enactment of the Family Smoking Prevention and Tobacco Control Act, the 
Secretary shall establish a list of harmful and potentially harmful 
constituents, including smoke constituents, to health in each tobacco 
product by brand and by quantity in each brand and subbrand. The 
Secretary shall publish a public notice requesting the submission by 
interested persons of scientific and other information concerning the 
harmful and potentially harmful constituents in tobacco products and 
tobacco smoke.

``SEC. 905. ANNUAL REGISTRATION.

    ``(a) Definitions.--In this section:
            ``(1) Manufacture, preparation, compounding, or 
        processing.--The term `manufacture, preparation, compounding, 
        or processing' shall include repackaging or otherwise changing 
        the container, wrapper, or labeling of any tobacco product 
        package in furtherance of the distribution of the tobacco 
        product from the original place of manufacture to the person 
        who makes final delivery or sale to the ultimate consumer or 
        user.
            ``(2) Name.--The term `name' shall include in the case of a 
        partnership the name of each partner and, in the case of a 
        corporation, the name of each corporate officer and director, 
        and the State of incorporation.
    ``(b) Registration by Owners and Operators.--On or before December 
31 of each year every person who owns or operates any establishment in 
any State engaged in the manufacture, preparation, compounding, or 
processing of a tobacco product or tobacco products shall register with 
the Secretary the name, places of business, and all such establishments 
of that person.
    ``(c) Registration of New Owners and Operators.--Every person upon 
first engaging in the manufacture, preparation, compounding, or 
processing of a tobacco product or tobacco products in any 
establishment owned or operated in any State by that person shall 
immediately register with the Secretary that person's name, place of 
business, and such establishment.
    ``(d) Registration of Added Establishments.--Every person required 
to register under subsection (b) or (c) shall immediately register with 
the Secretary any additional establishment which that person owns or 
operates in any State and in which that person begins the manufacture, 
preparation, compounding, or processing of a tobacco product or tobacco 
products.
    ``(e) Uniform Product Identification System.--The Secretary may by 
regulation prescribe a uniform system for the identification of tobacco 
products and may require that persons who are required to list such 
tobacco products under subsection (i) shall list such tobacco products 
in accordance with such system.
    ``(f) Public Access to Registration Information.--The Secretary 
shall make available for inspection, to any person so requesting, any 
registration filed under this section.
    ``(g) Biennial Inspection of Registered Establishments.--Every 
establishment in any State registered with the Secretary under this 
section shall be subject to inspection under section 704, and every 
such establishment engaged in the manufacture, compounding, or 
processing of a tobacco product or tobacco products shall be so 
inspected by 1 or more officers or employees duly designated by the 
Secretary at least once in the 2-year period beginning with the date of 
registration of such establishment under this section and at least once 
in every successive 2-year period thereafter.
    ``(h) Foreign Establishments Shall Register.--Any establishment 
within any foreign country engaged in the manufacture, preparation, 
compounding, or processing of a tobacco product or tobacco products, 
shall register under this section under regulations promulgated by the 
Secretary. Such regulations shall require such establishment to provide 
the information required by subsection (i) of this section and shall 
include provisions for registration of any such establishment upon 
condition that adequate and effective means are available, by 
arrangement with the government of such foreign country or otherwise, 
to enable the Secretary to determine from time to time whether tobacco 
products manufactured, prepared, compounded, or processed in such 
establishment, if imported or offered for import into the United 
States, shall be refused admission on any of the grounds set forth in 
section 801(a).
    ``(i) Registration Information.--
            ``(1) Product list.--Every person who registers with the 
        Secretary under subsection (b), (c), (d), or (h) shall, at the 
        time of registration under any such subsection, file with the 
        Secretary a list of all tobacco products which are being 
        manufactured, prepared, compounded, or processed by that person 
        for commercial distribution and which has not been included in 
        any list of tobacco products filed by that person with the 
        Secretary under this paragraph or paragraph (2) before such 
        time of registration. Such list shall be prepared in such form 
        and manner as the Secretary may prescribe and shall be 
        accompanied by--
                    ``(A) in the case of a tobacco product contained in 
                the applicable list with respect to which a tobacco 
                product standard has been established under section 907 
                or which is subject to section 910, a reference to the 
                authority for the marketing of such tobacco product and 
                a copy of all labeling for such tobacco product;
                    ``(B) in the case of any other tobacco product 
                contained in an applicable list, a copy of all consumer 
                information and other labeling for such tobacco 
                product, a representative sampling of advertisements 
                for such tobacco product, and, upon request made by the 
Secretary for good cause, a copy of all advertisements for a particular 
tobacco product; and
                    ``(C) if the registrant filing a list has 
                determined that a tobacco product contained in such 
                list is not subject to a tobacco product standard 
                established under section 907, a brief statement of the 
basis upon which the registrant made such determination if the 
Secretary requests such a statement with respect to that particular 
tobacco product.
            ``(2) Biannual report of any change in product list.--Each 
        person who registers with the Secretary under this section 
        shall report to the Secretary once during the month of June of 
        each year and once during the month of December of each year 
        the following:
                    ``(A) A list of each tobacco product introduced by 
                the registrant for commercial distribution which has 
                not been included in any list previously filed by that 
                person with the Secretary under this subparagraph or 
                paragraph (1). A list under this subparagraph shall 
                list a tobacco product by its established name and 
                shall be accompanied by the other information required 
                by paragraph (1).
                    ``(B) If since the date the registrant last made a 
                report under this paragraph that person has 
                discontinued the manufacture, preparation, compounding, 
                or processing for commercial distribution of a tobacco 
                product included in a list filed under subparagraph (A) 
                or paragraph (1), notice of such discontinuance, the 
                date of such discontinuance, and the identity of its 
                established name.
                    ``(C) If since the date the registrant reported 
                under subparagraph (B) a notice of discontinuance that 
                person has resumed the manufacture, preparation, 
                compounding, or processing for commercial distribution 
                of the tobacco product with respect to which such 
                notice of discontinuance was reported, notice of such 
                resumption, the date of such resumption, the identity 
                of such tobacco product by established name, and other 
                information required by paragraph (1), unless the 
                registrant has previously reported such resumption to 
                the Secretary under this subparagraph.
                    ``(D) Any material change in any information 
                previously submitted under this paragraph or paragraph 
                (1).
    ``(j) Report Preceding Introduction of Certain Substantially-
Equivalent Products Into Interstate Commerce.--
            ``(1) In general.--Each person who is required to register 
        under this section and who proposes to begin the introduction 
        or delivery for introduction into interstate commerce for 
        commercial distribution of a tobacco product intended for human 
        use that was not commercially marketed (other than for test 
        marketing) in the United States as of June 1, 2003, shall, at 
        least 90 days prior to making such introduction or delivery, 
        report to the Secretary (in such form and manner as the 
        Secretary shall prescribe)--
                    ``(A) the basis for such person's determination 
                that the tobacco product is substantially equivalent, 
                within the meaning of section 910, to a tobacco product 
                commercially marketed (other than for test marketing) 
                in the United States as of June 1, 2003, that is in 
                compliance with the requirements of this Act; and
                    ``(B) action taken by such person to comply with 
                the requirements under section 907 that are applicable 
                to the tobacco product.
            ``(2) Application to certain post june 1, 2003 products.--A 
        report under this subsection for a tobacco product that was 
        first introduced or delivered for introduction into interstate 
        commerce for commercial distribution in the United States after 
        June 1, 2003, and prior to the date that is 15 months after the 
        date of enactment of the Family Smoking Prevention and Tobacco 
        Control Act shall be submitted to the Secretary not later than 
        15 months after such date of enactment.
            ``(3) Exemptions.--
                    ``(A) In general.--The Secretary may by regulation, 
                exempt from the requirements of this subsection tobacco 
                products that are modified by adding or deleting a 
                tobacco additive, or increasing or decreasing the 
                quantity of an existing tobacco additive, if the 
                Secretary determines that--
                            ``(i) such modification would be a minor 
                        modification of a tobacco product authorized 
                        for sale under this Act;
                            ``(ii) a report under this subsection is 
                        not necessary to ensure that permitting the 
                        tobacco product to be marketed would be 
                        appropriate for protection of the public 
                        health; and
                            ``(iii) an exemption is otherwise 
                        appropriate.
                    ``(B) Regulations.--Not later than 9 months after 
                the date of enactment of the Family Smoking Prevention 
                and Tobacco Control Act, the Secretary shall issue 
                regulations to implement this paragraph.

``SEC. 906. GENERAL PROVISIONS RESPECTING CONTROL OF TOBACCO PRODUCTS.

    ``(a) In General.--Any requirement established by or under section 
902, 903, 905, or 909 applicable to a tobacco product shall apply to 
such tobacco product until the applicability of the requirement to the 
tobacco product has been changed by action taken under section 907, 
section 910, section 911, or subsection (d) of this section, and any 
requirement established by or under section 902, 903, 905, or 909 which 
is inconsistent with a requirement imposed on such tobacco product 
under section 907, section 910, section 911, or subsection (d) of this 
section shall not apply to such tobacco product.
    ``(b) Information on Public Access and Comment.--Each notice of 
proposed rulemaking under section 907, 908, 909, 910, or 911 or under 
this section, any other notice which is published in the Federal 
Register with respect to any other action taken under any such section 
and which states the reasons for such action, and each publication of 
findings required to be made in connection with rulemaking under any 
such section shall set forth--
            ``(1) the manner in which interested persons may examine 
        data and other information on which the notice or findings is 
        based; and
            ``(2) the period within which interested persons may 
        present their comments on the notice or findings (including the 
        need therefore) orally or in writing, which period shall be at 
        least 60 days but may not exceed 90 days unless the time is 
        extended by the Secretary by a notice published in the Federal 
        Register stating good cause therefore.
    ``(c) Limited Confidentiality of Information.--Any information 
reported to or otherwise obtained by the Secretary or the Secretary's 
representative under section 903, 904, 907, 908, 909, 910, 911, or 704, 
or under subsection (e) or (f) of this section, which is exempt from 
disclosure under subsection (a) of section 552 of title 5, United 
States Code, by reason of subsection (b)(4) of that section shall be 
considered confidential and shall not be disclosed, except that the 
information may be disclosed to other officers or employees concerned 
with carrying out this chapter, or when relevant in any proceeding 
under this chapter.
    ``(d) Restrictions.--
            ``(1) In general.--The Secretary may by regulation require 
        restrictions on the sale and distribution of a tobacco product, 
        including restrictions on the access to, and the advertising 
        and promotion of, the tobacco product, if the Secretary 
        determines that such regulation would be appropriate for the 
        protection of the public health. The Secretary may by 
        regulation impose restrictions on the advertising and promotion 
        of a tobacco product consistent with and to full extent 
        permitted by the first amendment to the Constitution. The 
        finding as to whether such regulation would be appropriate for 
        the protection of the public health shall be determined with 
        respect to the risks and benefits to the population as a whole, 
        including users and non-users of the tobacco product, and 
        taking into account--
                    ``(A) the increased or decreased likelihood that 
                existing users of tobacco products will stop using such 
                products; and
                    ``(B) the increased or decreased likelihood that 
                those who do not use tobacco products will start using 
                such products.
        No such regulation may require that the sale or distribution of 
        a tobacco product be limited to the written or oral 
        authorization of a practitioner licensed by law to prescribe 
        medical products.
            ``(2) Label statements.--The label of a tobacco product 
        shall bear such appropriate statements of the restrictions 
        required by a regulation under subsection (a) as the Secretary 
        may in such regulation prescribe.
            ``(3) Limitations.--
                    ``(A) In general.--No restrictions under paragraph 
                (1) may--
                            ``(i) prohibit the sale of any tobacco 
                        product in face-to-face transactions by a 
                        specific category of retail outlets; or
                            ``(ii) establish a minimum age of sale of 
                        tobacco products to any person older than 18 
                        years of age.
                    ``(B) Matchbooks.--For purposes of any regulations 
                issued by the Secretary, matchbooks of conventional 
                size containing not more than 20 paper matches, and 
                which are customarily given away for free with the 
                purchase of tobacco products shall be considered as 
                adult written publications which shall be permitted to 
                contain advertising. Notwithstanding the preceding 
                sentence, if the Secretary finds that such treatment of 
                matchbooks is not appropriate for the protection of the 
                public health, the Secretary may determine by 
                regulation that matchbooks shall not be considered 
                adult written publications.
    ``(e) Good Manufacturing Practice Requirements.--
            ``(1) Methods, facilities, and controls to conform.--
                    ``(A) In general.--The Secretary may, in accordance 
                with subparagraph (B), prescribe regulations (which may 
                differ based on the type of tobacco product involved) 
                requiring that the methods used in, and the facilities 
                and controls used for, the manufacture, pre-production 
                design validation (including a process to assess the 
                performance of a tobacco product), packing and storage 
                of a tobacco product, conform to current good 
                manufacturing practice, as prescribed in such 
                regulations, to assure that the public health is 
                protected and that the tobacco product is in compliance 
                with this chapter. Good manufacturing practices may 
                include the testing of raw tobacco for pesticide 
                chemical residues regardless of whether a tolerance for 
                such chemical residues has been established.
                    ``(B) Requirements.--The Secretary shall--
                            ``(i) before promulgating any regulation 
                        under subparagraph (A), afford the Tobacco 
                        Products Scientific Advisory Committee an 
                        opportunity to submit recommendations with 
                        respect to the regulation proposed to be 
                        promulgated;
                            ``(ii) before promulgating any regulation 
                        under subparagraph (A), afford opportunity for 
                        an oral hearing;
                            ``(iii) provide the advisory committee a 
                        reasonable time to make its recommendation with 
                        respect to proposed regulations under 
                        subparagraph (A); and
                            ``(iv) in establishing the effective date 
                        of a regulation promulgated under this 
                        subsection, take into account the differences 
                        in the manner in which the different types of 
                        tobacco products have historically been 
                        produced, the financial resources of the 
                        different tobacco product manufacturers, and 
                        the state of their existing manufacturing 
                        facilities, and shall provide for a reasonable 
                        period of time for such manufacturers to 
conform to good manufacturing practices.
            ``(2) Exemptions; variances.--
                    ``(A) Petition.--Any person subject to any 
                requirement prescribed under paragraph (1) may petition 
                the Secretary for a permanent or temporary exemption or 
                variance from such requirement. Such a petition shall 
                be submitted to the Secretary in such form and manner 
                as the Secretary shall prescribe and shall--
                            ``(i) in the case of a petition for an 
                        exemption from a requirement, set forth the 
                        basis for the petitioner's determination that 
                        compliance with the requirement is not required 
                        to assure that the tobacco product will be in 
                        compliance with this chapter;
                            ``(ii) in the case of a petition for a 
                        variance from a requirement, set forth the 
                        methods proposed to be used in, and the 
                        facilities and controls proposed to be used 
                        for, the manufacture, packing, and storage of 
                        the tobacco product in lieu of the methods, 
                        facilities, and controls prescribed by the 
                        requirement; and
                            ``(iii) contain such other information as 
                        the Secretary shall prescribe.
                    ``(B) Referral to the tobacco products scientific 
                advisory committee.--The Secretary may refer to the 
                Tobacco Products Scientific Advisory Committee any 
                petition submitted under subparagraph (A). The Tobacco 
                Products Scientific Advisory Committee shall report its 
                recommendations to the Secretary with respect to a 
                petition referred to it within 60 days after the date 
                of the petition's referral. Within 60 days after--
                            ``(i) the date the petition was submitted 
                        to the Secretary under subparagraph (A); or
                            ``(ii) the day after the petition was 
                        referred to the Tobacco Products Scientific 
                        Advisory Committee,
                whichever occurs later, the Secretary shall by order 
                either deny the petition or approve it.
                    ``(C) Approval.--The Secretary may approve--
                            ``(i) a petition for an exemption for a 
                        tobacco product from a requirement if the 
                        Secretary determines that compliance with such 
                        requirement is not required to assure that the 
                        tobacco product will be in compliance with this 
                        chapter; and
                            ``(ii) a petition for a variance for a 
                        tobacco product from a requirement if the 
                        Secretary determines that the methods to be 
                        used in, and the facilities and controls to be 
                        used for, the manufacture, packing, and storage 
                        of the tobacco product in lieu of the methods, 
                        controls, and facilities prescribed by the 
                        requirement are sufficient to assure that the 
                        tobacco product will be in compliance with this 
                        chapter.
                    ``(D) Conditions.--An order of the Secretary 
                approving a petition for a variance shall prescribe 
                such conditions respecting the methods used in, and the 
                facilities and controls used for, the manufacture, 
                packing, and storage of the tobacco product to be 
                granted the variance under the petition as may be 
                necessary to assure that the tobacco product will be in 
                compliance with this chapter.
                    ``(E) Hearing.--After the issuance of an order 
                under subparagraph (B) respecting a petition, the 
                petitioner shall have an opportunity for an informal 
                hearing on such order.
            ``(3) Compliance.--Compliance with requirements under this 
        subsection shall not be required before the period ending 3 
        years after the date of enactment of the Family Smoking 
        Prevention and Tobacco Control Act.
    ``(f) Research and Development.--The Secretary may enter into 
contracts for research, testing, and demonstrations respecting tobacco 
products and may obtain tobacco products for research, testing, and 
demonstration purposes without regard to section 3324(a) and (b) of 
title 31, United States Code, and section 5 of title 41, United States 
Code.

``SEC. 907. TOBACCO PRODUCT STANDARDS.

    ``(a) In General.--
            ``(1) Special rule for cigarettes.--A cigarette or any of 
        its component parts (including the tobacco, filter, or paper) 
        shall not contain, as a constituent (including a smoke 
        constituent) or additive, an artificial or natural flavor 
        (other than tobacco or menthol) or an herb or spice, including 
        strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, 
        coconut, licorice, cocoa, chocolate, cherry, or coffee, that is 
        a characterizing flavor of the tobacco product or tobacco 
        smoke. Nothing in this subparagraph shall be construed to limit 
        the Secretary's authority to take action under this section or 
        other sections of this Act applicable to menthol or any 
        artificial or natural flavor, herb, or spice not specified in 
        this paragraph.
            ``(2) Revision of tobacco product standards.--The Secretary 
        may revise the tobacco product standards in paragraph (1) in 
        accordance with subsection (b).
            ``(3) Tobacco product standards.--The Secretary may adopt 
        tobacco product standards in addition to those in paragraph (1) 
        if the Secretary finds that a tobacco product standard is 
        appropriate for the protection of the public health. This 
        finding shall be determined with respect to the risks and 
        benefits to the population as a whole, including users and non-
        users of the tobacco product, and taking into account--
                    ``(A) the increased or decreased likelihood that 
                existing users of tobacco products will stop using such 
                products; and
                    ``(B) the increased or decreased likelihood that 
                those who do not use tobacco products will start using 
                such products.
            ``(4) Content of tobacco product standards.--A tobacco 
        product standard established under this section for a tobacco 
        product--
                    ``(A) shall include provisions that are appropriate 
                for the protection of the public health, including 
                provisions, where appropriate--
                            ``(i) for the reduction of nicotine yields 
                        of the product;
                            ``(ii) for the reduction or elimination of 
                        other constituents, including smoke 
                        constituents, or harmful components of the 
                        product; or
                            ``(iii) relating to any other requirement 
                        under (B);
                    ``(B) shall, where appropriate for the protection 
                of the public health, include--
                            ``(i) provisions respecting the 
                        construction, components, ingredients, 
                        additives, constituents, including smoke 
                        constituents, and properties of the tobacco 
                        product;
                            ``(ii) provisions for the testing (on a 
                        sample basis or, if necessary, on an individual 
                        basis) of the tobacco product;
                            ``(iii) provisions for the measurement of 
                        the tobacco product characteristics of the 
                        tobacco product;
                            ``(iv) provisions requiring that the 
                        results of each or of certain of the tests of 
                        the tobacco product required to be made under 
                        clause (ii) show that the tobacco product is in 
                        conformity with the portions of the standard 
                        for which the test or tests were required; and
                            ``(v) a provision requiring that the sale 
                        and distribution of the tobacco product be 
                        restricted but only to the extent that the sale 
                        and distribution of a tobacco product may be 
                        restricted under a regulation under section 
                        906(d); and
                    ``(C) shall, where appropriate, require the use and 
                prescribe the form and content of labeling for the 
                proper use of the tobacco product.
            ``(5) Periodic re-evaluation of tobacco product 
        standards.--The Secretary shall provide for periodic evaluation 
        of tobacco product standards established under this section to 
        determine whether such standards should be changed to reflect 
        new medical, scientific, or other technological data. The 
        Secretary may provide for testing under paragraph (4)(B) by any 
        person.
            ``(6) Involvement of other agencies; informed persons.--In 
        carrying out duties under this section, the Secretary shall 
        endeavor to--
                    ``(A) use personnel, facilities, and other 
                technical support available in other Federal agencies;
                    ``(B) consult with other Federal agencies concerned 
                with standard-setting and other nationally or 
                internationally recognized standard-setting entities; 
                and
                    ``(C) invite appropriate participation, through 
                joint or other conferences, workshops, or other means, 
                by informed persons representative of scientific, 
                professional, industry, agricultural, or consumer 
                organizations who in the Secretary's judgment can make 
                a significant contribution.
    ``(b) Establishment of Standards.--
            ``(1) Notice.--
                    ``(A) In general.--The Secretary shall publish in 
                the Federal Register a notice of proposed rulemaking 
                for the establishment, amendment, or revocation of any 
                tobacco product standard.
                    ``(B) Requirements of notice.--A notice of proposed 
                rulemaking for the establishment or amendment of a 
                tobacco product standard for a tobacco product shall--
                            ``(i) set forth a finding with supporting 
                        justification that the tobacco product standard 
                        is appropriate for the protection of the public 
                        health;
                            ``(ii) set forth proposed findings with 
                        respect to the risk of illness or injury that 
                        the tobacco product standard is intended to 
                        reduce or eliminate; and
                            ``(iii) invite interested persons to submit 
                        an existing tobacco product standard for the 
                        tobacco product, including a draft or proposed 
                        tobacco product standard, for consideration by 
                        the Secretary.
                    ``(C) Standard.--Upon a determination by the 
                Secretary that an additive, constituent (including 
                smoke constituent), or other component of the product 
                that is the subject of the proposed tobacco product 
                standard is harmful, it shall be the burden of any 
                party challenging the proposed standard to prove that 
                the proposed standard will not reduce or eliminate the 
                risk of illness or injury.
                    ``(D) Finding.--A notice of proposed rulemaking for 
                the revocation of a tobacco product standard shall set 
                forth a finding with supporting justification that the 
                tobacco product standard is no longer appropriate for 
                the protection of the public health.
                    ``(E) Consideration by secretary.--The Secretary 
                shall consider all information submitted in connection 
                with a proposed standard, including information 
                concerning the countervailing effects of the tobacco 
                product standard on the health of adolescent tobacco 
                users, adult tobacco users, or non-tobacco users, such 
                as the creation of a significant demand for contraband 
                or other tobacco products that do not meet the 
                requirements of this chapter and the significance of 
                such demand, and shall issue the standard if the 
                Secretary determines that the standard would be 
                appropriate for the protection of the public health.
                    ``(F) Comment.--The Secretary shall provide for a 
                comment period of not less than 60 days.
            ``(2) Promulgation.--
                    ``(A) In general.--After the expiration of the 
                period for comment on a notice of proposed rulemaking 
                published under paragraph (1) respecting a tobacco 
                product standard and after consideration of such 
                comments and any report from the Tobacco Products 
                Scientific Advisory Committee, the Secretary shall--
                            ``(i) promulgate a regulation establishing 
                        a tobacco product standard and publish in the 
                        Federal Register findings on the matters 
                        referred to in paragraph (1); or
                            ``(ii) publish a notice terminating the 
                        proceeding for the development of the standard 
                        together with the reasons for such termination.
                    ``(B) Effective date.--A regulation establishing a 
                tobacco product standard shall set forth the date or 
                dates upon which the standard shall take effect, but no 
                such regulation may take effect before 1 year after the 
                date of its publication unless the Secretary determines 
                that an earlier effective date is necessary for the 
                protection of the public health. Such date or dates 
                shall be established so as to minimize, consistent with 
                the public health, economic loss to, and disruption or 
                dislocation of, domestic and international trade.
            ``(3) Power reserved to congress.--Because of the 
        importance of a decision of the Secretary to issue a regulation 
        establishing a tobacco product standard--
                    ``(A) banning all cigarettes, all smokeless tobacco 
                products, all little cigars, all cigars other than 
                little cigars, all pipe tobacco, or all roll your own 
                tobacco products; or
                    ``(B) requiring the reduction of nicotine yields of 
                a tobacco product to zero,
        Congress expressly reserves to itself such power.
            ``(4) Amendment; revocation.--
                    ``(A) Authority.--The Secretary, upon the 
                Secretary's own initiative or upon petition of an 
                interested person may by a regulation, promulgated in 
                accordance with the requirements of paragraphs (1) and 
                (2)(B), amend or revoke a tobacco product standard.
                    ``(B) Effective date.--The Secretary may declare a 
                proposed amendment of a tobacco product standard to be 
                effective on and after its publication in the Federal 
                Register and until the effective date of any final 
                action taken on such amendment if the Secretary 
                determines that making it so effective is in the public 
                interest.
            ``(5) Reference to advisory committee.--The Secretary may--
                    ``(A) on the Secretary's own initiative, refer a 
                proposed regulation for the establishment, amendment, 
                or revocation of a tobacco product standard; or
                    ``(B) upon the request of an interested person 
                which demonstrates good cause for referral and which is 
                made before the expiration of the period for submission 
                of comments on such proposed regulation,
refer such proposed regulation to the Tobacco Products Scientific 
Advisory Committee, for a report and recommendation with respect to any 
matter involved in the proposed regulation which requires the exercise 
of scientific judgment. If a proposed regulation is referred under this 
paragraph to the Tobacco Products Scientific Advisory Committee, the 
Secretary shall provide the advisory committee with the data and 
information on which such proposed regulation is based. The Tobacco 
Products Scientific Advisory Committee shall, within 60 days after the 
referral of a proposed regulation and after independent study of the 
data and information furnished to it by the Secretary and other data 
and information before it, submit to the Secretary a report and 
recommendation respecting such regulation, together with all underlying 
data and information and a statement of the reason or basis for the 
recommendation. A copy of such report and recommendation shall be made 
public by the Secretary.

``SEC. 908. NOTIFICATION AND OTHER REMEDIES.

    ``(a) Notification.--If the Secretary determines that--
            ``(1) a tobacco product which is introduced or delivered 
        for introduction into interstate commerce for commercial 
        distribution presents an unreasonable risk of substantial harm 
        to the public health; and
            ``(2) notification under this subsection is necessary to 
        eliminate the unreasonable risk of such harm and no more 
        practicable means is available under the provisions of this 
        chapter (other than this section) to eliminate such risk,
the Secretary may issue such order as may be necessary to assure that 
adequate notification is provided in an appropriate form, by the 
persons and means best suited under the circumstances involved, to all 
persons who should properly receive such notification in order to 
eliminate such risk. The Secretary may order notification by any 
appropriate means, including public service announcements. Before 
issuing an order under this subsection, the Secretary shall consult 
with the persons who are to give notice under the order.
    ``(b) No Exemption From Other Liability.--Compliance with an order 
issued under this section shall not relieve any person from liability 
under Federal or State law. In awarding damages for economic loss in an 
action brought for the enforcement of any such liability, the value to 
the plaintiff in such action of any remedy provided under such order 
shall be taken into account.
    ``(c) Recall Authority.--
            ``(1) In general.--If the Secretary finds that there is a 
        reasonable probability that a tobacco product contains a 
        manufacturing or other defect not ordinarily contained in 
        tobacco products on the market that would cause serious, 
        adverse health consequences or death, the Secretary shall issue 
        an order requiring the appropriate person (including the 
manufacturers, importers, distributors, or retailers of the tobacco 
product) to immediately cease distribution of such tobacco product. The 
order shall provide the person subject to the order with an opportunity 
for an informal hearing, to be held not later than 10 days after the 
date of the issuance of the order, on the actions required by the order 
and on whether the order should be amended to require a recall of such 
tobacco product. If, after providing an opportunity for such a hearing, 
the Secretary determines that inadequate grounds exist to support the 
actions required by the order, the Secretary shall vacate the order.
            ``(2) Amendment of order to require recall.--
                    ``(A) In general.--If, after providing an 
                opportunity for an informal hearing under paragraph 
                (1), the Secretary determines that the order should be 
                amended to include a recall of the tobacco product with 
                respect to which the order was issued, the Secretary 
                shall, except as provided in subparagraph (B), amend 
                the order to require a recall. The Secretary shall 
                specify a timetable in which the tobacco product recall 
                will occur and shall require periodic reports to the 
                Secretary describing the progress of the recall.
                    ``(B) Notice.--An amended order under subparagraph 
                (A)--
                            ``(i) shall not include recall of a tobacco 
                        product from individuals; and
                            ``(ii) shall provide for notice to persons 
                        subject to the risks associated with the use of 
                        such tobacco product.
                In providing the notice required by clause (ii), the 
                Secretary may use the assistance of retailers and other 
                persons who distributed such tobacco product. If a 
                significant number of such persons cannot be 
                identified, the Secretary shall notify such persons 
                under section 705(b).
            ``(3) Remedy not exclusive.--The remedy provided by this 
        subsection shall be in addition to remedies provided by 
        subsection (a) of this section.

``SEC. 909. RECORDS AND REPORTS ON TOBACCO PRODUCTS.

    ``(a) In General.--Every person who is a tobacco product 
manufacturer or importer of a tobacco product shall establish and 
maintain such records, make such reports, and provide such information, 
as the Secretary may by regulation reasonably require to assure that 
such tobacco product is not adulterated or misbranded and to otherwise 
protect public health. Regulations prescribed under the preceding 
sentence--
            ``(1) may require a tobacco product manufacturer or 
        importer to report to the Secretary whenever the manufacturer 
        or importer receives or otherwise becomes aware of information 
        that reasonably suggests that one of its marketed tobacco 
        products may have caused or contributed to a serious unexpected 
        adverse experience associated with the use of the product or 
        any significant increase in the frequency of a serious, 
        expected adverse product experience;
            ``(2) shall require reporting of other significant adverse 
        tobacco product experiences as determined by the Secretary to 
        be necessary to be reported;
            ``(3) shall not impose requirements unduly burdensome to a 
        tobacco product manufacturer or importer, taking into account 
        the cost of complying with such requirements and the need for 
the protection of the public health and the implementation of this 
chapter;
            ``(4) when prescribing the procedure for making requests 
        for reports or information, shall require that each request 
        made under such regulations for submission of a report or 
        information to the Secretary state the reason or purpose for 
        such request and identify to the fullest extent practicable 
        such report or information;
            ``(5) when requiring submission of a report or information 
        to the Secretary, shall state the reason or purpose for the 
        submission of such report or information and identify to the 
        fullest extent practicable such report or information; and
            ``(6) may not require that the identity of any patient or 
        user be disclosed in records, reports, or information required 
        under this subsection unless required for the medical welfare 
        of an individual, to determine risks to public health of a 
        tobacco product, or to verify a record, report, or information 
        submitted under this chapter.
In prescribing regulations under this subsection, the Secretary shall 
have due regard for the professional ethics of the medical profession 
and the interests of patients. The prohibitions of paragraph (6) 
continue to apply to records, reports, and information concerning any 
individual who has been a patient, irrespective of whether or when he 
ceases to be a patient.
    ``(b) Reports of Removals and Corrections.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall by regulation require a tobacco product 
        manufacturer or importer of a tobacco product to report 
        promptly to the Secretary any corrective action taken or 
        removal from the market of a tobacco product undertaken by such 
        manufacturer or importer if the removal or correction was 
        undertaken--
                    ``(A) to reduce a risk to health posed by the 
                tobacco product; or
                    ``(B) to remedy a violation of this chapter caused 
                by the tobacco product which may present a risk to 
                health.
        A tobacco product manufacturer or importer of a tobacco product 
        who undertakes a corrective action or removal from the market 
        of a tobacco product which is not required to be reported under 
        this subsection shall keep a record of such correction or 
        removal.
            ``(2) Exception.--No report of the corrective action or 
        removal of a tobacco product may be required under paragraph 
        (1) if a report of the corrective action or removal is required 
        and has been submitted under subsection (a).

``SEC. 910. APPLICATION FOR REVIEW OF CERTAIN TOBACCO PRODUCTS.

    ``(a) In General.--
            ``(1) New tobacco product defined.--For purposes of this 
        section the term `new tobacco product' means--
                    ``(A) any tobacco product (including those products 
                in test markets) that was not commercially marketed in 
                the United States as of June 1, 2003; or
                    ``(B) any modification (including a change in 
                design, any component, any part, or any constituent, 
                including a smoke constituent, or in the content, 
                delivery or form of nicotine, or any other additive or 
                ingredient) of a tobacco product where the modified 
                product was commercially marketed in the United States 
                after June 1, 2003.
            ``(2) Premarket approval required.--
                    ``(A) New products.--Approval under this section of 
                an application for premarket approval for any new 
                tobacco product is required unless--
                            ``(i) the manufacturer has submitted a 
                        report under section 905(j); and
                            ``(ii) the Secretary has issued an order 
                        that the tobacco product--
                                    ``(I) is substantially equivalent 
                                to a tobacco product commercially 
                                marketed (other than for test 
                                marketing) in the United States as of 
                                June 1, 2003; and
                                    ``(II)(aa) is in compliance with 
                                the requirements of this Act; or
                                    ``(bb) is exempt from the 
                                requirements of section 905(j) pursuant 
                                to a regulation issued under section 
                                905(j)(3).
                    ``(B) Application to certain post june 1, 2003 
                products.--Subparagraph (A) shall not apply to a 
                tobacco product--
                            ``(i) that was first introduced or 
                        delivered for introduction into interstate 
                        commerce for commercial distribution in the 
                        United States after June 1, 2003, and prior to 
                        the date that is 15 months after the date of 
                        enactment of the Family Smoking Prevention and 
                        Tobacco Control Act; and
                            ``(ii) for which a report was submitted 
                        under section 905(j) within such 15-month 
                        period, until the Secretary issues an order 
                        that the tobacco product is not substantially 
                        equivalent.
            ``(3) Substantially equivalent defined.--
                    ``(A) In general.--In this section and section 
                905(j), the terms `substantially equivalent' or 
                `substantial equivalence' mean, with respect to the 
                tobacco product being compared to the predicate tobacco 
                product, that the Secretary by order has found that the 
                tobacco product--
                            ``(i) has the same characteristics as the 
                        predicate tobacco product; or
                            ``(ii) has different characteristics and 
                        the information submitted contains information, 
                        including clinical data if deemed necessary by 
                        the Secretary, that demonstrates that it is not 
                        appropriate to regulate the product under this 
                        section because the product does not raise 
                        different questions of public health.
                    ``(B) Characteristics.--In subparagraph (A), the 
                term `characteristics' means the materials, 
                ingredients, design, composition, heating source, or 
                other features of a tobacco product.
                    ``(C) Limitation.--A tobacco product may not be 
                found to be substantially equivalent to a predicate 
                tobacco product that has been removed from the market 
                at the initiative of the Secretary or that has been 
                determined by a judicial order to be misbranded or 
                adulterated.
            ``(4) Health information.--
                    ``(A) Summary.--As part of a submission under 
                section 905(j) respecting a tobacco product, the person 
                required to file a premarket notification under such 
                section shall provide an adequate summary of any health 
                information related to the tobacco product or state 
                that such information will be made available upon 
                request by any person.
                    ``(B) Required information.--Any summary under 
                subparagraph (A) respecting a tobacco product shall 
                contain detailed information regarding data concerning 
adverse health effects and shall be made available to the public by the 
Secretary within 30 days of the issuance of a determination that such 
tobacco product is substantially equivalent to another tobacco product.
    ``(b) Application.--
            ``(1) Contents.--An application for premarket approval 
        shall contain--
                    ``(A) full reports of all information, published or 
                known to, or which should reasonably be known to, the 
                applicant, concerning investigations which have been 
                made to show the health risks of such tobacco product 
                and whether such tobacco product presents less risk 
                than other tobacco products;
                    ``(B) a full statement of the components, 
                ingredients, additives, and properties, and of the 
                principle or principles of operation, of such tobacco 
                product;
                    ``(C) a full description of the methods used in, 
                and the facilities and controls used for, the 
                manufacture, processing, and, when relevant, packing 
                and installation of, such tobacco product;
                    ``(D) an identifying reference to any tobacco 
                product standard under section 907 which would be 
                applicable to any aspect of such tobacco product, and 
                either adequate information to show that such aspect of 
                such tobacco product fully meets such tobacco product 
                standard or adequate information to justify any 
                deviation from such standard;
                    ``(E) such samples of such tobacco product and of 
                components thereof as the Secretary may reasonably 
                require;
                    ``(F) specimens of the labeling proposed to be used 
                for such tobacco product; and
                    ``(G) such other information relevant to the 
                subject matter of the application as the Secretary may 
                require.
            ``(2) Reference to tobacco products scientific advisory 
        committee.--Upon receipt of an application meeting the 
        requirements set forth in paragraph (1), the Secretary--
                    ``(A) may, on the Secretary's own initiative; or
                    ``(B) may, upon the request of an applicant,
        refer such application to the Tobacco Products Scientific 
        Advisory Committee for reference and for submission (within 
        such period as the Secretary may establish) of a report and 
        recommendation respecting approval of the application, together 
        with all underlying data and the reasons or basis for the 
        recommendation.
    ``(c) Action on Application.--
            ``(1) Deadline.--
                    ``(A) In general.--As promptly as possible, but in 
                no event later than 180 days after the receipt of an 
                application under subsection (b), the Secretary, after 
                considering the report and recommendation submitted 
                under paragraph (2) of such subsection, shall--
                            ``(i) issue an order approving the 
                        application if the Secretary finds that none of 
                        the grounds for denying approval specified in 
                        paragraph (2) of this subsection applies; or
                            ``(ii) deny approval of the application if 
                        the Secretary finds (and sets forth the basis 
                        for such finding as part of or accompanying 
                        such denial) that 1 or more grounds for denial 
                        specified in paragraph (2) of this subsection 
                        apply.
                    ``(B) Restrictions on sale and distribution.--An 
                order approving an application for a tobacco product 
                may require as a condition to such approval that the 
                sale and distribution of the tobacco product be 
                restricted but only to the extent that the sale and 
                distribution of a tobacco product may be restricted 
                under a regulation under section 906(d).
            ``(2) Denial of approval.--The Secretary shall deny 
        approval of an application for a tobacco product if, upon the 
        basis of the information submitted to the Secretary as part of 
        the application and any other information before the Secretary 
        with respect to such tobacco product, the Secretary finds 
        that--
                    ``(A) there is a lack of a showing that permitting 
                such tobacco product to be marketed would be 
                appropriate for the protection of the public health;
                    ``(B) the methods used in, or the facilities or 
                controls used for, the manufacture, processing, or 
                packing of such tobacco product do not conform to the 
                requirements of section 906(e);
                    ``(C) based on a fair evaluation of all material 
                facts, the proposed labeling is false or misleading in 
                any particular; or
                    ``(D) such tobacco product is not shown to conform 
                in all respects to a tobacco product standard in effect 
                under section 907, compliance with which is a condition 
                to approval of the application, and there is a lack of 
                adequate information to justify the deviation from such 
                standard.
            ``(3) Denial information.--Any denial of an application 
        shall, insofar as the Secretary determines to be practicable, 
        be accompanied by a statement informing the applicant of the 
        measures required to place such application in approvable form 
        (which measures may include further research by the applicant 
        in accordance with 1 or more protocols prescribed by the 
        Secretary).
            ``(4) Basis for finding.--For purposes of this section, the 
        finding as to whether approval of a tobacco product is 
        appropriate for the protection of the public health shall be 
        determined with respect to the risks and benefits to the 
        population as a whole, including users and nonusers of the 
        tobacco product, and taking into account--
                    ``(A) the increased or decreased likelihood that 
                existing users of tobacco products will stop using such 
                products; and
                    ``(B) the increased or decreased likelihood that 
                those who do not use tobacco products will start using 
                such products.
            ``(5) Basis for action.--
                    ``(A) Investigations.--For purposes of paragraph 
                (2)(A), whether permitting a tobacco product to be 
                marketed would be appropriate for the protection of the 
                public health shall, when appropriate, be determined on 
                the basis of well-controlled investigations, which may 
                include 1 or more clinical investigations by experts 
                qualified by training and experience to evaluate the 
                tobacco product.
                    ``(B) Other evidence.--If the Secretary determines 
                that there exists valid scientific evidence (other than 
                evidence derived from investigations described in 
                subparagraph (A)) which is sufficient to evaluate the 
                tobacco product the Secretary may authorize that the 
                determination for purposes of paragraph (2)(A) be made 
on the basis of such evidence.
    ``(d) Withdrawal and Temporary Suspension.--
            ``(1) In general.--The Secretary shall, upon obtaining, 
        where appropriate, advice on scientific matters from an 
        advisory committee, and after due notice and opportunity for 
        informal hearing to the holder of an approved application for a 
        tobacco product, issue an order withdrawing approval of the 
        application if the Secretary finds--
                    ``(A) that the continued marketing of such tobacco 
                product no longer is appropriate for the protection of 
                the public health;
                    ``(B) that the application contained or was 
                accompanied by an untrue statement of a material fact;
                    ``(C) that the applicant--
                            ``(i) has failed to establish a system for 
                        maintaining records, or has repeatedly or 
                        deliberately failed to maintain records or to 
                        make reports, required by an applicable 
                        regulation under section 909;
                            ``(ii) has refused to permit access to, or 
                        copying or verification of, such records as 
                        required by section 704; or
                            ``(iii) has not complied with the 
                        requirements of section 905;
                    ``(D) on the basis of new information before the 
                Secretary with respect to such tobacco product, 
                evaluated together with the evidence before the 
                Secretary when the application was approved, that the 
                methods used in, or the facilities and controls used 
                for, the manufacture, processing, packing, or 
                installation of such tobacco product do not conform 
                with the requirements of section 906(e) and were not 
                brought into conformity with such requirements within a 
                reasonable time after receipt of written notice from 
                the Secretary of nonconformity;
                    ``(E) on the basis of new information before the 
                Secretary, evaluated together with the evidence before 
                the Secretary when the application was approved, that 
                the labeling of such tobacco product, based on a fair 
                evaluation of all material facts, is false or 
                misleading in any particular and was not corrected 
                within a reasonable time after receipt of written 
                notice from the Secretary of such fact; or
                    ``(F) on the basis of new information before the 
                Secretary, evaluated together with the evidence before 
                the Secretary when the application was approved, that 
                such tobacco product is not shown to conform in all 
                respects to a tobacco product standard which is in 
                effect under section 907, compliance with which was a 
                condition to approval of the application, and that 
                there is a lack of adequate information to justify the 
                deviation from such standard.
            ``(2) Appeal.--The holder of an application subject to an 
        order issued under paragraph (1) withdrawing approval of the 
        application may, by petition filed on or before the 30th day 
        after the date upon which such holder receives notice of such 
        withdrawal, obtain review thereof in accordance with subsection 
        (e).
            ``(3) Temporary suspension.--If, after providing an 
        opportunity for an informal hearing, the Secretary determines 
        there is reasonable probability that the continuation of 
        distribution of a tobacco product under an approved application 
        would cause serious, adverse health consequences or death, that 
        is greater than ordinarily caused by tobacco products on the 
        market, the Secretary shall by order temporarily suspend the 
        approval of the application approved under this section. If the 
        Secretary issues such an order, the Secretary shall proceed 
        expeditiously under paragraph (1) to withdraw such application.
    ``(e) Service of Order.--An order issued by the Secretary under 
this section shall be served--
            ``(1) in person by any officer or employee of the 
        department designated by the Secretary; or
            ``(2) by mailing the order by registered mail or certified 
        mail addressed to the applicant at the applicant's last known 
        address in the records of the Secretary.
    ``(f) Records.--
            ``(1) Additional information.--In the case of any tobacco 
        product for which an approval of an application filed under 
        subsection (b) is in effect, the applicant shall establish and 
        maintain such records, and make such reports to the Secretary, 
        as the Secretary may by regulation, or by order with respect to 
        such application, prescribe on the basis of a finding that such 
        records and reports are necessary in order to enable the 
        Secretary to determine, or facilitate a determination of, 
        whether there is or may be grounds for withdrawing or 
        temporarily suspending such approval.
            ``(2) Access to records.--Each person required under this 
        section to maintain records, and each person in charge or 
        custody thereof, shall, upon request of an officer or employee 
        designated by the Secretary, permit such officer or employee at 
        all reasonable times to have access to and copy and verify such 
        records.
    ``(g) Investigational Tobacco Product Exemption for Investigational 
Use.--The Secretary may exempt tobacco products intended for 
investigational use from the provisions of this chapter under such 
conditions as the Secretary may by regulation prescribe.

``SEC. 911. MODIFIED RISK TOBACCO PRODUCTS.

    ``(a) In General.--No person may introduce or deliver for 
introduction into interstate commerce any modified risk tobacco product 
unless approval of an application filed pursuant to subsection (d) is 
effective with respect to such product.
    ``(b) Definitions.--In this section:
            ``(1) Modified risk tobacco product.--The term `modified 
        risk tobacco product' means any tobacco product that is sold or 
        distributed for use to reduce harm or the risk of tobacco-
        related disease associated with commercially marketed tobacco 
        products.
            ``(2) Sold or distributed.--
                    ``(A) In general.--With respect to a tobacco 
                product, the term `sold or distributed for use to 
                reduce harm or the risk of tobacco-related disease 
                associated with commercially marketed tobacco products' 
                means a tobacco product--
                            ``(i) the label, labeling, or advertising 
                        of which represents explicitly or implicitly 
                        that--
                                    ``(I) the tobacco product presents 
                                a lower risk of tobacco-related disease 
                                or is less harmful than one or more 
                                other commercially marketed tobacco 
                                products;
                                    ``(II) the tobacco product or its 
                                smoke contains a reduced level of a 
                                substance or presents a reduced 
                                exposure to a substance; or
                                    ``(III) the tobacco product or its 
                                smoke does not contain or is free of a 
                                substance;
                            ``(ii) the label, labeling, or advertising 
                        of which uses the descriptors `light', `mild', 
                        or `low' or similar descriptors; or
                            ``(iii) the tobacco product manufacturer of 
                        which has taken any action directed to 
                        consumers through the media or otherwise, other 
                        than by means of the tobacco product's label, 
                        labeling or advertising, after the date of 
                        enactment of the Family Smoking Prevention and 
                        Tobacco Control Act, respecting the product 
                        that would be reasonably expected to result in 
                        consumers believing that the tobacco product or 
                        its smoke may present a lower risk of disease 
                        or is less harmful than one or more 
                        commercially marketed tobacco products, or 
                        presents a reduced exposure to, or does not 
                        contain or is free of, a substance or 
                        substances.
                    ``(B) Limitation.--No tobacco product shall be 
                considered to be `sold or distributed for use to reduce 
                harm or the risk of tobacco-related disease associated 
                with commercially marketed tobacco products', except as 
                described in subparagraph (A).
    ``(c) Tobacco Dependence Products.--A product that is intended to 
be used for the treatment of tobacco dependence, including smoking 
cessation, is not a modified risk tobacco product under this section 
and is subject to the requirements of chapter V.
    ``(d) Filing.--Any person may file with the Secretary an 
application for a modified risk tobacco product. Such application shall 
include--
            ``(1) a description of the proposed product and any 
        proposed advertising and labeling;
            ``(2) the conditions for using the product;
            ``(3) the formulation of the product;
            ``(4) sample product labels and labeling;
            ``(5) all documents (including underlying scientific 
        information) relating to research findings conducted, 
        supported, or possessed by the tobacco product manufacturer 
        relating to the effect of the product on tobacco related 
        diseases and health-related conditions, including information 
        both favorable and unfavorable to the ability of the product to 
        reduce risk or exposure and relating to human health;
            ``(6) data and information on how consumers actually use 
        the tobacco product; and
            ``(7) such other information as the Secretary may require.
    ``(e) Public Availability.--The Secretary shall make the 
application described in subsection (d) publicly available (except 
matters in the application which are trade secrets or otherwise 
confidential, commercial information) and shall request comments by 
interested persons on the information contained in the application and 
on the label, labeling, and advertising accompanying such application.
    ``(f) Advisory Committee.--
            ``(1) In general.--The Secretary shall refer to an advisory 
        committee any application submitted under this subsection.
            ``(2) Recommendations.--Not later than 60 days after the 
        date an application is referred to an advisory committee under 
        paragraph (1), the advisory committee shall report its 
        recommendations on the application to the Secretary.
    ``(g) Approval.--
            ``(1) Modified risk products.--Except as provided in 
        paragraph (2), the Secretary shall approve an application for a 
        modified risk tobacco product filed under this section only if 
        the Secretary determines that the applicant has demonstrated 
        that such product, as it is actually used by consumers, will--
                    ``(A) significantly reduce harm and the risk of 
                tobacco-related disease to individual tobacco users; 
                and
                    ``(B) benefit the health of the population as a 
                whole taking into account both users of tobacco 
                products and persons who do not currently use tobacco 
                products.
            ``(2) Special rule for certain products.--
                    ``(A) In general.--The Secretary may approve an 
                application for a tobacco product that has not been 
                approved as a modified risk tobacco product pursuant to 
                paragraph (1) if the Secretary makes the findings 
                required under this paragraph and determines that the 
                applicant has demonstrated that--
                            ``(i) the approval of the application would 
                        be appropriate to promote the public health;
                            ``(ii) any aspect of the label, labeling, 
                        and advertising for such product that would 
                        cause the tobacco product to be a modified risk 
                        tobacco product under subsection (b)(2) is 
                        limited to an explicit or implicit 
                        representation that such tobacco product or its 
                        smoke contains or is free of a substance or 
                        contains a reduced level of a substance, or 
                        presents a reduced exposure to a substance in 
                        tobacco smoke;
                            ``(iii) scientific evidence is not 
                        available and, using the best available 
                        scientific methods, cannot be made available 
                        without conducting long-term epidemiological 
                        studies for an application to meet the 
                        standards set forth in paragraph (1); and
                            ``(iv) the scientific evidence that is 
                        available without conducting long-term 
                        epidemiological studies demonstrates that a 
                        measurable and substantial reduction in 
                        morbidity or mortality among individual tobacco 
                        users is anticipated in subsequent studies.
                    ``(B) Additional findings required.--In order to 
                approve an application under subparagraph (A) the 
                Secretary must also find that the applicant has 
                demonstrated that--
                            ``(i) the magnitude of the overall 
                        reductions in exposure to the substance or 
                        substances which are the subject of the 
                        application is substantial, such substance or 
                        substances are harmful, and the product 
as actually used exposes consumers to the specified reduced level of 
the substance or substances;
                            ``(ii) the product as actually used by 
                        consumers will not expose them to higher levels 
                        of other harmful substances compared to the 
                        similar types of tobacco products then on the 
                        market unless such increases are minimal and 
                        the anticipated overall impact of use of the 
                        product remains a substantial and measurable 
                        reduction in overall morbidity and mortality 
                        among individual tobacco users;
                            ``(iii) testing of actual consumer 
                        perception shows that, as the applicant 
                        proposes to label and market the product, 
                        consumers will not be misled into believing 
                        that the product--
                                    ``(I) is or has been demonstrated 
                                to be less harmful; or
                                    ``(II) presents or has been 
                                demonstrated to present less of a risk 
                                of disease than 1 or more other 
                                commercially marketed tobacco products; 
                                and
                            ``(iv) approval of the application is 
                        expected to benefit the health of the 
                        population as a whole taking into account both 
                        users of tobacco products and persons who do 
                        not currently use tobacco products.
                    ``(C) Conditions of approval.--
                            ``(i) In general.--Applications approved 
                        under this paragraph shall be limited to a term 
                        of not more than 5 years, but may be renewed 
                        upon a finding by the Secretary that the 
                        requirements of this paragraph continue to be 
                        satisfied based on the filing of a new 
                        application.
                            ``(ii) Agreements by applicant.--
                        Applications approved under this paragraph 
                        shall be conditioned on the applicant's 
                        agreement to conduct post-market surveillance 
                        and studies and to submit to the Secretary the 
                        results of such surveillance and studies to 
                        determine the impact of the application 
                        approval on consumer perception, behavior, and 
                        health and to enable the Secretary to review 
                        the accuracy of the determinations upon which 
                        the approval was based in accordance with a 
                        protocol approved by the Secretary.
                            ``(iii) Annual submission.--The results of 
                        such post-market surveillance and studies 
                        described in clause (ii) shall be submitted 
                        annually.
            ``(3) Basis.--The determinations under paragraphs (1) and 
        (2) shall be based on--
                    ``(A) the scientific evidence submitted by the 
                applicant; and
                    ``(B) scientific evidence and other information 
                that is available to the Secretary.
            ``(4) Benefit to health of individuals and of population as 
        a whole.--In making the determinations under paragraphs (1) and 
        (2), the Secretary shall take into account--
                    ``(A) the relative health risks to individuals of 
                the tobacco product that is the subject of the 
                application;
                    ``(B) the increased or decreased likelihood that 
                existing users of tobacco products who would otherwise 
                stop using such products will switch to the tobacco 
                product that is the subject of the application;
                    ``(C) the increased or decreased likelihood that 
                persons who do not use tobacco products will start 
                using the tobacco product that is the subject of the 
                application;
                    ``(D) the risks and benefits to persons from the 
                use of the tobacco product that is the subject of the 
                application as compared to the use of products for 
                smoking cessation approved under chapter V to treat 
                nicotine dependence; and
                    ``(E) comments, data, and information submitted by 
                interested persons.
    ``(h) Additional Conditions for Approval.--
            ``(1) Modified risk products.--The Secretary shall require 
        for the approval of an application under this section that any 
        advertising or labeling concerning modified risk products 
        enable the public to comprehend the information concerning 
        modified risk and to understand the relative significance of 
        such information in the context of total health and in relation 
        to all of the diseases and health-related conditions associated 
        with the use of tobacco products.
            ``(2) Comparative claims.--
                    ``(A) In general.--The Secretary may require for 
                the approval of an application under this subsection 
                that a claim comparing a tobacco product to 1 or more 
                other commercially marketed tobacco products shall 
                compare the tobacco product to a commercially marketed 
                tobacco product that is representative of that type of 
                tobacco product on the market (for example the average 
                value of the top 3 brands of an established regular 
                tobacco product).
                    ``(B) Quantitative comparisons.--The Secretary may 
                also require, for purposes of subparagraph (A), that 
                the percent (or fraction) of change and identity of the 
                reference tobacco product and a quantitative comparison 
                of the amount of the substance claimed to be reduced 
                shall be stated in immediate proximity to the most 
                prominent claim.
            ``(3) Label disclosure.--
                    ``(A) In general.--The Secretary may require the 
                disclosure on the label of other substances in the 
                tobacco product, or substances that may be produced by 
                the consumption of that tobacco product, that may 
                affect a disease or health-related condition or may 
                increase the risk of other diseases or health-related 
                conditions associated with the use of tobacco products.
                    ``(B) Conditions of use.--If the conditions of use 
                of the tobacco product may affect the risk of the 
                product to human health, the Secretary may require the 
                labeling of conditions of use.
            ``(4) Time.--The Secretary shall limit an approval under 
        subsection (g)(1) for a specified period of time.
            ``(5) Advertising.--The Secretary may require that an 
        applicant, whose application has been approved under this 
        subsection, comply with requirements relating to advertising 
        and promotion of the tobacco product.
    ``(i) Postmarket Surveillance and Studies.--
            ``(1) In general.--The Secretary shall require that an 
        applicant under subsection (g)(1) conduct post market 
        surveillance and studies for a tobacco product for which an 
        application has been approved to determine the impact of the 
        application approval on consumer perception, behavior, and 
        health, to enable the Secretary to review the accuracy of the 
        determinations upon which the approval was based, and to 
provide information that the Secretary determines is otherwise 
necessary regarding the use or health risks involving the tobacco 
product. The results of post-market surveillance and studies shall be 
submitted to the Secretary on an annual basis.
            ``(2) Surveillance protocol.--Each applicant required to 
        conduct a surveillance of a tobacco product under paragraph (1) 
        shall, within 30 days after receiving notice that the applicant 
        is required to conduct such surveillance, submit, for the 
        approval of the Secretary, a protocol for the required 
        surveillance. The Secretary, within 60 days of the receipt of 
        such protocol, shall determine if the principal investigator 
        proposed to be used in the surveillance has sufficient 
        qualifications and experience to conduct such surveillance and 
        if such protocol will result in collection of the data or other 
        information designated by the Secretary as necessary to protect 
        the public health.
    ``(j) Withdrawal of Approval.--The Secretary, after an opportunity 
for an informal hearing, shall withdraw the approval of an application 
under this section if the Secretary determines that--
            ``(1) the applicant, based on new information, can no 
        longer make the demonstrations required under subsection (g), 
        or the Secretary can no longer make the determinations required 
        under subsection (g);
            ``(2) the application failed to include material 
        information or included any untrue statement of material fact;
            ``(3) any explicit or implicit representation that the 
        product reduces risk or exposure is no longer valid, including 
        if--
                    ``(A) a tobacco product standard is established 
                pursuant to section 907;
                    ``(B) an action is taken that affects the risks 
                presented by other commercially marketed tobacco 
                products that were compared to the product that is the 
                subject of the application; or
                    ``(C) any postmarket surveillance or studies reveal 
                that the approval of the application is no longer 
                consistent with the protection of the public health;
            ``(4) the applicant failed to conduct or submit the 
        postmarket surveillance and studies required under subsection 
        (g)(2)(C)(ii) or (i); or
            ``(5) the applicant failed to meet a condition imposed 
        under subsection (h).
    ``(k) Chapter IV or V.--A product approved in accordance with this 
section shall not be subject to chapter IV or V.
    ``(l) Implementing Regulations or Guidance.--
            ``(1) Scientific evidence.--Not later than 2 years after 
        the date of enactment of the Family Smoking Prevention and 
        Tobacco Control Act, the Secretary shall issue regulations or 
        guidance (or any combination thereof) on the scientific 
        evidence required for assessment and ongoing review of modified 
        risk tobacco products. Such regulations or guidance shall--
                    ``(A) establish minimum standards for scientific 
                studies needed prior to approval to show that a 
                substantial reduction in morbidity or mortality among 
                individual tobacco users is likely;
                    ``(B) include validated biomarkers, intermediate 
                clinical endpoints, and other feasible outcome 
                measures, as appropriate;
                    ``(C) establish minimum standards for post market 
                studies, that shall include regular and long-term 
                assessments of health outcomes and mortality, 
                intermediate clinical endpoints, consumer perception of 
                harm reduction, and the impact on quitting behavior and 
                new use of tobacco products, as appropriate;
                    ``(D) establish minimum standards for required 
                postmarket surveillance, including ongoing assessments 
                of consumer perception; and
                    ``(E) require that data from the required studies 
                and surveillance be made available to the Secretary 
                prior to the decision on renewal of a modified risk 
                tobacco product.
            ``(2) Consultation.--The regulations or guidance issued 
        under paragraph (1) shall be developed in consultation with the 
        Institute of Medicine, and with the input of other appropriate 
        scientific and medical experts, on the design and conduct of 
        such studies and surveillance.
            ``(3) Revision.--The regulations or guidance under 
        paragraph (1) shall be revised on a regular basis as new 
        scientific information becomes available.
            ``(4) New tobacco products.--Not later than 2 years after 
        the date of enactment of the Family Smoking Prevention and 
        Tobacco Control Act, the Secretary shall issue a regulation or 
        guidance that permits the filing of a single application for 
        any tobacco product that is a new tobacco product under section 
        910 and for which the applicant seeks approval as a modified 
        risk tobacco product under this section.
    ``(m) Distributors.--No distributor may take any action, after the 
date of enactment of the Family Smoking Prevention and Tobacco Control 
Act, with respect to a tobacco product that would reasonably be 
expected to result in consumers believing that the tobacco product or 
its smoke may present a lower risk of disease or is less harmful than 
one or more commercially marketed tobacco products, or presents a 
reduced exposure to, or does not contain or is free of, a substance or 
substances.

``SEC. 912. JUDICIAL REVIEW.

    ``(a) Right To Review.--
            ``(1) In general.--Not later than 30 days after--
                    ``(A) the promulgation of a regulation under 
                section 907 establishing, amending, or revoking a 
                tobacco product standard; or
                    ``(B) a denial of an application for approval under 
                section 910(c),
        any person adversely affected by such regulation or denial may 
        file a petition for judicial review of such regulation or 
        denial with the United States Court of Appeals for the District 
        of Columbia or for the circuit in which such person resides or 
        has their principal place of business.
            ``(2) Requirements.--
                    ``(A) Copy of petition.--A copy of the petition 
                filed under paragraph (1) shall be transmitted by the 
                clerk of the court involved to the Secretary.
                    ``(B) Record of proceedings.--On receipt of a 
                petition under subparagraph (A), the Secretary shall 
                file in the court in which such petition was filed--
                            ``(i) the record of the proceedings on 
                        which the regulation or order was based; and
                            ``(ii) a statement of the reasons for the 
                        issuance of such a regulation or order.
                    ``(C) Definition of record.--In this section, the 
                term `record' means--
                            ``(i) all notices and other matter 
                        published in the Federal Register with respect 
                        to the regulation or order reviewed;
                            ``(ii) all information submitted to the 
                        Secretary with respect to such regulation or 
                        order;
                            ``(iii) proceedings of any panel or 
                        advisory committee with respect to such 
                        regulation or order;
                            ``(iv) any hearing held with respect to 
                        such regulation or order; and
                            ``(v) any other information identified by 
                        the Secretary, in the administrative proceeding 
                        held with respect to such regulation or order, 
                        as being relevant to such regulation or order.
    ``(b) Standard of Review.--Upon the filing of the petition under 
subsection (a) for judicial review of a regulation or order, the court 
shall have jurisdiction to review the regulation or order in accordance 
with chapter 7 of title 5, United States Code, and to grant appropriate 
relief, including interim relief, as provided for in such chapter. A 
regulation or denial described in subsection (a) shall be reviewed in 
accordance with section 706(2)(A) of title 5, United States Code.
    ``(c) Finality of Judgment.--The judgment of the court affirming or 
setting aside, in whole or in part, any regulation or order shall be 
final, subject to review by the Supreme Court of the United States upon 
certiorari or certification, as provided in section 1254 of title 28, 
United States Code.
    ``(d) Other Remedies.--The remedies provided for in this section 
shall be in addition to, and not in lieu of, any other remedies 
provided by law.
    ``(e) Regulations and Orders Must Recite Basis in Record.--To 
facilitate judicial review, a regulation or order issued under section 
906, 907, 908, 909, 910, or 916 shall contain a statement of the 
reasons for the issuance of such regulation or order in the record of 
the proceedings held in connection with its issuance.

``SEC. 913. EQUAL TREATMENT OF RETAIL OUTLETS.

    ``The Secretary shall issue regulations to require that retail 
establishments for which the predominant business is the sale of 
tobacco products comply with any advertising restrictions applicable to 
retail establishments accessible to individuals under the age of 18.

``SEC. 914. JURISDICTION OF AND COORDINATION WITH THE FEDERAL TRADE 
              COMMISSION.

    ``(a) Jurisdiction.--
            ``(1) In general.--Except where expressly provided in this 
        chapter, nothing in this chapter shall be construed as limiting 
        or diminishing the authority of the Federal Trade Commission to 
        enforce the laws under its jurisdiction with respect to the 
        advertising, sale, or distribution of tobacco products.
            ``(2) Enforcement.--Any advertising that violates this 
        chapter or a provision of the regulations referred to in 
        section 232 of the Family Smoking Prevention and Tobacco 
        Control Act, is an unfair or deceptive act or practice under 
        section 5(a) of the Federal Trade Commission Act (15 U.S.C. 
        45(a)) and shall be considered a violation of a rule 
        promulgated under section 18 of that Act (15 U.S.C. 57a).
    ``(b) Coordination.--With respect to the requirements of section 4 
of the Federal Cigarette Labeling and Advertising Act (15 U.S.C. 1333) 
and section 3 of the Comprehensive Smokeless Tobacco Health Education 
Act of 1986 (15 U.S.C. 4402)--
            ``(1) the Chairman of the Federal Trade Commission shall 
        coordinate with the Secretary concerning the enforcement of 
        such Act as such enforcement relates to unfair or deceptive 
        acts or practices in the advertising of cigarettes or smokeless 
        tobacco; and
            ``(2) the Secretary shall consult with the Chairman of such 
        Commission in revising the label statements and requirements 
        under such sections.

``SEC. 915. CONGRESSIONAL REVIEW PROVISIONS.

    ``In accordance with section 801 of title 5, United States Code, 
Congress shall review, and may disapprove, any rule under this chapter 
that is subject to section 801. This section and section 801 do not 
apply to the regulations referred to in section 232 of the Family 
Smoking Prevention and Tobacco Control Act.

``SEC. 916. REGULATION REQUIREMENT.

    ``(a) Testing, Reporting, and Disclosure.--Not later than 24 months 
after the date of enactment of the Family Smoking Prevention and 
Tobacco Control Act, the Secretary, acting through the Commissioner of 
the Food and Drug Administration, shall promulgate regulations under 
this Act that meet the requirements of subsection (b).
    ``(b) Contents of Rules.--The regulations promulgated under 
subsection (a) shall require testing and reporting of tobacco product 
constituents, ingredients, and additives, including smoke constituents, 
by brand and sub-brand that the Secretary determines should be tested 
to protect the public health. The regulations may require that tobacco 
product manufacturers, packagers, or importers make disclosures 
relating to the results of the testing of tar and nicotine through 
labels or advertising or other appropriate means, and make disclosures 
regarding the results of the testing of other constituents, including 
smoke constituents, ingredients, or additives, that the Secretary 
determines should be disclosed to the public to protect the public 
health and will not mislead consumers about the risk of tobacco related 
disease.
    ``(c) Authority.--The Food and Drug Administration shall have the 
authority under this chapter to conduct or to require the testing, 
reporting, or disclosure of tobacco product constituents, including 
smoke constituents.

``SEC. 917. PRESERVATION OF STATE AND LOCAL AUTHORITY.

    ``(a) In General.--
            ``(1) Preservation.--Nothing in this chapter, or rules 
        promulgated under this chapter, shall be construed to limit the 
        authority of a Federal agency (including the Armed Forces), a 
        State or political subdivision of a State, or the government of 
        an Indian tribe to enact, adopt, promulgate, and enforce any 
        law, rule, regulation, or other measure with respect to tobacco 
        products that is in addition to, or more stringent than, 
        requirements established under this chapter, including a law, 
        rule, regulation, or other measure relating to or prohibiting 
        the sale, distribution, possession, exposure to, access to, 
        advertising and promotion of, or use of tobacco products by 
        individuals of any age, information reporting to the State, or 
        measures relating to fire safety standards for tobacco 
        products. No provision of this chapter shall limit or otherwise 
affect any State, Tribal, or local taxation of tobacco products.
            ``(2) Preemption of certain state and local requirements.--
                    ``(A) In general.--Except as provided in paragraph 
                (1) and subparagraph (B), no State or political 
                subdivision of a State may establish or continue in 
                effect with respect to a tobacco product any 
                requirement which is different from, or in addition to, 
                any requirement under the provisions of this chapter 
                relating to tobacco product standards, premarket 
                approval, adulteration, misbranding, labeling, 
                registration, good manufacturing standards, or reduced 
                risk products.
                    ``(B) Exception.--Subparagraph (A) does not apply 
                to requirements relating to the sale, distribution, 
                possession, information reporting to the State, 
                exposure to, access to, the advertising and promotion 
                of, or use of, tobacco products by individuals of any 
                age, or relating to fire safety standards for tobacco 
                products. Information disclosed to a State under 
                subparagraph (A) that is exempt from disclosure under 
                section 554(b)(4) of title 5, United States Code, shall 
                be treated as trade secret and confidential information 
                by the State.
    ``(b) Rule of Construction Regarding Product Liability.--No 
provision of this chapter relating to a tobacco product shall be 
construed to modify or otherwise affect any action or the liability of 
any person under the product liability law of any State.

``SEC. 918. TOBACCO PRODUCTS SCIENTIFIC ADVISORY COMMITTEE.

    ``(a) Establishment.--Not later than 1 year after the date of 
enactment of the Family Smoking Prevention and Tobacco Control Act, the 
Secretary shall establish an 11-member advisory committee, to be known 
as the `Tobacco Products Scientific Advisory Committee'.
    ``(b) Membership.--
            ``(1) In general.--
                    ``(A) Members.--The Secretary shall appoint as 
                members of the Tobacco Products Scientific Advisory 
                Committee individuals who are technically qualified by 
                training and experience in the medicine, medical 
                ethics, science, or technology involving the 
                manufacture, evaluation, or use of tobacco products, 
                who are of appropriately diversified professional 
                backgrounds. The committee shall be composed of--
                            ``(i) 7 individuals who are physicians, 
                        dentists, scientists, or health care 
                        professionals practicing in the area of 
                        oncology, pulmonology, cardiology, toxicology, 
                        pharmacology, addiction, or any other relevant 
                        specialty;
                            ``(ii) 1 individual who is an officer or 
                        employee of a State or local government or of 
                        the Federal Government;
                            ``(iii) 1 individual as a representative of 
                        the general public;
                            ``(iv) 1 individual as a representative of 
                        the interests in the tobacco manufacturing 
                        industry; and
                            ``(v) 1 individual as a representative of 
                        the interests of the tobacco growers.
                    ``(B) Nonvoting members.--The members of the 
                committee appointed under clauses (iv) and (v) of 
                subparagraph (A) shall serve as consultants to those 
                described in clauses (i) through (iii) of subparagraph 
                (A) and shall be nonvoting representatives.
            ``(2) Limitation.--The Secretary may not appoint to the 
        Advisory Committee any individual who is in the regular full-
        time employ of the Food and Drug Administration or any agency 
        responsible for the enforcement of this Act. The Secretary may 
        appoint Federal officials as ex officio members.
            ``(3) Chairperson.--The Secretary shall designate 1 of the 
        members of the Advisory Committee to serve as chairperson.
    ``(c) Duties.--The Tobacco Products Scientific Advisory Committee 
shall provide advice, information, and recommendations to the 
Secretary--
            ``(1) as provided in this chapter;
            ``(2) on the effects of the alteration of the nicotine 
        yields from tobacco products;
            ``(3) on whether there is a threshold level below which 
        nicotine yields do not produce dependence on the tobacco 
        product involved; and
            ``(4) on its review of other safety, dependence, or health 
        issues relating to tobacco products as requested by the 
        Secretary.
    ``(d) Compensation; Support; FACA.--
            ``(1) Compensation and travel.--Members of the Advisory 
        Committee who are not officers or employees of the United 
        States, while attending conferences or meetings of the 
        committee or otherwise engaged in its business, shall be 
        entitled to receive compensation at rates to be fixed by the 
        Secretary, which may not exceed the daily equivalent of the 
        rate in effect for level 4 of the Senior Executive Schedule 
        under section 5382 of title 5, United States Code, for each day 
        (including travel time) they are so engaged; and while so 
        serving away from their homes or regular places of business 
        each member may be allowed travel expenses, including per diem 
        in lieu of subsistence, as authorized by section 5703 of title 
        5, United States Code, for persons in the Government service 
        employed intermittently.
            ``(2) Administrative support.--The Secretary shall furnish 
        the Advisory Committee clerical and other assistance.
            ``(3) Nonapplication of faca.--Section 14 of the Federal 
        Advisory Committee Act (5 U.S.C. 
        App.) does not apply to the Advisory Committee.
    ``(e) Proceedings of Advisory Panels and Committees.--The Advisory 
Committee shall make and maintain a transcript of any proceeding of the 
panel or committee. Each such panel and committee shall delete from any 
transcript made under this subsection information which is exempt from 
disclosure under section 552(b) of title 5, United States Code.

``SEC. 919. DRUG PRODUCTS USED TO TREAT TOBACCO DEPENDENCE.

    ``The Secretary shall consider--
            ``(1) at the request of the applicant, designating nicotine 
        replacement products as fast track research and approval 
        products within the meaning of section 506;
            ``(2) direct the Commissioner to consider approving the 
        extended use of nicotine replacement products (such as nicotine 
        patches, nicotine gum, and nicotine lozenges) for the treatment 
        of tobacco dependence;
            ``(3) review and consider the evidence for additional 
        indications for nicotine replacement products, such as for 
        craving relief or relapse prevention; and
            ``(4) consider--
                    ``(A) relieving companies of premarket burdens 
                under section 505 if the requirement is redundant 
                considering other nicotine replacement therapies 
                already on the market; and
                    ``(B) time and extent applications for nicotine 
                replacement therapies that have been approved by a 
                regulatory body in a foreign country and have marketing 
                experience in such country.

``SEC. 920. USER FEE.

    ``(a) Establishment of Quarterly User Fee.--The Secretary shall 
assess a quarterly user fee with respect to every quarter of each 
fiscal year commencing fiscal year 2004, calculated in accordance with 
this section, upon each manufacturer and importer of tobacco products 
subject to this chapter.
    ``(b) Funding of FDA Regulation of Tobacco Products.--The Secretary 
shall make user fees collected pursuant to this section available to 
pay, in each fiscal year, for the costs of the activities of the Food 
and Drug Administration related to the regulation of tobacco products 
under this chapter.
    ``(c) Assessment of User Fee.--
            ``(1) Amount of assessment.--Except as provided in 
        paragraph (4), the total user fees assessed each year pursuant 
        to this section shall be sufficient, and shall not exceed what 
        is necessary, to pay for the costs of the activities described 
        in subsection (b) for each fiscal year.
            ``(2) Allocation of assessment by class of tobacco 
        products.--
                    ``(A) In general.--Subject to paragraph (3), the 
                total user fees assessed each fiscal year with respect 
                to each class of importers and manufacturers shall be 
                equal to an amount that is the applicable percentage of 
                the total costs of activities of the Food and Drug 
                Administration described in subsection (b).
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A) the applicable percentage for a fiscal 
year shall be the following:
                            ``(i) 92.07 percent shall be assessed on 
                        manufacturers and importers of cigarettes;
                            ``(ii) 0.05 percent shall be assessed on 
                        manufacturers and importers of little cigars;
                            ``(iii) 7.15 percent shall be assessed on 
                        manufacturers and importers of cigars other 
                        than little cigars;
                            ``(iv) 0.43 percent shall be assessed on 
                        manufacturers and importers of snuff;
                            ``(v) 0.10 percent shall be assessed on 
                        manufacturers and importers of chewing tobacco;
                            ``(vi) 0.06 percent shall be assessed on 
                        manufacturers and importers of pipe tobacco; 
                        and
                            ``(vii) 0.14 percent shall be assessed on 
                        manufacturers and importers of roll-your-own 
                        tobacco.
            ``(3) Distribution of fee shares of manufacturers and 
        importers exempt from user fee.--Where a class of tobacco 
        products is not subject to a user fee under this section, the 
        portion of the user fee assigned to such class under subsection 
        (d)(2) shall be allocated by the Secretary on a pro rata basis 
        among the classes of tobacco products that are subject to a 
        user fee under this section. Such pro rata allocation for each 
        class of tobacco products that are subject to a user fee under 
        this section shall be the quotient of--
                    ``(A) the sum of the percentages assigned to all 
                classes of tobacco products subject to this section; 
                divided by
                    ``(B) the percentage assigned to such class under 
                paragraph (2).
            ``(4) Annual limit on assessment.--The total assessment 
        under this section--
                    ``(A) for fiscal year 2004 shall be $85,000,000;
                    ``(B) for fiscal year 2005 shall be $175,000,000;
                    ``(C) for fiscal year 2006 shall be $300,000,000; 
                and
                    ``(D) for each subsequent fiscal year, shall not 
                exceed the limit on the assessment imposed during the 
                previous fiscal year, as adjusted by the Secretary 
                (after notice, published in the Federal Register) to 
                reflect the greater of--
                            ``(i) the total percentage change that 
                        occurred in the Consumer Price Index for all 
                        urban consumers (all items; United States city 
                        average) for the 12-month period ending on June 
                        30 of the preceding fiscal year for which fees 
                        are being established; or
                            ``(ii) the total percentage change for the 
                        previous fiscal year in basic pay under the 
                        General Schedule in accordance with section 
                        5332 of title 5, United States Code, as 
                        adjusted by any locality-based comparability 
                        payment pursuant to section 5304 of such title 
                        for Federal employees stationed in the District 
                        of Columbia.
            ``(5) Timing of user fee assessment.--The Secretary shall 
        notify each manufacturer and importer of tobacco products 
        subject to this section of the amount of the quarterly 
        assessment imposed on such manufacturer or importer under 
        subsection (f) during each quarter of each fiscal year. Such 
        notifications shall occur not earlier than 3 months prior to 
        the end of the quarter for which such assessment is made, and 
        payments of all assessments shall be made not later than 60 
        days after each such notification.
    ``(d) Determination of User Fee by Company Market Share.--
            ``(1) In general.--The user fee to be paid by each 
        manufacturer or importer of a given class of tobacco products 
        shall be determined in each quarter by multiplying--
                    ``(A) such manufacturer's or importer's market 
                share of such class of tobacco products; by
                    ``(B) the portion of the user fee amount for the 
                current quarter to be assessed on manufacturers and 
                importers of such class of tobacco products as 
                determined under subsection (e).
            ``(2) No fee in excess of market share.--No manufacturer or 
        importer of tobacco products shall be required to pay a user 
        fee in excess of the market share of such manufacturer or 
        importer.
    ``(e) Determination of Volume of Domestic Sales.--
            ``(1) In general.--The calculation of gross domestic volume 
        of a class of tobacco product by a manufacturer or importer, 
        and by all manufacturers and importers as a group, shall be 
        made by the Secretary using information provided by 
        manufacturers and importers pursuant to subsection (f), as well 
        as any other relevant information provided to or obtained by 
        the Secretary.
            ``(2) Measurement.--For purposes of the calculations under 
        this subsection and the information provided under subsection 
        (f) by the Secretary, gross domestic volume shall be measured 
        by--
                    ``(A) in the case of cigarettes, the number of 
                cigarettes sold;
                    ``(B) in the case of little cigars, the number of 
                little cigars sold;
                    ``(C) in the case of large cigars, the number of 
                cigars weighing more than 3 pounds per thousand sold; 
                and
                    ``(D) in the case of other classes of tobacco 
                products, in terms of number of pounds, or fraction 
                thereof, of these products sold.
    ``(f) Measurement of Gross Domestic Volume.--
            ``(1) In general.--Each manufacturer and importer of 
        tobacco products shall submit to the Secretary a certified copy 
        of each of the returns or forms described by this paragraph 
        that are required to be filed with a Government agency on the 
same date that those returns or forms are filed, or required to be 
filed, with such agency. The returns and forms described by this 
paragraph are those returns and forms related to the release of tobacco 
products into domestic commerce, as defined by section 5702(k) of the 
Internal Revenue Code of 1986, and the repayment of the taxes imposed 
under chapter 52 of such Code (ATF Form 500.24 and United States 
Customs Form 7501 under currently applicable regulations).
            ``(2) Penalties.--Any person that knowingly fails to 
        provide information required under this subsection or that 
        provides false information under this subsection shall be 
        subject to the penalties described in section 1003 of title 18, 
        United States Code. In addition, such person may be subject to 
        a civil penalty in an amount not to exceed 2 percent of the 
        value of the kind of tobacco products manufactured or imported 
        by such person during the applicable quarter, as determined by 
        the Secretary.
    ``(h) Effective Date.--The user fees prescribed by this section 
shall be assessed in fiscal year 2004, based on domestic sales of 
tobacco products during fiscal year 2003 and shall be assessed in each 
fiscal year thereafter.''.

SEC. 232. INTERIM FINAL RULE.

    (a) Cigarettes and Smokeless Tobacco.--
            (1) In general.--Not later than 30 days after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services shall publish in the Federal Register an interim final 
        rule regarding cigarettes and smokeless tobacco, which is 
        hereby deemed to be in compliance with the Administrative 
        Procedures Act and other applicable law.
            (2) Contents of rule.--Except as provided in this 
        subsection, the interim final rule published under paragraph 
        (1), shall be identical in its provisions to part 897 of the 
        regulations promulgated by the Secretary of Health and Human 
        Services in the August 28, 1996, issue of the Federal Register 
        (61 Fed. Reg., 44615-44618). Such rule shall--
                    (A) provide for the designation of jurisdictional 
                authority that is in accordance with this subsection;
                    (B) strike Subpart C--Labeling and section 
                897.32(c); and
                    (C) become effective not later than 1 year after 
                the date of enactment of this Act.
            (3) Amendments to rule.--Prior to making amendments to the 
        rule published under paragraph (1), the Secretary shall 
        promulgate a proposed rule in accordance with the 
        Administrative Procedures Act.
            (4) Rule of construction.--Except as provided in paragraph 
        (3), nothing in this section shall be construed to limit the 
        authority of the Secretary to amend, in accordance with the 
        Administrative Procedures Act, the regulation promulgated 
        pursuant to this section.
    (b) Limitation on Advisory Opinions.--As of the date of enactment 
of this Act, the following documents issued by the Food and Drug 
Administration shall not constitute advisory opinions under section 
10.85(d)(1) of title 21, Code of Federal Regulations, except as they 
apply to tobacco products, and shall not be cited by the Secretary of 
Health and Human Services or the Food and Drug Administration as 
binding precedent:
            (1) The preamble to the proposed rule in the document 
        entitled ``Regulations Restricting the Sale and Distribution of 
        Cigarettes and Smokeless Tobacco Products to Protect Children 
        and Adolescents'' (60 Fed. Reg. 41314-41372 (August 11, 1995)).
            (2) The document entitled ``Nicotine in Cigarettes and 
        Smokeless Tobacco Products is a Drug and These Products Are 
        Nicotine Delivery Devices Under the Federal Food, Drug, and 
        Cosmetic Act'' (60 Fed. Reg. 41453-41787 (August 11, 1995)).
            (3) The preamble to the final rule in the document entitled 
        ``Regulations Restricting the Sale and Distribution of 
        Cigarettes and Smokeless Tobacco to Protect Children and 
        Adolescents'' (61 Fed. Reg. 44396-44615 (August 28, 1996)).
            (4) The document entitled ``Nicotine in Cigarettes and 
        Smokeless Tobacco is a Drug and These Products are Nicotine 
        Delivery Devices Under the Federal Food, Drug, and Cosmetic 
        Act; Jurisdictional Determination'' (61 Fed. Reg. 44619-45318 
        (August 28, 1996)).

SEC. 233. CONFORMING AND OTHER AMENDMENTS TO GENERAL PROVISIONS.

    (a) Amendment of Federal Food, Drug, and Cosmetic Act.--Except as 
otherwise expressly provided, whenever in this section an amendment is 
expressed in terms of an amendment to, or repeal of, a section or other 
provision, the reference is to a section or other provision of the 
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.).
    (b) Section 301.--Section 301 (21 U.S.C. 331) is amended--
            (1) in subsection (a), by inserting ``tobacco product,'' 
        after ``device,'';
            (2) in subsection (b), by inserting ``tobacco product,'' 
        after ``device,'';
            (3) in subsection (c), by inserting ``tobacco product,'' 
        after ``device,'';
            (4) in subsection (e), by striking ``515(f), or 519'' and 
        inserting ``515(f), 519, or 909'';
            (5) in subsection (g), by inserting ``tobacco product,'' 
        after ``device,'';
            (6) in subsection (h), by inserting ``tobacco product,'' 
        after ``device,'';
            (7) in subsection (j), by striking ``708, or 721'' and 
        inserting ``708, 721, 904, 905, 906, 907, 908, 909, or section 
        921(b)'';
            (8) in subsection (k), by inserting ``tobacco product,'' 
        after ``device,'';
            (9) by striking subsection (p) and inserting the following:
    ``(p) The failure to register in accordance with section 510 or 
905, the failure to provide any information required by section 510(j), 
510(k), 905(i), or 905(j), or the failure to provide a notice required 
by section 510(j)(2) or 905(i)(2).'';
            (10) by striking subsection (q)(1) and inserting the 
        following:
    ``(q)(1) The failure or refusal--
            ``(A) to comply with any requirement prescribed under 
        section 518, 520(g), 903(b)(8), or 908, or condition prescribed 
        under section 903(b)(6)(B)(ii)(II);
            ``(B) to furnish any notification or other material or 
        information required by or under section 519, 520(g), 904, 909, 
        or section 921; or
            ``(C) to comply with a requirement under section 522 or 
        913.'';
            (11) in subsection (q)(2), by striking ``device,'' and 
        inserting ``device or tobacco product,'';
            (12) in subsection (r), by inserting ``or tobacco product'' 
        after ``device'' each time that it appears; and
            (13) by adding at the end the following:
            ``(aa) The sale of tobacco products in violation of a no-
        tobacco-sale order issued under section 303(f).
            ``(bb) The introduction or delivery for introduction into 
        interstate commerce of a tobacco product in violation of 
        section 911.
            ``(cc)(1) Forging, counterfeiting, simulating, or falsely 
        representing, or without proper authority using any mark, stamp 
        (including tax stamp), tag, label, or other identification 
        device upon any tobacco product or container or labeling 
        thereof so as to render such tobacco product a counterfeit 
        tobacco product.
            ``(2) Making, selling, disposing of, or keeping in 
        possession, control, or custody, or concealing any punch, die, 
        plate, stone, or other item that is designed to print, imprint, 
        or reproduce the trademark, trade name, or other identifying 
        mark, imprint, or device of another or any likeness of any of 
        the foregoing upon any tobacco product or container or labeling 
        thereof so as to render such tobacco product a counterfeit 
        tobacco product.
            ``(3) The doing of any act that causes a tobacco product to 
        be a counterfeit tobacco product, or the sale or dispensing, or 
        the holding for sale or dispensing, of a counterfeit tobacco 
        product.
            ``(dd) The charitable distribution of tobacco products.
            ``(ee) The failure of a manufacturer or distributor to 
        notify the Attorney General of their knowledge of tobacco 
        products used in illicit trade.''.
    (c) Section 303.--Section 303 (21 U.S.C. 333(f)) is amended in 
subsection (f)--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(f) Civil Penalties; No-Tobacco-Sale Orders.--'';
            (2) in paragraph (1)(A), by inserting ``or tobacco 
        products'' after ``devices'';
            (3) by redesignating paragraphs (3), (4), and (5) as 
        paragraphs (4), (5), and (6), and inserting after paragraph (2) 
        the following:
            ``(3) If the Secretary finds that a person has committed 
        repeated violations of restrictions promulgated under section 
        906(d) at a particular retail outlet then the Secretary may 
        impose a no-tobacco-sale order on that person prohibiting the 
        sale of tobacco products in that outlet. A no-tobacco-sale 
        order may be imposed with a civil penalty under paragraph 
        (1).'';
            (4) in paragraph (4) as so redesignated--
                    (A) in subparagraph (A)--
                            (i) by striking ``assessed'' the first time 
                        it appears and inserting ``assessed, or a no-
                        tobacco-sale order may be imposed,''; and
                            (ii) by striking ``penalty'' and inserting 
                        ``penalty, or upon whom a no-tobacco-order is 
                        to be imposed,'';
                    (B) in subparagraph (B)--
                            (i) by inserting after ``penalty,'' the 
                        following: ``or the period to be covered by a 
                        no-tobacco-sale order,''; and
                            (ii) by adding at the end the following: 
                        ``A no-tobacco-sale order permanently 
                        prohibiting an individual retail outlet from 
                        selling tobacco products shall include 
                        provisions that allow the outlet, after a 
                        specified period of time, to request that the 
                        Secretary compromise, modify, or terminate the 
                        order.''; and
                    (C) by adding at the end, the following:
                    ``(D) The Secretary may compromise, modify, or 
                terminate, with or without conditions, any no-tobacco-
                sale order.'';
            (5) in paragraph (5) as so redesignated--
                    (A) by striking ``(3)(A)'' as redesignated, and 
                inserting ``(4)(A)'';
                    (B) by inserting ``or the imposition of a no-
                tobacco-sale order'' after ``penalty'' the first 2 
                places it appears; and
                    (C) by striking ``issued.'' and inserting ``issued, 
                or on which the no-tobacco-sale order was imposed, as 
                the case may be.''; and
            (6) in paragraph (6), as so redesignated, by striking 
        ``paragraph (4)'' each place it appears and inserting 
        ``paragraph (5)''.
    (d) Section 304.--Section 304 (21 U.S.C. 334) is amended--
            (1) in subsection (a)(2)--
                    (A) by striking ``and'' before ``(D)''; and
                    (B) by striking ``device.'' and inserting the 
                following: ``, (E) Any adulterated or misbranded 
                tobacco product.'';
            (2) in subsection (d)(1), by inserting ``tobacco product,'' 
        after ``device,'';
            (3) in subsection (g)(1), by inserting ``or tobacco 
        product'' after ``device'' each place it appears; and
            (4) in subsection (g)(2)(A), by inserting ``or tobacco 
        product'' after ``device'' each place it appears.
    (e) Section 702.--Section 702(a) (21 U.S.C. 372(a)) is amended--
            (1) by inserting ``(1)'' after ``(a)''; and
            (2) by adding at the end thereof the following:
    ``(2) For a tobacco product, to the extent feasible, the Secretary 
shall contract with the States in accordance with paragraph (1) to 
carry out inspections of retailers in connection with the enforcement 
of this Act.''.
    (f) Section 703.--Section 703 (21 U.S.C. 373) is amended--
            (1) by inserting ``tobacco product,'' after ``device,'' 
        each place it appears; and
            (2) by inserting ``tobacco products,'' after ``devices,'' 
        each place it appears.
    (g) Section 704.--Section 704 (21 U.S.C. 374) is amended--
            (1) in subsection (a)(1)(A), by inserting ``tobacco 
        products,'' after ``devices,'' each place it appears;
            (2) in subsection (a)(1)(B), by inserting ``or tobacco 
        product'' after ``restricted devices'' each place it appears; 
        and
            (3) in subsection (b), by inserting ``tobacco product,'' 
        after ``device,''.
    (h) Section 705.--Section 705(b) (21 U.S.C. 375(b)) is amended by 
inserting ``tobacco products,'' after ``devices,''.
    (i) Section 709.--Section 709 (21 U.S.C. 379) is amended by 
inserting ``or tobacco product'' after ``device''.
    (j) Section 801.--Section 801 (21 U.S.C. 381) is amended--
            (1) in subsection (a)--
                    (A) by inserting ``tobacco products,'' after 
                ``devices,'' the first time it appears;
                    (B) by inserting ``or section 905(j)'' after 
                ``section 510''; and
                    (C) by striking ``drugs or devices'' each time it 
                appears and inserting ``drugs, devices, or tobacco 
                products'';
            (2) in subsection (e)(1), by inserting ``tobacco product,'' 
        after ``device,''; and
            (3) by adding at the end the following:
    ``(p)(1) Not later than 2 years after the date of enactment of the 
Family Smoking Prevention and Tobacco Control Act, and annually 
thereafter, the Secretary shall submit to the Committee on Health, 
Education, Labor, and Pensions of the Senate and the Committee on 
Energy and Commerce of the House of Representatives, a report 
regarding--
            ``(A) the nature, extent, and destination of United States 
        tobacco product exports that do not conform to tobacco product 
        standards established pursuant to this Act;
            ``(B) the public health implications of such exports, 
        including any evidence of a negative public health impact; and
            ``(C) recommendations or assessments of policy alternatives 
        available to Congress and the Executive Branch to reduce any 
        negative public health impact caused by such exports.
    ``(2) The Secretary is authorized to establish appropriate 
information disclosure requirements to carry out this subsection.''.
    (k) Section 1003.--Section 1003(d)(2)(C) (as redesignated by 
section 101(a)) is amended--
            (1) by striking ``and'' after ``cosmetics,''; and
            (2) inserting a comma and ``and tobacco products'' after 
        ``devices''.
    (l) Effective Date for No-Tobacco-Sale Order Amendments.--The 
amendments made by subsection (c), other than the amendment made by 
paragraph (2) of such subsection, shall take effect upon the issuance 
of guidance by the Secretary of Health and Human Services--
            (1) defining the term ``repeated violation'', as used in 
        section 303(f) of the Federal Food, Drug, and Cosmetic Act (21 
        U.S.C. 333(f)) as amended by subsection (c), by identifying the 
        number of violations of particular requirements over a 
        specified period of time at a particular retail outlet that 
        constitute a repeated violation;
            (2) providing for timely and effective notice to the 
        retailer of each alleged violation at a particular retail 
        outlet and an expedited procedure for the administrative appeal 
        of an alleged violation;
            (3) providing that a person may not be charged with a 
        violation at a particular retail outlet unless the Secretary 
        has provided notice to the retailer of all previous violations 
        at that outlet;
            (4) establishing a period of time during which, if there 
        are no violations by a particular retail outlet, that outlet 
        will not be considered to have been the site of repeated 
        violations when the next violation occurs; and
            (5) providing that good faith reliance on the presentation 
        of a false government issued photographic identification that 
        contains the bearer's date of birth does not constitute a 
        violation of any minimum age requirement for the sale of 
        tobacco products if the retailer has taken effective steps to 
        prevent such violations, including--
                    (A) adopting and enforcing a written policy against 
                sales to minors;
                    (B) informing its employees of all applicable laws;
                    (C) establishing disciplinary sanctions for 
                employee noncompliance; and
                    (D) requiring its employees to verify age by way of 
                photographic identification or electronic scanning 
                device.

CHAPTER 2--TOBACCO PRODUCT WARNINGS; CONSTITUENT AND SMOKE CONSTITUENT 
                               DISCLOSURE

SEC. 241. CIGARETTE LABEL AND ADVERTISING WARNINGS.

    Section 4 of the Federal Cigarette Labeling and Advertising Act (15 
U.S.C. 1333) is amended to read as follows:

``SEC. 4. LABELING.

    ``(a) Label Requirements.--
            ``(1) In general.--It shall be unlawful for any person to 
        manufacture, package, sell, offer to sell, distribute, or 
        import for sale or distribution within the United States any 
        cigarettes the package of which fails to bear, in accordance 
        with the requirements of this section, one of the following 
        labels:
        `WARNING: Cigarettes are addictive'.
        `WARNING: Tobacco smoke can harm your children'.
        `WARNING: Cigarettes cause fatal lung disease'.
        `WARNING: Cigarettes cause cancer'.
        `WARNING: Cigarettes cause strokes and heart disease'.
        `WARNING: Smoking during pregnancy can harm your baby'.
        `WARNING: Smoking can kill you'.
        `WARNING: Tobacco smoke causes fatal lung disease in non-
        smokers'.
        `WARNING: Quitting smoking now greatly reduces serious risks to 
        your health'.
            ``(2) Placement; typography; etc.--
                    ``(A) In general.--Each label statement required by 
                paragraph (1) shall be located in the upper portion of 
                the front and rear panels of the package, directly on 
                the package underneath the cellophane or other clear 
                wrapping. Except as provided in subparagraph (B), each 
                label statement shall comprise at least the top 30 
                percent of the front and rear panels of the package. 
                The word `WARNING' shall appear in capital letters and 
                all text shall be in conspicuous and legible 17-point 
                type, unless the text of the label statement would 
                occupy more than 70 percent of such area, in which case 
                the text may be in a smaller conspicuous and legible 
                type size, provided that at least 60 percent of such 
                area is occupied by required text. The text shall be 
                black on a white background, or white on a black 
                background, in a manner that contrasts, by typography, 
                layout, or color, with all other printed material on 
                the package, in an alternating fashion under the plan 
                submitted under subsection (b)(4).
                    ``(B) Flip-top boxes.--For any cigarette brand 
                package manufactured or distributed before January 1, 
                2000, which employs a flip-top style (if such packaging 
                was used for that brand in commerce prior to June 21, 
                1997), the label statement required by paragraph (1) 
                shall be located on the flip-top area of the package, 
                even if such area is less than 25 percent of the area 
                of the front panel. Except as provided in this 
                paragraph, the provisions of this subsection shall 
                apply to such packages.
            ``(3) Does not apply to foreign distribution.--The 
        provisions of this subsection do not apply to a tobacco product 
        manufacturer or distributor of cigarettes which does not 
        manufacture, package, or import cigarettes for sale or 
        distribution within the United States.
            ``(4) Applicability to retailers.--A retailer of cigarettes 
        shall not be in violation of this subsection for packaging that 
        is supplied to the retailer by a tobacco product manufacturer, 
        importer, or distributor and is not altered by the retailer in 
        a way that is material to the requirements of this subsection 
        except that this paragraph shall not relieve a retailer of 
        liability if the retailer sells or distributes tobacco products 
        that are not labeled in accordance with this subsection.
    ``(b) Advertising Requirements.--
            ``(1) In general.--It shall be unlawful for any tobacco 
        product manufacturer, importer, distributor, or retailer of 
        cigarettes to advertise or cause to be advertised within the 
        United States any cigarette unless its advertising bears, in 
        accordance with the requirements of this section, one of the 
        labels specified in subsection (a) of this section.
            ``(2) Typography, etc.--Each label statement required by 
        subsection (a) of this section in cigarette advertising shall 
        comply with the standards set forth in this paragraph. For 
        press and poster advertisements, each such statement and (where 
        applicable) any required statement relating to tar, nicotine, 
        or other constituent (including a smoke constituent) yield 
        shall comprise at least 20 percent of the area of the 
        advertisement and shall appear in a conspicuous and prominent 
        format and location at the top of each advertisement within the 
        trim area. The Secretary may revise the required type sizes in 
        such area in such manner as the Secretary determines 
        appropriate. The word `WARNING' shall appear in capital 
        letters, and each label statement shall appear in conspicuous 
        and legible type. The text of the label statement shall be 
        black if the background is white and white if the background is 
        black, under the plan submitted under paragraph (4) of this 
        subsection. The label statements shall be enclosed by a 
        rectangular border that is the same color as the letters of the 
        statements and that is the width of the first downstroke of the 
        capital `W' of the word `WARNING' in the label statements. The 
        text of such label statements shall be in a typeface pro rata 
        to the following requirements: 45-point type for a whole-page 
        broadsheet newspaper advertisement; 39-point type for a half-
        page broadsheet newspaper advertisement; 39-point type for a 
        whole-page tabloid newspaper advertisement; 27-point type for a 
        half-page tabloid newspaper advertisement; 31.5-point type for 
        a double page spread magazine or whole-page magazine 
        advertisement; 22.5-point type for a 28 centimeter by 3 column 
        advertisement; and 15-point type for a 20 centimeter by 2 
        column advertisement. The label statements shall be in English, 
        except that in the case of--
                    ``(A) an advertisement that appears in a newspaper, 
                magazine, periodical, or other publication that is not 
                in English, the statements shall appear in the 
                predominant language of the publication; and
                    ``(B) in the case of any other advertisement that 
                is not in English, the statements shall appear in the 
                same language as that principally used in the 
                advertisement.
            ``(3) Matchbooks.--Notwithstanding paragraph (2), for 
        matchbooks (defined as containing not more than 20 matches) 
        customarily given away with the purchase of tobacco products, 
        each label statement required by subsection (a) may be printed 
        on the inside cover of the matchbook.
            ``(4) Adjustment by secretary.--The Secretary may, through 
        a rulemaking under section 553 of title 5, United States Code, 
        adjust the format and
type sizes for the label statements required by this section or the 
text, format, and type sizes of any required tar, nicotine yield, or 
other constituent (including smoke constituent) disclosures, or to 
establish the text, format, and type sizes for any other disclosures 
required under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 
et seq.). The text of any such label statements or disclosures shall be 
required to appear only within the 20 percent area of cigarette 
advertisements provided by paragraph (2) of this subsection. The 
Secretary shall promulgate regulations which provide for adjustments in 
the format and type sizes of any text required to appear in such area 
to ensure that the total text required to appear by law will fit within 
such area.
            ``(5) Marketing requirements.--
                    ``(A) The label statements specified in subsection 
                (a)(1) shall be randomly displayed in each 12-month 
                period, in as equal a number of times as is possible on 
                each brand of the product and be randomly distributed 
                in all areas of the United States in which the product 
                is marketed in accordance with a plan submitted by the 
                tobacco product manufacturer, importer, distributor, or 
                retailer and approved by the Secretary.
                    ``(B) The label statements specified in subsection 
                (a)(1) shall be rotated quarterly in alternating 
                sequence in advertisements for each brand of cigarettes 
                in accordance with a plan submitted by the tobacco 
                product manufacturer, importer, distributor, or 
retailer to, and approved by, the Secretary.
                    ``(C) The Secretary shall review each plan 
                submitted under subparagraph (B) and approve it if the 
                plan--
                            ``(i) will provide for the equal 
                        distribution and display on packaging and the 
                        rotation required in advertising under this 
                        subsection; and
                            ``(ii) assures that all of the labels 
                        required under this section will be displayed 
                        by the tobacco product manufacturer, importer, 
                        distributor, or retailer at the same time.
            ``(6) Applicability to retailers.--This subsection applies 
        to a retailer only if that retailer is responsible for or 
        directs the label statements required under this section except 
        that this paragraph shall not relieve a retailer of liability 
        if the retailer displays, in a location open to the public, an 
        advertisement that is not labeled in accordance with the 
        requirements of this subsection.''.

SEC. 242. AUTHORITY TO REVISE CIGARETTE WARNING LABEL STATEMENTS.

    Section 4 of the Federal Cigarette Labeling and Advertising Act (15 
U.S.C. 1333), as amended by section 241, is further amended by adding 
at the end the following:
    ``(c) Change in Required Statements.--The Secretary may, by a 
rulemaking conducted under section 553 of title 5, United States Code, 
adjust the format, type size, and text of any of the label 
requirements, require color graphics to accompany the text, increase 
the required label area from 30 percent up to 50 percent of the front 
and rear panels of the package, or establish the format, type size, and 
text of any other disclosures required under the Federal Food, Drug, 
and Cosmetic Act (21 U.S.C. 301 et seq.), if the Secretary finds that 
such a change would promote greater public understanding of the risks 
associated with the use of tobacco products.''.

SEC. 243. STATE REGULATION OF CIGARETTE ADVERTISING AND PROMOTION.

    Section 5 of the Federal Cigarette Labeling and Advertising Act (15 
U.S.C. 1334) is amended by adding at the end the following:
    ``(c) Exception.--Notwithstanding subsection (b), a State or 
locality may enact statutes and promulgate regulations, based on 
smoking and health, that take effect after the effective date of the 
Family Smoking Prevention and Tobacco Control Act, imposing specific 
bans or restrictions on the time, place, and manner, but not content, 
of the advertising or promotion of any cigarettes.''.

SEC. 244. SMOKELESS TOBACCO LABELS AND ADVERTISING WARNINGS.

    Section 3 of the Comprehensive Smokeless Tobacco Health Education 
Act of 1986 (15 U.S.C. 4402) is amended to read as follows:

``SEC. 3. SMOKELESS TOBACCO WARNING.

    ``(a) General Rule.--
            ``(1) It shall be unlawful for any person to manufacture, 
        package, sell, offer to sell, distribute, or import for sale or 
        distribution within the United States any smokeless tobacco 
        product unless the product package bears, in accordance with 
        the requirements of this Act, one of the following labels:
        `WARNING: This product can cause mouth cancer'.
        `WARNING: This product can cause gum disease and tooth loss'.
        `WARNING: This product is not a safe alternative to 
        cigarettes'.
        `WARNING: Smokeless tobacco is addictive'.
            ``(2) Each label statement required by paragraph (1) shall 
        be--
                    ``(A) located on the 2 principal display panels of 
                the package, and each label statement shall comprise at 
                least 30 percent of each such display panel; and
                    ``(B) in 17-point conspicuous and legible type and 
                in black text on a white background, or white text on a 
                black background, in a manner that contrasts by 
                typography, layout, or color, with all other printed 
                material on the package, in an alternating fashion 
                under the plan submitted under subsection (b)(3), 
                except that if the text of a label statement would 
                occupy more than 70 percent of the area specified by 
                subparagraph (A), such text may appear in a smaller 
                type size, so long as at least 60 percent of such 
                warning area is occupied by the label statement.
            ``(3) The label statements required by paragraph (1) shall 
        be introduced by each tobacco product manufacturer, packager, 
        importer, distributor, or retailer of smokeless tobacco 
        products concurrently into the distribution chain of such 
        products.
            ``(4) The provisions of this subsection do not apply to a 
        tobacco product manufacturer or distributor of any smokeless 
        tobacco product that does not manufacture, package, or import 
        smokeless tobacco products for sale or distribution within the 
        United States.
            ``(5) A retailer of smokeless tobacco products shall not be 
        in violation of this subsection for packaging that is supplied 
        to the retailer by a tobacco products manufacturer, importer, 
        or distributor and that is not altered by the retailer unless 
        the retailer offers for sale, sells, or distributes a smokeless 
        tobacco product that is not labeled in accordance with this 
        subsection.
    ``(b) Required Labels.--
            ``(1) It shall be unlawful for any tobacco product 
        manufacturer, packager, importer, distributor, or retailer of 
        smokeless tobacco products to advertise or cause to be 
        advertised within the United States any smokeless tobacco 
        product unless its advertising bears, in accordance with the 
        requirements of this section, one of the labels specified in 
        subsection (a).
            ``(2) Each label statement required by subsection (a) in 
        smokeless tobacco advertising shall comply with the standards 
        set forth in this paragraph. For press and poster 
        advertisements, each such statement and (where applicable) any 
        required statement relating to tar, nicotine, or other 
constituent yield shall--
                    ``(A) comprise at least 20 percent of the area of 
                the advertisement, and the warning area shall be 
                delineated by a dividing line of contrasting color from 
                the advertisement; and
                    ``(B) the word `WARNING' shall appear in capital 
                letters and each label statement shall appear in 
                conspicuous and legible type. The text of the label 
                statement shall be black on a white background, or 
                white on a black background, in an alternating fashion 
                under the plan submitted under paragraph (3).
            ``(3)(A) The label statements specified in subsection 
        (a)(1) shall be randomly displayed in each 12-month period, in 
        as equal a number of times as is possible on each brand of the 
        product and be randomly distributed in all areas of the United 
        States in which the product is marketed in accordance with a 
        plan submitted by the tobacco product manufacturer, importer, 
        distributor, or retailer and approved by the Secretary.
            ``(B) The label statements specified in subsection (a)(1) 
        shall be rotated quarterly in alternating sequence in 
        advertisements for each brand of smokeless tobacco product in 
        accordance with a plan submitted by the tobacco product 
        manufacturer, importer, distributor, or retailer to, and 
        approved by, the Secretary.
            ``(C) The Secretary shall review each plan submitted under 
        subparagraph (B) and approve it if the plan--
                    ``(i) will provide for the equal distribution and 
                display on packaging and the rotation required in 
                advertising under this subsection; and
                    ``(ii) assures that all of the labels required 
                under this section will be displayed by the tobacco 
                product manufacturer, importer, distributor, or 
                retailer at the same time.
            ``(D) This paragraph applies to a retailer only if that 
        retailer is responsible for or directs the label statements 
        under this section, unless the retailer displays in a location 
        open to the public, an advertisement that is not labeled in 
        accordance with the requirements of this subsection.
    ``(c) Television and Radio Advertising.--It is unlawful to 
advertise smokeless tobacco on any medium of electronic communications 
subject to the jurisdiction of the Federal Communications 
Commission.''.

SEC. 245. AUTHORITY TO REVISE SMOKELESS TOBACCO PRODUCT WARNING LABEL 
              STATEMENTS.

    Section 3 of the Comprehensive Smokeless Tobacco Health Education 
Act of 1986 (15 U.S.C. 4402), as amended by section 243, is further 
amended by adding at the end the following:
    ``(d) Authority To Revise Warning Label Statements.--The Secretary 
may, by a rulemaking conducted under section 553 of title 5, United 
States Code, adjust the format, type size, and text of any of the label 
requirements, require color graphics to accompany the text, increase 
the required label area from 30 percent up to 50 percent of the front 
and rear panels of the package, or establish the format, type size, and 
text of any other disclosures required under the Federal Food, Drug, 
and Cosmetic Act (21 U.S.C. 301 et seq.), if the Secretary finds that 
such a change would promote greater public understanding of the risks 
associated with the use of smokeless tobacco products.''.

SEC. 246. TAR, NICOTINE, AND OTHER SMOKE CONSTITUENT DISCLOSURE TO THE 
              PUBLIC.

    Section 4(a) of the Federal Cigarette Labeling and Advertising Act 
(15 U.S.C. 1333 (a)), as amended by section 241, is further amended by 
adding at the end the following:
            ``(4)(A) The Secretary shall, by a rulemaking conducted 
        under section 553 of title 5, United States Code, determine (in 
        the Secretary's sole discretion) whether cigarette and other 
        tobacco product manufacturers shall be required to include in 
        the area of each cigarette advertisement specified by 
        subsection (b) of this section, or on the package label, or 
        both, the tar and nicotine yields of the advertised or packaged 
        brand. Any such disclosure shall be in accordance with the 
        methodology established under such regulations, shall conform 
        to the type size requirements of subsection (b) of this 
        section, and shall appear within the area specified in 
        subsection (b) of this section.
            ``(B) Any differences between the requirements established 
        by the Secretary under subparagraph (A) and tar and nicotine 
        yield reporting requirements established by the Federal Trade 
        Commission shall be resolved by a memorandum of understanding 
        between the Secretary and the Federal Trade Commission.
            ``(C) In addition to the disclosures required by 
        subparagraph (A) of this paragraph, the Secretary may, under a 
        rulemaking conducted under section 553 of title 5, United 
        States Code, prescribe disclosure requirements regarding the 
        level of any cigarette or other tobacco product constituent 
        including any smoke constituent. Any such disclosure may be 
        required if the Secretary determines that disclosure would be 
        of benefit to the public health, or otherwise would increase 
        consumer awareness of the health consequences of the use of 
        tobacco products, except that no such prescribed disclosure 
        shall be required on the face of any cigarette package or 
        advertisement. Nothing in this section shall prohibit the 
        Secretary from requiring such prescribed disclosure through a 
        cigarette or other tobacco product package or advertisement 
        insert, or by any other means under the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 301 et seq.).
            ``(D) This paragraph applies to a retailer only if that 
        retailer is responsible for or directs the label statements 
        required under this section, except that this paragraph shall 
        not relieve a retailer of liability if the retailer sells or 
        distributes tobacco products that are not labeled in accordance 
        with the requirements of this subsection.''.

       CHAPTER 3--PREVENTION OF ILLICIT TRADE IN TOBACCO PRODUCTS

SEC. 251. LABELING, RECORDKEEPING, RECORDS INSPECTION.

    Chapter IX of the Federal Food, Drug, and Cosmetic Act, as added by 
section 231, is further amended by adding at the end the following:

``SEC. 921. LABELING, RECORDKEEPING, RECORDS INSPECTION.

    ``(a) Origin Labeling.--The label, packaging, and shipping 
containers of tobacco products for introduction or delivery for 
introduction into interstate commerce shall bear the statement `sale 
only allowed in the United States.'
    ``(b) Regulations Concerning Recordkeeping for Tracking and 
Tracing.--
            ``(1) In general.--Not later than 9 months after the date 
        of enactment of the Family Smoking Prevention and Tobacco 
        Control Act, the Secretary shall promulgate regulations 
        regarding the establishment and maintenance of records by any 
        person who manufactures, processes, transports, distributes, 
        receives, packages, holds, exports, or imports tobacco 
        products.
            ``(2) Inspection.--In promulgating the regulations 
        described in paragraph (1), the Secretary shall consider which 
        records are needed for inspection to monitor the movement of 
        tobacco products from the point of manufacture through 
        distribution to retail outlets to assist in investigating 
        potential illicit trade, smuggling or counterfeiting of tobacco 
        products.
            ``(3) Codes.--The Secretary may require codes on the labels 
        of tobacco products or other designs or devices for the purpose 
        of tracking or tracing the tobacco product through the 
        distribution system.
            ``(4) Size of business.--The Secretary shall take into 
        account the size of a business in promulgating regulations 
        under this section.
            ``(5) Recordkeeping by retailers.--The Secretary shall not 
        require any retailer to maintain records relating to individual 
        purchasers of tobacco products for personal consumption.
    ``(c) Records Inspection.--If the Secretary has a reasonable belief 
that a tobacco product is part of an illicit trade or smuggling or is a 
counterfeit product, each person who manufactures, processes, 
transports, distributes, receives, holds, packages, exports, or imports 
tobacco products shall, at the request of an officer or employee duly 
designated by the Secretary, permit such officer or employee, at 
reasonable times and within reasonable limits and in a reasonable 
manner, upon the presentation of appropriate credentials and a written 
notice to such person, to have access to and copy all records 
(including financial records) relating to such article that are needed 
to assist the Secretary in investigating potential illicit trade, 
smuggling or counterfeiting of tobacco products.
    ``(d) Knowledge of Illegal Transaction.--If the manufacturer or 
distributor of a tobacco product has knowledge which reasonably 
supports the conclusion that a tobacco product manufactured or 
distributed by such manufacturer or distributor that has left the 
control of such person may be or has been--
                    ``(A) imported, exported, distributed or offered 
                for sale in interstate commerce by a person without 
                paying duties or taxes required by law; or
                    ``(B) imported, exported, distributed or diverted 
                for possible illicit marketing,
the manufacturer or distributor shall promptly notify the Attorney 
General of such knowledge.
    ``(e) Knowledge Defined.--For purposes of this subsection, the term 
`knowledge' as applied to a manufacturer or distributor means--
            ``(1) the actual knowledge that the manufacturer or 
        distributor had; or
            ``(2) the knowledge which a reasonable person would have 
        had under like circumstances or which would have been obtained 
        upon the exercise of due care.

SEC. 252. STUDY AND REPORT.

    (a) Study.--The Comptroller General of the United States shall 
conduct a study of cross-border trade in tobacco products to--
            (1) collect data on cross-border trade in tobacco products, 
        including illicit trade and trade of counterfeit tobacco 
        products and make recommendations on the monitoring of such 
        trade; and
            (2) collect data on cross-border advertising (any 
        advertising intended to be broadcast, transmitted, or 
        distributed from the United States to another country) of 
        tobacco products and make recommendations on how to prevent or 
        eliminate, and what technologies could help facilitate the 
        elimination of, cross-border advertising.
    (b) Report.--Not later than 18 months after the date of enactment 
of this Act, the Comptroller General of the United States shall submit 
to the Committee on Health, Education, Labor, and Pensions of the 
Senate and the Committee on Energy and Commerce of the House of 
Representatives a report on the study described in subsection (a).

        TITLE III--RESPONSIBLE MARKETING AND CONSUMER AWARENESS

                     Subtitle A--General Provisions

SEC. 301. NUTRITION LABELING OF RESTAURANT FOODS.

    Section 403(q)(5) of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 343(q)(5)(A)(i)) is amended--
            (1) in clause (A)--
                    (A) in subclause (i), by inserting ``except as 
                provided in clauses (H) and (I),'' before ``which'' the 
                first place it appears; and
                    (B) in subclause (ii), by inserting ``except as 
                provided in clauses (H) and (I),'' before ``which'' the 
                first place it appears; and
            (2) by adding at the end the following:
    ``(H) Restaurants and retail food establishments.--
            ``(i) In general.--Except for food described in subclause 
        (iii), in the case of food that--
                    ``(I) is served in a restaurant or similar retail 
                food establishment; or
                    ``(II) is processed and prepared primarily in a 
                retail establishment;
        that is part of a chain with 20 or more locations doing 
        business under the same trade name (regardless of the type of 
        ownership of the locations), the restaurant of the 
        establishment shall disclose the information described in 
        subclause (ii).
            ``(ii) Information required to be disclosed.--Except as 
        provided in clause (iii), the establishment shall disclose--
                    ``(I)(aa) in a statement adjacent to the name of 
                the food on any menu listing the food for sale, or by 
                any other means approved by the Secretary, the number 
                of calories, grams of saturated fat plus trans fat, and 
                milligrams of sodium contained in a serving of the 
                food, as offered for sale, in a clear and conspicuous 
                manner; and
                    ``(bb) information, specified by the Secretary by 
                regulation, designed to enable the public to 
                understand, in the context of a total daily diet, the 
                significance of the nutrition information that is 
                provided; and
                    ``(II) in a statement adjacent to the name of the 
                food on any menu board or other sign listing the food 
                for sale, or by any other means approved by the 
                Secretary, the number of calories contained in a 
                serving of the food, as offered for sale, in a clear 
                and conspicuous manner.
            ``(iii) Nonapplicability to certain food.--This clause does 
        not apply to--
                    ``(I) items that are not listed on a menu or menu 
                board (such as condiments, other items placed on the 
                table or counter for general use, and items from salad 
                bars or other self-service facilities); or
                    ``(II) daily specials, temporary menu items, or 
                other irregular menu items, as specified by the 
                Secretary by regulation.
            ``(iv) Self-service facilities.--
                    ``(I) In general.--In the case of food sold at a 
                salad bar, buffet line, cafeteria line, or similar 
                self-service facility, a restaurant or other 
                establishment shall place a sign that lists calories 
per standard serving adjacent to the name of each food offered.
                    ``(II) Vending machines.--In the case of an article 
                of food sold from a vending machine or other 
                arrangement that does not permit a prospective 
                purchaser to examine the article so as to be able to 
                read a statement affixed to the article as required 
                under subclause (I) before purchasing the article, a 
                restaurant or other establishment (or, in the case of a 
                vending machine that is owned and operated by a vending 
                machine operator, the vending machine operator) shall 
                provide a conspicuous sign, in close proximity to the 
                article, identifying the food and including a statement 
                disclosing the number of calories contained in the 
                article.
            ``(v) Voluntary provision of nutrition information; state 
        regulation of nutrition information for restaurant food.--
                    ``(I) Retail food establishments.--Nothing in this 
                clause precludes a restaurant or similar retail food 
                establishment from providing additional nutrition 
                information, voluntarily, if the information complies 
                with the nutrition labeling requirements contained in 
                this subparagraph.
                    ``(II) State or local requirements.--Nothing in 
                this clause precludes a State or political subdivision 
                of a State from requiring that a restaurant or similar 
                food establishment provide nutrition information in 
                addition to that required under this clause.
            ``(vi) Regulations.--
                    ``(I) Proposed regulation.--Not later than 1 year 
                after the date of enactment of this clause, the 
                Secretary shall promulgate proposed regulations to 
                carry out this clause.
                    ``(II) Contents.--The regulations shall allow for 
                the variations in serving sizes and in food preparation 
                that can reasonably be expected to result from 
                inadvertent human error, training of food service 
                workers, and other factors.
                    ``(III) Final regulations.--Not later than 2 years 
                after the date of enactment of this clause, the 
                Secretary shall promulgate final regulations to 
                implement this clause.
                    ``(IV) Failure to promulgate final regulations by 
                required date.--If the Secretary does not promulgate 
                final regulations under item (III) by the date that is 
                2 years after the date of enactment of this clause--
                            ``(aa) the proposed regulations issued in 
                        accordance with item (I) shall become effective 
                        as the final regulations on the day after that 
                        date; and
                            ``(bb) the Secretary shall publish in the 
                        Federal Register notice of the final 
                        regulations.
    ``(I) Vending machines.--
            ``(i) In general.--In the case of an article of food sold 
        from a vending machine that--
                    ``(I) does not permit a prospective purchaser to 
                examine the article so as to be able to read a 
                statement affixed to the article before purchasing the 
                article; and
                    ``(II) is operated by a person that is engaged in 
                the business of owning and operating 20 or more vending 
                machines;
        the vending machine operator shall provide a conspicuous sign, 
        in close proximity to the article, identifying the food and 
        including a statement disclosing the number of calories 
        contained in the article.
            ``(ii) Voluntary provision of nutrition information; state 
        regulation of nutrition information for vending machines.--
                    ``(I) Vending machine operators.--Nothing in this 
                clause precludes a vending machine operator from 
                providing additional nutrition information, 
                voluntarily, if the information complies with the 
                nutrition labeling requirements contained in this 
                subparagraph.
                    ``(II) State or local requirements.--Nothing in 
                this title precludes a State or political subdivision 
                of a State from requiring that a vending machine 
                operator provide nutrition information in addition to 
                that required under this clause.
            ``(iii) Regulations.--
                    ``(I) Proposed regulation.--Not later than 1 year 
                after the date of enactment of this clause, the 
                Secretary shall promulgate proposed regulations to 
                carry out this clause.
                    ``(II) Final regulations.--Not later than 2 years 
                after the date of enactment of this clause, the 
                Secretary shall promulgate final regulations to 
                implement this clause.
                    ``(III) Failure to promulgate final regulations by 
                required date.--If the Secretary does not promulgate 
                final regulations under item (II) by the date that is 2 
                years after the date of enactment of this clause--
                            ``(aa) the proposed regulations issued in 
                        accordance with item (I) shall become effective 
                        as the final regulations on the day after that 
                        date; and
                            ``(bb) the Secretary shall publish in the 
                        Federal Register notice of the final 
                        regulations.''.

SEC. 302. RULEMAKING AUTHORITY FOR ADVERTISING TO CHILDREN.

    (a) Purpose.--The purpose of this section is to allow the Federal 
Trade Commission to issue regulations that restrict the marketing or 
advertising of foods and beverages to children under the age of 18 
years if the Federal Trade Commission determines that there is evidence 
that consumption of certain foods and beverages is detrimental to the 
health of children or it determines advertising to children to be 
unfair or deceptive.
    (b) Authority.--Section 18 of the Federal Trade Commission Act (15 
U.S.C. 57a) is amended by striking subsection (h).

SEC. 303. FOOD ADVERTISING IN SCHOOLS.

    Section 10 of the Child Nutrition Act of 1966 (42 U.S.C. 1779) is 
amended by adding at the end the following:
    ``(d) Food Advertising.--The Secretary may prohibit the advertising 
of food in participating schools if the Secretary determines that 
consumption of the advertised food has a detrimental effect on the 
diets or health of children.''.

SEC. 304. DISALLOWANCE OF DEDUCTIONS FOR ADVERTISING AND MARKETING 
              EXPENSES RELATING TO TOBACCO PRODUCT USE.

    (a) In General.--Part IX of subchapter B of chapter 1 of subtitle A 
of the Internal Revenue Code of 1986 (relating to items not deductible) 
is amended by adding at the end the following new section:

``SEC. 280I. DISALLOWANCE OF DEDUCTION FOR TOBACCO ADVERTISING AND 
              MARKETING EXPENSES.

    No deduction shall be allowed under this chapter for expenses 
relating to advertising or marketing cigars, cigarettes, smokeless 
tobacco, pipe tobacco, or any similar tobacco product. For purposes of 
this section, any term used in this section which is also used in 
section 5702 shall have the same meaning given such term by section 
5702.''.
    (b) Conforming Amendment.--The table of sections for such part IX 
is amended by adding after the item relating to section 280H the 
following new item:

                                  ``Sec. 280I. Disallowance of 
                                        deduction for tobacco 
                                        advertising and marketing 
                                        expenses.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 305. FEDERAL-STATE TOBACCO COUNTER-ADVERTISING PROGRAMS.

    Part P of title III of the Public Health Service Act (42 U.S.C. 
280g et seq.), as amended in section 212, is further amended by adding 
at the end the following:

``SEC. 399S. FEDERAL-STATE TOBACCO COUNTER-ADVERTISING PROGRAMS.

    ``(a) In General.--The Secretary, acting through the Director of 
the Centers for Disease Control and Prevention, shall award grants to 
and enter into contracts with eligible entities for the implementation 
of national and local media (such as counter-advertising) and non-media 
campaigns designed to reduce the use of tobacco products.
    ``(b) Eligibility.--To be eligible to receive a grant under 
subsection (a), an entity shall be--
            ``(1) a public entity, including a State public health 
        department; or
            ``(2) a private, nonprofit entity that--
                    ``(A) is not affiliated with a manufacturer or 
                importer of a tobacco product;
                    ``(B) has demonstrated a record of conducting a 
                national antitobacco public education campaign to 
                effectively reduce the use of tobacco products;
                    ``(C) has expertise in conducting a multi-media 
                communications campaign; and
                    ``(D) has expertise in developing strategies that 
                affect behavior changes in children and other targeted 
                populations.
    ``(c) Application.--An eligible entity shall submit an application 
to the Secretary for a grant under this section at such time, in such 
manner, and accompanied by such information as the Secretary may 
require.
    ``(d) Use of Funds.--An eligible entity shall use amounts received 
under a grant under this section to--
            ``(1) design and implement multimedia public education and 
        social marketing campaigns that--
                    ``(A) discourage the use of tobacco products;
                    ``(B) encourage the use of products designed to 
                enable tobacco use cessation; and
                    ``(C) educate the public about the hazards of 
                environmental tobacco smoke exposure; or
            ``(2) conduct research related to the effectiveness of the 
        campaigns described in paragraph (1).
    ``(e) Allocation of Grants.--Of the amounts awarded under this 
section, the Secretary shall award--
            ``(1) 50 percent of such amounts to eligible public 
        entities; and
            ``(2) 50 percent of such amounts to eligible private, 
        nonprofit entities.
    ``(f) Authorization of Appropriations.--There are authorized to be 
appropriated $200,000,000 to carry out this section.''.

        Subtitle B--Penalties for Failure to Reduce Teen Smoking

SEC. 311. CHILD CIGARETTE USE SURVEYS.

    (a) Annual Performance Survey.--
            (1) In general.--Not later than August 31, 2005, and 
        annually thereafter, the Secretary of Health and Human Services 
        (referred to in this section as the ``Secretary'') shall 
        publish the results of an annual cigarette survey, to be 
        carried out after the date of enactment of this Act and 
        completed prior to August 21, 2005, and prior to August 21 of 
        each year thereafter, to determine--
                    (A) the percentage of all young individuals who 
                used a type of cigarette within the 30-day period prior 
                to the conduct of the survey involved; and
                    (B) the percentage of young individuals who 
                identify each brand of each type of cigarette as the 
                usual brand smoked within such 30-day period.
            (2) Young individuals.--For the purposes of this subtitle, 
        the term ``young individuals'' means individuals who are under 
        18 years of age.
    (b) Size and Methodology.--
            (1) In general.--The survey referred to in subsection (a) 
        shall be comparable in size and methodology to the Monitoring 
        the Future survey that was completed in 1999 to measure the use 
        of cigarettes (by brand) by youths under 18 years of age within 
        the 30 day period prior to the conduct of the study.
            (2) Conclusive accurateness.--A survey using the 
        methodology described in paragraph (1) shall be deemed 
        conclusively proper, correct, and accurate for purposes of this 
        section.
            (3) Definition.--In this subtitle, the term ``Monitoring 
        the Future survey'' means the combined survey of 8th, 10th, and 
        12th grade students that was conducted at the Institute for 
        Social Research at the University of Michigan.
    (c) Reduction.--The Secretary, based on a comparison of the results 
of the first annual cigarette survey referred to in subsection (a) and 
the Monitoring the Future survey referred to in subsection (b)(1), 
shall determine the percentage reduction (if any) in youth cigarette 
use for each manufacturer of cigarettes.
    (d) Participation in Survey.--Notwithstanding any other provision 
of law, the Secretary may conduct a survey under this section involving 
minors if the results of such survey with respect to such minors are 
kept confidential and not disclosed.
    (e) Nonapplicability.--Chapter 35 of title 44, United States Code, 
shall not apply to information required for the purposes of carrying 
out this section.
    (f) Definition.--In this subtitle the term ``cigarette'' has the 
meaning given such term in section 3(1) of the Federal Cigarette 
Labeling and Advertising Act (15 U.S.C. 1332(1)).

SEC. 312. CIGARETTE USE REDUCTION GOAL AND NONCOMPLIANCE.

    (a) Goal.--It shall be the cigarette use reduction goal that each 
manufacturer reduce youth cigarette use by at least 15 percent during 
the period between the Monitoring the Future survey referred to in 
section 311(b)(1) and the completion of the first annual cigarette 
survey (and such subsequent surveys as compared to the previous year's 
survey) referred to in section 311(a).
    (b) Noncompliance.--
            (1) Industry-wide penalty.--If the Secretary determines 
        that the cigarette use reduction goal under subsection (a) has 
        not been achieved, the Secretary shall, not later than 
        September 10, 2005, and September 10 of each year thereafter, 
        impose an industry-wide penalty on the manufacturers of 
        cigarettes in an amount that is in the aggregate equal to--
                    (A) if youth cigarette use has been reduced by 5 
                percent or less, $6,000,000,000;
                    (B) if youth cigarette use has been reduced by at 
                least 6 percent but less than 10 percent, 
                $4,000,000,000; and
                    (C) if youth cigarette use has been reduced by at 
                least 11 percent but less than 15 percent, 
                $2,000,000,000.
            (2) Payment.--The industry-wide penalty imposed under this 
        subsection shall be paid by each manufacturer based on the 
        percentage of cigarettes of each such manufacturer that, are 
        used by youth (as determined under the Monitoring the Future 
        survey and compared to the cigarettes manufactured by all 
        manufacturers) as such percentage relates to the total amount 
        to be paid by all manufacturers.
            (3) Final determination.--The determination of the 
        Secretary as to the amount and allocation of a surcharge under 
        this subtitle shall be final and the manufacturer shall pay 
        such surcharge within 10 days of the date on which the 
        manufacturer is assessed. Such payment shall be retained by the 
        Secretary pending final judicial review of what, if any, change 
        in the surcharge is appropriate.
            (4) Compliance by certain manufacturers.--A manufacturer 
        that individually complies with the goal under subsection (a) 
        shall not be liable for the payment of any portion of the 
        penalty under this subsection.
            (5) Limitation.--With respect to cigarettes, a manufacturer 
        with a market share of 1 percent or less of youth cigarette use 
        shall not be liable for the payment of a surcharge under this 
        section.
    (c) Penalties Nondeductible.--The payment of penalties under this 
subtitle shall not be considered to be an ordinary and necessary 
expense in carrying on a trade or business for purposes of the Internal 
Revenue Code of 1986 and shall not be deductible.
    (d) Judicial Review.--
            (1) After payment.--A manufacturer of cigarettes may seek 
        judicial review of any action under this subtitle only after 
        the assessment involved has been paid by the manufacturer to 
        the Department of the Treasury and only in the United States 
        District Court for the District of Columbia.
            (2) Review by attorney general.--Prior to the filing of an 
        action by a manufacturer seeking judicial review of an action 
        under this subtitle, the manufacturer shall notify the Attorney 
        General of such intent to file and the Attorney General shall 
        have 30 days in which to respond to the action.
            (3) Review.--The amount of any surcharge paid under this 
        subtitle shall be subject to judicial review by the United 
        States Court of Appeals for the District of Columbia Circuit, 
        based on the arbitrary and capricious standard of section 706 
        of title 5, United States Code. Notwithstanding any other 
        provision of law, no court shall have the authority to stay any 
        surcharge payment due to the Secretary under this subtitle 
        pending judicial review until the Secretary has made or failed 
        to make a compliance determination, as described under this 
subtitle, that has adversely affected the person seeking the review.

 SEC. 313. ENFORCEMENT.

    (a) Initial Penalty.--There is hereby imposed an initial penalty on 
the failure of any manufacturer to make any payment required under this 
subtitle within 10 days after the date on which such payment is due.
    (b) Amount of Penalty.--The amount of the penalty imposed by 
subsection (a) on any failure with respect to a manufacturer shall be 
an amount equal to 2 percent of the penalty owed under section 312 for 
each day during the noncompliance period.
    (c) Noncompliance Period.--For purposes of this section, the term 
``noncompliance period'' means, with respect to any failure to make the 
surcharge payment required under this subtitle, the period--
            (1) beginning on the due date for such payment; and
            (2) ending on the date on which such payment is paid in 
        full.
    (d) Limitations.--No penalty shall be imposed by subsection (a) 
on--
            (1) any failure to make a surcharge payment under this 
        subtitle during any period for which it is established to the 
        satisfaction of the Secretary that none of the persons 
        responsible for such failure knew or, exercising reasonable 
        diligence, would have known, that such failure existed; or
            (2) any manufacturer that produces less than 1 percent of 
        cigarettes used by youth in that year (as determined by the 
        annual survey).

      TITLE IV--REIMBURSEMENT AND COVERAGE OF PREVENTIVE SERVICES

SEC. 401. COVERAGE OF SUBSTANCE USE (OTHER THAN TOBACCO), DIET, 
              EXERCISE, INJURY PREVENTION, AND DENTAL HEALTH 
              COUNSELING.

    (a) Coverage.--
            (1) In general.--Section 1861(s)(2) of the Social Security 
        Act (42 U.S.C. 1395x(s)(2)), as amended by section 642(a) of 
        the Medicare Prescription Drug, Improvement, and Modernization 
        Act of 2003 (Public Law 108-173; 117 Stat. 2322), is amended--
                    (A) in subparagraph (Y), by striking ``and'' after 
                the semicolon at the end;
                    (B) in subparagraph (Z), by adding ``and'' after 
                the semicolon at the end; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(AA) substance use (other than tobacco), diet, exercise, 
        injury prevention, and dental health counseling (as defined in 
        subsection (bbb)(1));''.
            (2) Conforming amendments.--(A) Section 1862(a)(12) of the 
        Social Security Act (42 U.S.C. 1395y(a)(12)) is amended by 
        inserting ``(except as otherwise allowed under subsection 
        1861(s)(2)(AA))'' after ``directly supporting teeth''.
            (B) Clauses (i) and (ii) of section 1861(s)(2)(K) of the 
        Social Security Act (42 U.S.C. 1395x(s)(2)(K)), as amended by 
        section 611(d)(2) of the Medicare Prescription Drug, 
        Improvement, and Modernization Act of 2003 (Public Law 108-173; 
        117 Stat. 2304), are each amended by striking ``subsection 
        (ww)(1)'' and inserting ``subsections (ww)(1) and (bbb)''.
    (b) Services Described.--Section 1861 of the Social Security Act 
(42 U.S.C. 1395x), as amended by section 706(b) of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108-173; 117 Stat. 2339), is amended by adding at the end the 
following new subsection:

     ``Substance Use (Other Than Tobacco), Diet, Exercise, Injury 
                Prevention, and Dental Health Counseling

    ``(bbb) The term `substance use (other than tobacco), diet, 
exercise, injury prevention, and dental health counseling' means 
therapy and counseling relating to substance use (other than tobacco), 
diet, exercise, injury prevention, and dental health counseling that is 
furnished--
            ``(1) by or under the supervision of a physician; or
            ``(2) by any other health care professional who--
                    ``(A) is legally authorized to furnish such 
                services under State law (or the State regulatory 
                mechanism provided by State law) of the State in which 
                the services are furnished; and
                    ``(B) is authorized to receive payment for other 
                services under this title or is designated by the 
                Secretary for this purpose.''.
    (c) Payment and Elimination of Cost-Sharing.--
            (1) Payment and elimination of coinsurance.--Section 
        1833(a)(1) of the Social Security Act (42 U.S.C. 1395l(a)(1)), 
        as amended by section 302(b)(2) of the Medicare Prescription 
        Drug, Improvement, and Modernization Act of 2003 (Public Law 
        108-173; 117 Stat. 2229), is amended--
                    (A) in subparagraph (N), by inserting ``or 
                substance use (other than tobacco), diet, exercise, 
                injury prevention, and dental health counseling (as 
                defined in section 1861(bbb))'' after ``(as defined in 
                section 1848(j)(3))'';
                    (B) by striking ``and'' before ``(V)''; and
                    (C) by inserting before the semicolon at the end 
                the following: ``and (W) with respect to substance use 
                (other than tobacco), diet, exercise, injury 
                prevention, and dental health counseling (as defined in 
                section 1861(bbb) the amount paid shall be the lesser 
                of the actual charge for the services or the amount 
                determined under the payment basis determined under 
                section 1848''.
            (2) Payment under physician fee schedule.--Section 
        1848(j)(3) of the Social Security Act (42 U.S.C. 1395w-
        4(j)(3)), as amended by section 611(c) of the Medicare 
        Prescription Drug, Improvement, and Modernization Act of 2003 
        (Public Law 108-173; 117 Stat. 2304), is amended by inserting 
        ``(2)(AA),'' after ``(2)(W),''.
            (3) Elimination of coinsurance in outpatient hospital 
        settings.--
                    (A) Exclusion from opd fee schedule.--Section 
                1833(t)(1)(B)(iv) of the Social Security Act (42 U.S.C. 
                1395l(t)(1)(B)(iv)), as amended by section 614(a) of 
                the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173; 117 
                Stat. 2306), is amended by striking ``and diagnostic 
                mammography'' and inserting ``, diagnostic mammography, 
                or substance use (other than tobacco), diet, exercise, 
                injury prevention, and dental health counseling (as 
                defined in section 1861(bbb))''.
                    (B) Conforming amendments.--Section 1833(a)(2) of 
                the Social Security Act (42 U.S.C. 1395l(a)(2)) is 
                amended--
                            (i) in subparagraph (F), by striking 
                        ``and'' after the semicolon at the end;
                            (ii) in subparagraph (G)(ii), by striking 
                        the comma at the end and inserting
                        ``; and''; and
                            (iii) by inserting after subparagraph 
                        (G)(ii) the following new subparagraph:
                    ``(H) with respect to substance use (other than 
                tobacco), diet, exercise, injury prevention, and dental 
                health counseling (as defined in section 1861(bbb)) 
                furnished by an outpatient department of a hospital, 
                the amount determined under paragraph (1)(W),''.
            (4) Elimination of deductible.--The first sentence of 
        section 1833(b) of the Social Security Act (42 U.S.C. 1395l(b)) 
        is amended--
                    (A) by striking ``and'' before ``(6)''; and
                    (B) by inserting before the period at the end the 
                following: ``, and (7) such deductible shall not apply 
                with respect to substance use (other than tobacco), 
                diet, exercise, injury prevention, and dental health 
                counseling (as defined in section 1861(bbb))''.
    (d) Application of Limits on Billing.--Section 1842(b)(18)(C) of 
the Social Security Act (42 U.S.C. 1395u(b)(18)(C)) is amended by 
adding at the end the following new clause:
            ``(vii) Any health care professional designated under 
        section 1861(bbb)(2)(B) to perform substance use (other than 
        tobacco), diet, exercise, injury prevention, and dental health 
        counseling that is not otherwise described in this 
        subparagraph.''.
    (e) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173; 
117 Stat. 2066) and shall apply to services furnished on and after 
January 1, 2005.

SEC. 402. PREVENTIVE MENTAL HEALTH SCREENINGS.

    (a) Coverage.--
            (1) In general.--Section 1861(s)(2) of the Social Security 
        Act (42 U.S.C. 1395x(s)(2)), as amended by section 401(a)(1), 
        is amended--
                    (A) in subparagraph (Z), by striking ``and'' after 
                the semicolon at the end;
                    (B) in subparagraph (AA), by adding ``and'' after 
                the semicolon at the end; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(BB) screenings for clinical depression, anxiety, and 
        impaired cognitive functioning (as defined in subsection 
        (ccc)(1));''.
            (2) Conforming amendments.--Clauses (i) and (ii) of section 
        1861(s)(2)(K) of the Social Security Act (42 U.S.C. 
        1395x(s)(2)(K)), as amended by section 401(a)(2)(B), are each 
        amended by striking ``and (bbb)'' and inserting ``(bbb), and 
        (ccc)''.
    (b) Services Described.--Section 1861 of the Social Security Act 
(42 U.S.C. 1395x), as amended by section 401(b), is amended by adding 
at the end the following new subsection:

 ``Screenings for Clinical Depression, Anxiety, and Impaired Cognitive 
                              Functioning

    ``(ccc)(1) The term `screening for clinical depression, anxiety, 
and impaired cognitive functioning' means a consultation for the 
purpose of detecting clinical depression, anxiety, and impaired 
cognitive functioning during which a qualified health professional (as 
defined in paragraph (2))--
            ``(A) uses a screening on the list established or 
        identified under paragraph (3);
            ``(B) assesses the individual's risk of clinical 
        depression, anxiety, and impaired cognitive functioning; and
            ``(C) if the qualified health professional determines that 
        the individual is at high risk for clinical depression, 
        anxiety, or impaired cognitive functioning, refers the 
        individual for a full diagnostic evaluation and such additional 
        treatment as may be required.
Nothing in subparagraph (C) shall be construed as prohibiting a 
qualified health professional performing the screening for clinical 
depression, anxiety, and impaired cognitive functioning with respect to 
an individual from directly providing the diagnostic evaluation and 
additional treatment described in such clause to such individual if 
such professional is legally authorized to provide such an evaluation 
and additional treatment under State law (or the State regulatory 
mechanism provided by State law) of the State in which the screening is 
performed.
    ``(2) For purposes of this subsection, the term `qualified health 
professional' means an individual who--
            ``(A) is--
                    ``(i) a physician (as defined in subsection 
                (r)(1));
                    ``(ii) a nurse practitioner (as defined in 
                subsection (aa)(5)); or
                    ``(iii) a mental health care professional 
                (including clinical psychologists (as defined by the 
                Secretary for purposes of section 1861(ii)) and 
                clinical social workers (as defined in subsection 
                1861(hh))) that is licensed or certified to perform 
                mental health services by the State in which the 
                screenings are performed; and
            ``(B) has an agreement in effect with the Secretary to 
        accept--
                    ``(i) the amount determined under section 
                1833(a)(1)(W) as full payment for screenings for 
                clinical depression, anxiety, and impaired cognitive 
                functioning; and
                    ``(ii) an assignment described in section 
                1842(b)(3)(B)(ii) with respect to payment for each 
                screening furnished by the professional to an 
                individual enrolled under part B.
    ``(3) The Secretary shall, in consultation with mental health 
professionals and other stakeholders with experience in screening for 
clinical depression, anxiety, and impaired cognitive functioning, shall 
establish or identify a list of approved screenings to be used under 
this paragraph. The Secretary, in consultation with such professionals 
and stakeholders, shall review and update such list not less frequently 
than once every 5 years.''.
    (c) Payment and Elimination of Cost-Sharing.--
            (1) Payment and elimination of coinsurance.--Section 
        1833(a)(1) of the Social Security Act (42 U.S.C. 1395l(a)(1)), 
        as amended by section 401(c)(1), is amended--
                    (A) in subparagraph (N), by striking ``or substance 
                use (other than tobacco), diet, exercise, injury 
                prevention, and dental health counseling (as defined in 
                section 1861(bbb))'' and inserting ``substance use 
                (other than tobacco), diet, exercise, injury 
                prevention, and dental health counseling (as defined in 
                section 1861(bbb)), or screenings for clinical 
                depression, anxiety, and impaired cognitive functioning 
                (as defined in section 1861(ccc))''; and
                    (B) in subparagraph (W), by inserting ``and 
                screenings for clinical depression, anxiety, and 
                impaired cognitive functioning (as defined in section 
                1861(ccc))'' after ``(as defined in section 
                1861(bbb))''.
            (2) Payment under physician fee schedule.--Section 
        1848(j)(3) of the Social Security Act (42 U.S.C. 1395w-
        4(j)(3)), as amended by section 401(c)(2), is amended by 
        inserting ``(2)(BB),'' after ``(2)(AA),''.
            (3) Elimination of coinsurance in outpatient hospital 
        settings.--
                    (A) Exclusion from opd fee schedule.--Section 
                1833(t)(1)(B)(iv) of the Social Security Act (42 U.S.C. 
                1395l(t)(1)(B)(iv)), as amended by section 
                401(c)(3)(A), is amended by striking ``or substance use 
                (other than tobacco), diet, exercise, injury 
                prevention, and dental health counseling (as defined in 
                section 1861(bbb))'' and inserting ``substance use 
                (other than tobacco), diet, exercise, injury 
                prevention, and dental health counseling (as defined in 
                section 1861(bbb)), or screenings for clinical 
                depression, anxiety, and impaired cognitive functioning 
                (as defined in section 1861(ccc))''.
                    (B) Conforming amendment.--Section 1833(a)(2)(H) of 
                the Social Security Act (42 U.S.C. 1395l(a)(2)(H)), as 
                added by section 401(c)(3)(B)(iii), is amended by 
                inserting ``and screenings for clinical depression, 
                anxiety, and impaired cognitive functioning (as defined 
                in section 1861(ccc))'' after ``(as defined in section 
                1861(bbb))''.
            (4) Elimination of deductible.--Section 1833(b)(7) of the 
        Social Security Act (42 U.S.C. 1395l(b)(7)), as amended by 
        section 401(c)(4), is amended by inserting ``or screenings for 
        clinical depression, anxiety, and impaired cognitive 
        functioning (as defined in section 1861(ccc))'' before the 
        period at the end.
    (d) Application of Limits on Billing.--Section 1842(b)(18)(C) of 
the Social Security Act (42 U.S.C. 1395u(b)(18)(C)), as amended by 
section 401(d), is amended by adding at the end the following new 
clause:
            ``(viii) A mental health care professional described in 
        section 1861(ccc)(2) that is authorized to perform screenings 
        for clinical depression, anxiety, and impaired cognitive 
        functioning (as defined in section 1861(ccc)(1)) that is not 
        otherwise described in this subparagraph.''.
    (e) Frequency.--Section 1862(a)(1) of the Social Security Act (42 
U.S.C. 1395y(a)(1)), as amended by section 613(c) of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108-173; 117 Stat. 2306), is amended--
            (1) in subparagraph (L), by striking ``and'' after the 
        comma at the end;
            (2) in subparagraph (M), by striking the semicolon at the 
        end and inserting ``, and''; and
            (3) by adding at the end the following new subparagraph:
            ``(N) in the case of screenings for clinical depression, 
        anxiety, and impaired cognitive functioning (as defined in 
        section 1861(ccc)(1)), which is performed more frequently than 
        is covered under such section;''.
    (f) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173; 
117 Stat. 2066) and shall apply to services furnished on and after 
January 1, 2005.

SEC. 403. ENCOURAGEMENT OF CESSATION OF TOBACCO USE.

    (a) Medicare Coverage of Counseling and Pharmacotherapy for 
Cessation of Tobacco Use.--
            (1) Coverage.--
                    (A) In general.--Section 1861(s)(2) of the Social 
                Security Act (42 U.S.C. 1395x(s)(2)), as amended by 
                section 402(a)(1), is amended--
                            (i) in subparagraph (AA), by striking 
                        ``and'' after the semicolon at the end;
                            (ii) in subparagraph (BB), by adding 
                        ``and'' after the semicolon at the end; and
                            (iii) by adding at the end the following 
                        new subparagraph:
            ``(CC) counseling and pharmacotherapy for cessation of 
        tobacco use (as defined in subsection (ddd)(1));''.
                    (B) Conforming amendments.--Clauses (i) and (ii) of 
                section 1861(s)(2)(K) of the Social Security Act (42 
                U.S.C. 1395x(s)(2)(K)), as amended by section 
                402(a)(2), are each amended by striking ``and (ccc)'' 
                and inserting ``(ccc), and (ddd)''.
            (2) Services described.--Section 1861 of the Social 
        Security Act (42 U.S.C. 1395x), as amended by section 402(b), 
        is amended by adding at the end the following new subsection:

     ``Counseling and Pharmacotherapy for Cessation of Tobacco Use

    ``(ddd)(1) Subject to paragraphs (2) and (3), the term `counseling 
and pharmacotherapy for cessation of tobacco use' means diagnostic, 
therapy, and counseling services and pharmacotherapy (including the 
coverage of prescription and nonprescription tobacco cessation agents 
approved by the Food and Drug Administration) for cessation of tobacco 
use for individuals who use tobacco products or who are being treated 
for tobacco use which are furnished--
            ``(A) by or under the supervision of a physician; or
            ``(B) by any other health care professional who--
                    ``(i) is legally authorized to furnish such 
                services under State law (or the State regulatory 
                mechanism provided by State law) of the State in which 
                the services are furnished; and
                    ``(ii) is authorized to receive payment for other 
                services under this title or is designated by the 
                Secretary for this purpose.
    ``(2) Such term is limited to--
            ``(A) services recommended in `Treating Tobacco Use and 
        Dependence: A Clinical Practice Guideline', published by the 
        Public Health Service in June 2000, or any subsequent 
        modification of such Guideline; and
            ``(B) such other services that the Secretary recognizes to 
        be effective.
    ``(3) Each individual who is described in paragraph (1) and 
enrolled under part B shall be eligible for the services described in 
this subsection for up to 3 attempts to cease the use of tobacco.''.
            (3) Payment and elimination of cost-sharing.--
                    (A) Payment and elimination of coinsurance.--
                Section 1833(a)(1) of the Social Security Act (42 
                U.S.C. 1395l(a)(1)), as amended by section 402(c)(1), 
                is amended--
                            (i) in subparagraph (N) by striking ``or 
                        screenings for clinical depression, anxiety, 
                        and impaired cognitive functioning (as defined 
                        in section 1861(ccc))'' and inserting ``, 
                        screenings for clinical depression, anxiety, 
                        and impaired cognitive functioning (as defined 
                        in section 1861(ccc)), or counseling and 
                        pharmacotherapy for cessation of tobacco use 
                        (as defined in section 1861(ddd))''; and
                            (ii) in subparagraph (W), by striking ``and 
                        screenings for clinical depression, anxiety, 
                        and impaired cognitive functioning (as defined 
                        in section 1861(ccc))'' and inserting 
                        ``screenings for clinical depression, anxiety, 
                        and impaired cognitive functioning (as defined 
                        in section 1861(ccc)), and counseling and 
                        pharmacotherapy for cessation of tobacco use 
                        (as defined in section 1861(ddd))''.
                    (B) Payment under physician fee schedule.--Section 
                1848(j)(3) of the Social Security Act (42 U.S.C. 1395w-
                4(j)(3)), as amended by section 402(c)(2), is amended 
                by inserting ``(2)(CC) (with separate payment amounts 
                for pharmacotherapy, including prescription and 
                nonprescription tobacco cessation agents approved by 
                the Food and Drug Administration),'' after 
                ``(2)(BB),''.
                    (C) Elimination of coinsurance in outpatient 
                hospital settings.--
                            (i) Exclusion from opd fee schedule.--
                        Section 1833(t)(1)(B)(iv) of the Social 
                        Security Act (42 U.S.C. 1395l(t)(1)(B)(iv)), as 
                        amended by section 402(c)(3)(A), is amended by 
                        striking ``or screenings for clinical 
                        depression, anxiety, and impaired cognitive 
                        functioning (as defined in section 1861(ccc))'' 
                        and inserting ``screenings for clinical 
                        depression, anxiety, and impaired cognitive 
                        functioning (as defined in section 1861(ccc)), 
                        or counseling and pharmacotherapy for cessation 
                        of tobacco use (as defined in section 
                        1861(ddd))''.
                            (ii) Conforming amendment.--Section 
                        1833(a)(2)(H) of the Social Security Act (42 
                        U.S.C. 1395l(a)(2)(H)), as added by section 
                        402(c)(3)(B), is amended by striking ``and 
                        screenings for clinical depression, anxiety, 
                        and impaired cognitive functioning (as defined 
                        in section 1861(ccc))'' and inserting 
                        ``screenings for clinical depression, anxiety, 
                        and impaired cognitive functioning (as defined 
                        in section 1861(ccc)), and counseling and 
                        pharmacotherapy for cessation of tobacco use 
                        (as defined in section 1861(ddd))''.
                    (D) Elimination of deductible.--Section 1833(b)(7) 
                of the Social Security Act (42 U.S.C. 1395l(b)(7)), as 
                added by section 402(c)(4), is amended by striking ``or 
                screenings for clinical depression, anxiety, and 
                impaired cognitive functioning (as defined in section 
                1861(ccc))'' and inserting ``screenings for clinical 
                depression, anxiety, and impaired cognitive functioning 
                (as defined in section 1861(ccc)), or counseling and 
                pharmacotherapy for cessation of tobacco use (as 
                defined in section 1861(ddd))''.
            (4) Application of limits on billing.--Section 
        1842(b)(18)(C) of the Social Security Act (42 U.S.C. 
        1395u(b)(18)(C)), as amended by section 402(d), is amended by 
        adding at the end the following new clause:
            ``(ix) Any individual designated by the Secretary under 
        section 1861(ddd)(1)(B)(ii).''.
            (5) Frequency.--Section 1862(a)(1) of the Social Security 
        Act (42 U.S.C. 1395y(a)(1)), as amended by section 402(e), is 
        amended--
                    (A) in subparagraph (M), by striking ``and'' after 
                the comma at the end;
                    (B) in subparagraph (N), by striking the semicolon 
                at the end and inserting ``, and''; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(O) in the case of counseling and pharmacotherapy for 
        cessation of tobacco use (as defined in section 1861(ddd)), 
        which is performed with respect to more attempts to cease 
        tobacco use than is covered under such section;''.
    (b) Promoting Cessation of Tobacco Use Under the Medicaid 
Program.--
            (1) Dropping exception from medicaid prescription drug 
        coverage for tobacco cessation medications.--Section 1927(d)(2) 
        of the Social Security Act (42 U.S.C. 1396r-8(d)(2)) is 
        amended--
                    (A) by striking subparagraph (E);
                    (B) by redesignating subparagraphs (F) through (J) 
                as subparagraphs (E) through (I), respectively; and
                    (C) in subparagraph (F) (as redesignated by 
                paragraph (2)), by inserting before the period at the 
                end the following: ``, except agents approved by the 
                Food and Drug Administration for purposes of promoting, 
                and when used to promote, tobacco cessation''.
            (2) Requiring coverage of tobacco cessation counseling and 
        pharmacotherapy services for pregnant women.--Section 
        1905(a)(4) of the Social Security Act (42 U.S.C. 1396d(a)(4)) 
        is amended--
                    (A) by striking ``and'' before ``(C)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``; and (D) counseling and 
                pharmacotherapy for cessation of tobacco use (as 
                defined in section 1861(ddd)) for pregnant women''.
            (3) Removal of cost-sharing for tobacco cessation 
        counseling and pharmacotherapy services for pregnant women.--
        Section 1916 of the Social Security Act (42 U.S.C. 1396o) is 
        amended in each of subsections (a)(2)(B) and (b)(2)(B), by 
        inserting ``, and counseling for cessation of tobacco use (as 
        defined in section 1861(ddd))'' after ``complicate the 
        pregnancy''.
    (c) Coverage Under FEHBP.--The last sentence of section 8904(a) of 
title 5, United States Code, is amended by striking ``both for costs 
associated with care in a general hospital and for other health 
services of a catastrophic nature'' and inserting ``for costs 
associated with care in a general hospital, for other health services 
of a catastrophic nature, and for counseling and pharmacotherapy for 
cessation of tobacco use (as defined in section 1861(ddd)(1) of the 
Social Security Act)''.
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173; 
117 Stat. 2066) and shall apply to services furnished on and after 
January 1, 2005.

SEC. 404. PREVENTIVE HEALTH SERVICES FOR WOMEN.

    Section 1509 of the Public Health Service Act (42 U.S.C. 300n-4a) 
is amended to read as follows:

``SEC. 1509. ESTABLISHMENT OF PROGRAM FOR ADDITIONAL PREVENTIVE HEALTH 
              SERVICES.

    ``(a) In General.--The Secretary, acting through the Director of 
the Centers for Disease Control and Prevention, may, through a 
competitive review process, award grants to States that have received 
grants under section 1501 for a fiscal year, to enable such State to 
carry out programs--
            ``(1) to provide preventive health services, in addition to 
        the services authorized in such section 1501, for diseases such 
        as cardiovascular diseases, osteoporosis, and obesity;
            ``(2) to provide screenings, such as screening for blood 
        pressure, cholesterol, and osteoporosis, and other services 
        that the Secretary, acting through the Director of the Centers 
        for Disease Control and Prevention, determines to be 
        appropriate and feasible;
            ``(3) for health education, counseling, and interventions 
        for behavioral risk factors, such as physical inactivity and 
        poor nutrition, and diseases referred to in paragraph (1);
            ``(4) to provide appropriate referrals for medical 
        treatment of women receiving services pursuant to paragraph (1) 
        through (3), and ensuring, to the extent practicable, the 
        provision of appropriate follow-up services; and
            ``(5) to evaluate the activities conducted under paragraphs 
        (1) through (4) through appropriate surveillance, research, or 
        program monitoring activities.
    ``(b) Status as Participant in Program Regarding Breast and 
Cervical Cancer.--The Secretary may not make a grant to a State under 
subsection (a) unless the State involved agrees that services under the 
grant will be provided in conjunction with entities that are screening 
women for breast or cervical cancer pursuant to a grant under section 
1501.
    ``(c) Applicability of Provisions.--The provisions of this title 
shall apply to a grant under subsection (a) to the same extent and in 
the same manner as such provisions apply to a grant under section 1501.
    ``(d) Funding.--
            ``(1) In general.--There is authorized to be appropriated 
        such sums as may be necessary to carry out this section for 
        fiscal year 2004 and for each subsequent fiscal year.
            ``(2) Limitation regarding funding with respect to breast 
        and cervical cancer.--No additional resources shall be 
        appropriated for a fiscal year under paragraph (1) unless the 
        amount appropriated under section 1510(a) for such fiscal year 
        is at least $173,920,000.''.

  TITLE V--HELP (HEALTHY LIFESTYLES AND PREVENTION) AMERICA TRUST FUND

SEC. 501. HELP (HEALTHY LIFESTYLES AND PREVENTION) AMERICA 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 `HeLP (Healthy 
Lifestyles and Prevention) America Trust Fund' (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.
    (b) Transfers to Trust Fund.--There is hereby appropriated to the 
Trust Fund an amount equivalent to--
            (1) the increase in revenues received in the Treasury as 
        the result of the amendment made by section 304 of this Act,
            (2) the increase in revenues received in the Treasury as 
        the result of the amendments made by title VII of this Act, and
            (3) the receipts paid by tobacco companies under subtitle B 
        of title III of this Act.
    (c) Distribution of Amounts in Trust Fund.--
            (1) Mandatory expenditures.--On a fiscal year basis 
        (beginning with fiscal year 2005) and without further 
        appropriation the Secretary of the Treasury shall distribute 
        from amounts in the Trust Fund such amounts as are necessary to 
        provide for the Federal expenditures attributable to the 
        following:
                    (A) Smoking cessation drugs under title XIX of the 
                Social Security Act as identified by the Secretary of 
                Health and Human Services.
                    (B) Coverage of smoking cessation under the Federal 
                Employee Health Benefits Program under chapter 89 of 
                title 5, United States Code.
                    (C) The amendments made to the medicare program 
                under title XVIII of the Social Security Act by 
                sections 401 and 402 of this Act.
        Such amounts shall be in addition to any other amounts 
        appropriated for such purposes.
            (2) Discretionary expenditures.--Amounts in the Trust Fund 
        not to exceed $1,600,000,000 shall be available, as provided in 
        appropriation Acts, for each fiscal year (beginning with fiscal 
        year 2005) only for purposes of making expenditures to carry 
        out the following:
                    (A) Fruit and vegetable program under section 18(g) 
                of the Richard B. Russell National School Lunch Act.
                    (B) Healthy school and child care nutrition under 
                section 18(h) of the Richard B. Russell National School 
                Lunch Act.
                    (C) Mental health services in schools under 
                paragraphs (7) and (8) of section 5541(c) of the 
                Elementary and Secondary Education Act of 1965.
                    (D) Healthy workforce grants under part R of title 
                III of the Public Health Service Act.
                    (E) Community grants to prevent and reduce the 
                incidence of chronic disease under section 399P of the 
                Public Health Service Act.
                    (F) Living well with a disability and working well 
                with a disability programs under sections 399Q and 399R 
                of the Public Health Service Act.
                    (G) Complete streets incentive program under 
                section 133(g) of title 23, United States Code.
                    (H) Mental health surveillance measures under 
                section 506C of the Public Health Service Act.
                    (I) Federal-State tobacco counter-advertising 
                programs under section 399S of the Public Health 
                Service Act.
                    (J) Preventive health services for women, including 
                well-integrated screening and evaluation for women 
                across the Nation, under section 1509 of the Public 
                Health Service Act.
                    (K) Carol M. White Physical Education Program under 
                subpart 10 of part D of title V of the Elementary and 
                Secondary Education Act of 1965.
                    (L) Research regarding obesity under section 601 of 
                this Act.
                    (M) Expanded Food and Nutrition Education Program 
                under section 3175 of title 23, United States Code.
                    (N) The following programs under the authority of 
                the Secretary of Health and Human Services through the 
                Centers for Disease Control and Prevention:
                            (i) Nutrition and physical activity grants.
                            (ii) Coordinated school health.
                            (iii) Verb Campaign.
                            (iv) Prevention research centers.
                            (v) 5-a-day programs.
                            (vi) Steps to a healthier United States.
    (d) Application of Certain Rules.--For purposes of this section, 
rules similar to the rules of sections 9601 and 9602 of the Internal 
Revenue Code of 1986 shall apply.

                           TITLE VI--RESEARCH

SEC. 601. EXPANSION OF RESEARCH REGARDING OBESITY.

    The Secretary of Health and Human Services shall, based on the 
conclusions of the United States Preventive Services Task Force on 
Obesity, conduct research on obesity prevention, treatment, and control 
with regard to the following:
            (1) The effectiveness of physical activity and dietary 
        counseling with children and adolescents in the primary care 
        setting to prevent, treat, and control obesity.
            (2) The cost-effectiveness of intensive dietary and 
        physical activity counseling to prevent, treat, and control 
        obesity in a variety of populations.
            (3) The effectiveness of dietary and physical activity 
        counseling among children and adolescents, low income 
        populations, and minority groups in the primary care setting to 
prevent, treat, and control obesity.
            (4) The effectiveness of the assessment of obesity by a 
        primary care physician and subsequent referral for obesity 
        counseling to a nonaffiliated obesity expert or specialist.

         TITLE VII--PROVISIONS DESIGNED TO CURTAIL TAX SHELTERS

SEC. 700. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 701. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

    (a) In General.--Section 7701 is amended by redesignating 
subsection (n) as subsection (o) and by inserting after subsection (m) 
the following new subsection:
    ``(n) Clarification of Economic Substance Doctrine; Etc.--
            ``(1) General rules.--
                    ``(A) In general.--In any case in which a court 
                determines that the economic substance doctrine is 
                relevant for purposes of this title to a transaction 
                (or series of transactions), such transaction (or 
                series of transactions) shall have economic substance 
                only if the requirements of this paragraph are met.
                    ``(B) Definition of economic substance.--For 
                purposes of subparagraph (A)--
                            ``(i) In general.--A transaction has 
                        economic substance only if--
                                    ``(I) the transaction changes in a 
                                meaningful way (apart from Federal tax 
                                effects) the taxpayer's economic 
                                position, and
                                    ``(II) the taxpayer has a 
                                substantial nontax purpose for entering 
                                into such transaction and the 
                                transaction is a reasonable means of 
                                accomplishing such purpose.
                        In applying subclause (II), a purpose of 
                        achieving a financial accounting benefit shall 
                        not be taken into account in determining 
                        whether a transaction has a substantial nontax 
                        purpose if the origin of such financial 
                        accounting benefit is a reduction of income 
                        tax.
                            ``(ii) Special rule where taxpayer relies 
                        on profit potential.--A transaction shall not 
                        be treated as having economic substance by 
                        reason of having a potential for profit 
                        unless--
                                    ``(I) the present value of the 
                                reasonably expected pre-tax profit from 
                                the transaction is substantial in 
                                relation to the present value of the 
                                expected net tax benefits that would be 
                                allowed if the transaction were 
                                respected, and
                                    ``(II) the reasonably expected pre-
                                tax profit from the transaction exceeds 
                                a risk-free rate of return.
                    ``(C) Treatment of fees and foreign taxes.--Fees 
                and other transaction expenses and foreign taxes shall 
                be taken into account as expenses in determining pre-
                tax profit under subparagraph (B)(ii).
            ``(2) Special rules for transactions with tax-indifferent 
        parties.--
                    ``(A) Special rules for financing transactions.--
                The form of a transaction which is in substance the 
                borrowing of money or the acquisition of financial 
                capital directly or indirectly from a tax-indifferent 
                party shall not be respected if the present value of 
                the deductions to be claimed with respect to the 
                transaction is substantially in excess of the present 
                value of the anticipated economic returns of the person 
                lending the money or providing the financial capital. A 
                public offering shall be treated as a borrowing, or an 
                acquisition of financial capital, from a tax-
                indifferent party if it is reasonably expected that at 
                least 50 percent of the offering will be placed with 
                tax-indifferent parties.
                    ``(B) Artificial income shifting and basis 
                adjustments.--The form of a transaction with a tax-
                indifferent party shall not be respected if--
                            ``(i) it results in an allocation of income 
                        or gain to the tax-indifferent party in excess 
                        of such party's economic income or gain, or
                            ``(ii) it results in a basis adjustment or 
                        shifting of basis on account of overstating the 
                        income or gain of the tax-indifferent party.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Economic substance doctrine.--The term 
                `economic substance doctrine' means the common law 
                doctrine under which tax benefits under subtitle A with 
                respect to a transaction are not allowable if the 
                transaction does not have economic substance or lacks a 
                business purpose.
                    ``(B) Tax-indifferent party.--The term `tax-
                indifferent party' means any person or entity not 
                subject to tax imposed by subtitle A. A person shall be 
                treated as a tax-indifferent party with respect to a 
                transaction if the items taken into account with 
                respect to the transaction have no substantial impact 
                on such person's liability under subtitle A.
                    ``(C) Exception for personal transactions of 
                individuals.--In the case of an individual, this 
                subsection shall apply only to transactions entered 
                into in connection with a trade or business or an 
activity engaged in for the production of income.
                    ``(D) Treatment of lessors.--In applying paragraph 
                (1)(B)(ii) to the lessor of tangible property subject 
                to a lease, the expected net tax benefits with respect 
                to the leased property shall not be taken into account.
            ``(4) Other common law doctrines not affected.--Except as 
        specifically provided in this subsection, the provisions of 
        this subsection shall not be construed as altering or 
        supplanting any other rule of law, and the requirements of this 
        subsection shall be construed as being in addition to any such 
        other rule of law.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection. Such regulations may include 
        exemptions from the application of this subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 702. PENALTY FOR FAILING TO DISCLOSE REPORTABLE TRANSACTION.

    (a) In General.--Part I of subchapter B of chapter 68 (relating to 
assessable penalties) is amended by inserting after section 6707 the 
following new section:

``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE TRANSACTION 
              INFORMATION WITH RETURN OR STATEMENT.

    ``(a) Imposition of Penalty.--Any person who fails to include on 
any return or statement any information with respect to a reportable 
transaction which is required under section 6011 to be included with 
such return or statement shall pay a penalty in the amount determined 
under subsection (b).
    ``(b) Amount of Penalty.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), the amount of the penalty under subsection (a) shall be 
        $50,000.
            ``(2) Listed transaction.--The amount of the penalty under 
        subsection (a) with respect to a listed transaction shall be 
        $100,000.
            ``(3) Increase in penalty for large entities and high net 
        worth individuals.--
                    ``(A) In general.--In the case of a failure under 
                subsection (a) by--
                            ``(i) a large entity, or
                            ``(ii) a high net worth individual,
                the penalty under paragraph (1) or (2) shall be twice 
                the amount determined without regard to this paragraph.
                    ``(B) Large entity.--For purposes of subparagraph 
                (A), the term `large entity' means, with respect to any 
                taxable year, a person (other than a natural person) 
                with gross receipts in excess of $10,000,000 for the 
                taxable year in which the reportable transaction occurs 
                or the preceding taxable year. Rules similar to the 
                rules of paragraph (2) and subparagraphs (B), (C), and 
                (D) of paragraph (3) of section 448(c) shall apply for 
                purposes of this subparagraph.
                    ``(C) High net worth individual.--For purposes of 
                subparagraph (A), the term `high net worth individual' 
                means, with respect to a reportable transaction, a 
                natural person whose net worth exceeds $2,000,000 
                immediately before the transaction.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Reportable transaction.--The term `reportable 
        transaction' means any transaction with respect to which 
        information is required to be included with a return or 
        statement because, as determined under regulations prescribed 
        under section 6011, such transaction is of a type which the 
        Secretary determines as having a potential for tax avoidance or 
        evasion.
            ``(2) Listed transaction.--Except as provided in 
        regulations, the term `listed transaction' means a reportable 
        transaction which is the same as, or substantially similar to, 
        a transaction specifically identified by the Secretary as a tax 
        avoidance transaction for purposes of section 6011.
    ``(d) Authority To Rescind Penalty.--
            ``(1) In general.--The Commissioner of Internal Revenue may 
        rescind all or any portion of any penalty imposed by this 
        section with respect to any violation if--
                    ``(A) the violation is with respect to a reportable 
                transaction other than a listed transaction,
                    ``(B) the person on whom the penalty is imposed has 
                a history of complying with the requirements of this 
                title,
                    ``(C) it is shown that the violation is due to an 
                unintentional mistake of fact;
                    ``(D) imposing the penalty would be against equity 
                and good conscience, and
                    ``(E) rescinding the penalty would promote 
                compliance with the requirements of this title and 
                effective tax administration.
            ``(2) Discretion.--The exercise of authority under 
        paragraph (1) shall be at the sole discretion of the 
        Commissioner and may be delegated only to the head of the 
        Office of Tax Shelter Analysis. The Commissioner, in the 
        Commissioner's sole discretion, may establish a procedure to 
        determine if a penalty should be referred to the Commissioner 
        or the head of such Office for a determination under paragraph 
        (1).
            ``(3) No appeal.--Notwithstanding any other provision of 
        law, any determination under this subsection may not be 
        reviewed in any administrative or judicial proceeding.
            ``(4) Records.--If a penalty is rescinded under paragraph 
        (1), the Commissioner shall place in the file in the Office of 
        the Commissioner the opinion of the Commissioner or the head of 
        the Office of Tax Shelter Analysis with respect to the 
        determination, including--
                    ``(A) the facts and circumstances of the 
                transaction,
                    ``(B) the reasons for the rescission, and
                    ``(C) the amount of the penalty rescinded.
            ``(5) Report.--The Commissioner shall each year report to 
        the Committee on Ways and Means of the House of Representatives 
        and the Committee on Finance of the Senate--
                    ``(A) a summary of the total number and aggregate 
                amount of penalties imposed, and rescinded, under this 
                section, and
                    ``(B) a description of each penalty rescinded under 
                this subsection and the reasons therefor.
    ``(e) Penalty Reported to SEC.--In the case of a person--
            ``(1) which is required to file periodic reports under 
        section 13 or 15(d) of the Securities Exchange Act of 1934 or 
        is required to be consolidated with another person for purposes 
        of such reports, and
            ``(2) which--
                    ``(A) is required to pay a penalty under this 
                section with respect to a listed transaction,
                    ``(B) is required to pay a penalty under section 
                6662A with respect to any reportable transaction at a 
                rate prescribed under section 6662A(c), or
                    ``(C) is required to pay a penalty under section 
                6662B with respect to any noneconomic substance 
                transaction,
the requirement to pay such penalty shall be disclosed in such reports 
filed by such person for such periods as the Secretary shall specify. 
Failure to make a disclosure in accordance with the preceding sentence 
shall be treated as a failure to which the penalty under subsection 
(b)(2) applies.
    ``(f) Coordination With Other Penalties.--The penalty imposed by 
this section is in addition to any penalty imposed under this title.''.
    (b) Disclosure by Secretary.--
            (1) In general.--Section 6103 is amended by redesignating 
        subsection (q) as subsection (r) and by inserting after 
        subsection (p) the following new subsection:
    ``(q) Disclosure Relating to Payments of Certain Penalties.--
Notwithstanding any other provision of this section, the Secretary 
shall make public the name of any person required to pay a penalty 
described in section 6707A(e)(2) and the amount of the penalty.''.
            (2) Records.--Section 6103(p)(3)(A) is amended by striking 
        ``or (n)'' and inserting ``(n), or (q)''.
    (c) Conforming Amendment.--The table of sections for part I of 
subchapter B of chapter 68 is amended by inserting after the item 
relating to section 6707 the following:

                              ``Sec. 6707A. Penalty for failure to 
                                        include reportable transaction 
                                        information with return or 
                                        statement.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to returns and statements the due date for which is after the 
date of the enactment of this Act.

SEC. 703. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS AND OTHER 
              REPORTABLE TRANSACTIONS HAVING A SIGNIFICANT TAX 
              AVOIDANCE PURPOSE.

    (a) In General.--Subchapter A of chapter 68 is amended by inserting 
after section 6662 the following new section:

``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERSTATEMENTS 
              WITH RESPECT TO REPORTABLE TRANSACTIONS.

    ``(a) Imposition of Penalty.--If a taxpayer has a reportable 
transaction understatement for any taxable year, there shall be added 
to the tax an amount equal to 20 percent of the amount of such 
understatement.
    ``(b) Reportable Transaction Understatement.--For purposes of this 
section--
            ``(1) In general.--The term `reportable transaction 
        understatement' means the sum of--
                    ``(A) the product of--
                            ``(i) the amount of the increase (if any) 
                        in taxable income which results from a 
                        difference between the proper tax treatment of 
                        an item to which this section applies and the 
                        taxpayer's treatment of such item (as shown on 
                        the taxpayer's return of tax), and
                            ``(ii) the highest rate of tax imposed by 
                        section 1 (section 11 in the case of a taxpayer 
                        which is a corporation), and
                    ``(B) the amount of the decrease (if any) in the 
                aggregate amount of credits determined under subtitle A 
                which results from a difference between the taxpayer's 
                treatment of an item to which this section applies (as 
                shown on the taxpayer's return of tax) and the proper 
                tax treatment of such item.
        For purposes of subparagraph (A), any reduction of the excess 
        of deductions allowed for the taxable year over gross income 
        for such year, and any reduction in the amount of capital 
        losses which would (without regard to section 1211) be allowed 
        for such year, shall be treated as an increase in taxable 
        income.
            ``(2) Items to which section applies.--This section shall 
        apply to any item which is attributable to--
                    ``(A) any listed transaction, and
                    ``(B) any reportable transaction (other than a 
                listed transaction) if a significant purpose of such 
                transaction is the avoidance or evasion of Federal 
                income tax.
    ``(c) Higher Penalty for Nondisclosed Listed and Other Avoidance 
Transactions.--
            ``(1) In general.--Subsection (a) shall be applied by 
        substituting `30 percent' for `20 percent' with respect to the 
        portion of any reportable transaction understatement with 
        respect to which the requirement of section 6664(d)(2)(A) is 
        not met.
            ``(2) Rules applicable to assertion and compromise of 
        penalty.--
                    ``(A) In general.--Only upon the approval by the 
                Chief Counsel for the Internal Revenue Service or the 
                Chief Counsel's delegate at the national office of the 
                Internal Revenue Service may a penalty to which 
                paragraph (1) applies be included in a 1st letter of 
                proposed deficiency which allows the taxpayer an 
                opportunity for administrative review in the Internal 
                Revenue Service Office of Appeals. If such a letter is 
                provided to the taxpayer, only the Commissioner of 
                Internal Revenue may compromise all or any portion of 
                such penalty.
                    ``(B) Applicable rules.--The rules of paragraphs 
                (2), (3), (4), and (5) of section 6707A(d) shall apply 
                for purposes of subparagraph (A).
    ``(d) Definitions of Reportable and Listed Transactions.--For 
purposes of this section, the terms `reportable transaction' and 
`listed transaction' have the respective meanings given to such terms 
by section 6707A(c).
    ``(e) Special Rules.--
            ``(1) Coordination with penalties, etc., on other 
        understatements.--In the case of an understatement (as defined 
        in section 6662(d)(2))--
                    ``(A) the amount of such understatement (determined 
                without regard to this paragraph) shall be increased by 
                the aggregate amount of reportable transaction 
                understatements and noneconomic substance transaction 
                understatements for purposes of determining whether 
                such understatement is a substantial understatement 
                under section 6662(d)(1), and
                    ``(B) the addition to tax under section 6662(a) 
                shall apply only to the excess of the amount of the 
                substantial understatement (if any) after the 
                application of subparagraph (A) over the aggregate 
                amount of reportable transaction understatements and 
                noneconomic substance transaction understatements.
            ``(2) Coordination with other penalties.--
                    ``(A) Application of fraud penalty.--References to 
                an underpayment in section 6663 shall be treated as 
                including references to a reportable transaction 
                understatement and a noneconomic substance transaction 
                understatement.
                    ``(B) No double penalty.--This section shall not 
                apply to any portion of an understatement on which a 
                penalty is imposed under section 6662B or 6663.
            ``(3) Special rule for amended returns.--Except as provided 
        in regulations, in no event shall any tax treatment included 
        with an amendment or supplement to a return of tax be taken 
        into account in determining the amount of any reportable 
        transaction understatement or noneconomic substance transaction 
        understatement if the amendment or supplement is filed after 
        the earlier of the date the taxpayer is first contacted by the 
        Secretary regarding the examination of the return or such other 
        date as is specified by the Secretary.
            ``(4) Noneconomic substance transaction understatement.--
        For purposes of this subsection, the term `noneconomic 
        substance transaction understatement' has the meaning given 
        such term by section 6662B(c).
            ``(5) Cross reference.--

                                ``For reporting of section 6662A(c) 
penalty to the Securities and Exchange Commission, see section 
6707A(e).''.
    (b) Determination of Other Understatements.--Subparagraph (A) of 
section 6662(d)(2) is amended by adding at the end the following flush 
sentence:
                ``The excess under the preceding sentence shall be 
                determined without regard to items to which section 
                6662A applies and without regard to items with respect 
                to which a penalty is imposed by section 6662B.''.
    (c) Reasonable Cause Exception.--
            (1) In general.--Section 6664 is amended by adding at the 
        end the following new subsection:
    ``(d) Reasonable Cause Exception for Reportable Transaction 
Understatements.--
            ``(1) In general.--No penalty shall be imposed under 
        section 6662A with respect to any portion of a reportable 
        transaction understatement if it is shown that there was a 
        reasonable cause for such portion and that the taxpayer acted 
        in good faith with respect to such portion.
            ``(2) Special rules.--Paragraph (1) shall not apply to any 
        reportable transaction understatement unless--
                    ``(A) the relevant facts affecting the tax 
                treatment of the item are adequately disclosed in 
                accordance with the regulations prescribed under 
                section 6011,
                    ``(B) there is or was substantial authority for 
                such treatment, and
                    ``(C) the taxpayer reasonably believed that such 
                treatment was more likely than not the proper 
                treatment.
        A taxpayer failing to adequately disclose in accordance with 
        section 6011 shall be treated as meeting the requirements of 
        subparagraph (A) if the penalty for such failure was rescinded 
        under section 6707A(d).
            ``(3) Rules relating to reasonable belief.--For purposes of 
        paragraph (2)(C)--
                    ``(A) In general.--A taxpayer shall be treated as 
                having a reasonable belief with respect to the tax 
                treatment of an item only if such belief--
                            ``(i) is based on the facts and law that 
                        exist at the time the return of tax which 
                        includes such tax treatment is filed, and
                            ``(ii) relates solely to the taxpayer's 
                        chances of success on the merits of such 
                        treatment and does not take into account the 
                        possibility that a return will not be audited, 
                        such treatment will not be raised on audit, or 
such treatment will be resolved through settlement if it is raised.
                    ``(B) Certain opinions may not be relied upon.--
                            ``(i) In general.--An opinion of a tax 
                        advisor may not be relied upon to establish the 
                        reasonable belief of a taxpayer if--
                                    ``(I) the tax advisor is described 
                                in clause (ii), or
                                    ``(II) the opinion is described in 
                                clause (iii).
                            ``(ii) Disqualified tax advisors.--A tax 
                        advisor is described in this clause if the tax 
                        advisor--
                                    ``(I) is a material advisor (within 
                                the meaning of section 6111(b)(1)) who 
                                participates in the organization, 
                                management, promotion, or sale of the 
                                transaction or who is related (within 
                                the meaning of section 267(b) or 
                                707(b)(1)) to any person who so 
                                participates,
                                    ``(II) is compensated directly or 
                                indirectly by a material advisor with 
                                respect to the transaction,
                                    ``(III) has a fee arrangement with 
                                respect to the transaction which is 
                                contingent on all or part of the 
                                intended tax benefits from the 
                                transaction being sustained,
                                    ``(IV) has an arrangement with 
                                respect to the transaction which 
                                provides that contractual disputes 
                                between the taxpayer and the advisor 
                                are to be settled by arbitration or 
                                which limits damages by reference to 
                                fees paid to the advisor for such 
                                transaction, or
                                    ``(V) as determined under 
                                regulations prescribed by the 
                                Secretary, has a disqualifying 
                                financial interest with respect to the 
                                transaction.
                            ``(iii) Disqualified opinions.--For 
                        purposes of clause (i), an opinion is 
                        disqualified if the opinion--
                                    ``(I) is based on unreasonable 
                                factual or legal assumptions (including 
                                assumptions as to future events),
                                    ``(II) unreasonably relies on 
                                representations, statements, findings, 
                                or agreements of the taxpayer or any 
                                other person,
                                    ``(III) does not identify and 
                                consider all relevant facts,
                                    ``(IV) is not signed by all 
                                individuals who are principal authors 
                                of the opinion, or
                                    ``(V) fails to meet any other 
                                requirement as the Secretary may 
                                prescribe.''.
            (2) Conforming amendment.--The heading for subsection (c) 
        of section 6664 is amended by inserting ``for Underpayments'' 
        after ``Exception''.
    (d) Conforming Amendments.--
            (1) Subparagraph (C) of section 461(i)(3) is amended by 
        striking ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
        1274(b)(3)(C)''.
            (2) Paragraph (3) of section 1274(b) is amended--
                    (A) by striking ``(as defined in section 
                6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Tax shelter.--For purposes of subparagraph 
                (B), the term `tax shelter' means--
                            ``(i) a partnership or other entity,
                            ``(ii) any investment plan or arrangement, 
                        or
                            ``(iii) any other plan or arrangement,
                if a significant purpose of such partnership, entity, 
                plan, or arrangement is the avoidance or evasion of 
                Federal income tax.''.
            (3) Section 6662(d)(2) is amended by striking subparagraphs 
        (C) and (D).
            (4) Section 6664(c)(1) is amended by striking ``this part'' 
        and inserting ``section 6662 or 6663''.
            (5) Subsection (b) of section 7525 is amended by striking 
        ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
        1274(b)(3)(C)''.
            (6)(A) The heading for section 6662 is amended to read as 
        follows:

``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
              UNDERPAYMENTS.''.

            (B) The table of sections for part II of subchapter A of 
        chapter 68 is amended by striking the item relating to section 
        6662 and inserting the following new items:

                              ``Sec. 6662. Imposition of accuracy-
                                        related penalty on 
                                        underpayments.
                              ``Sec. 6662A. Imposition of accuracy-
                                        related penalty on 
                                        understatements with respect to 
                                        reportable transactions.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 704. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    (a) In General.--Subchapter A of chapter 68 is amended by inserting 
after section 6662A the following new section:

``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    ``(a) Imposition of Penalty.--If a taxpayer has an noneconomic 
substance transaction understatement for any taxable year, there shall 
be added to the tax an amount equal to 40 percent of the amount of such 
understatement.
    ``(b) Reduction of Penalty for Disclosed Transactions.--Subsection 
(a) shall be applied by substituting `20 percent' for `40 percent' with 
respect to the portion of any noneconomic substance transaction 
understatement with respect to which the relevant facts affecting the 
tax treatment of the item are adequately disclosed in the return or a 
statement attached to the return.
    ``(c) Noneconomic Substance Transaction Understatement.--For 
purposes of this section--
            ``(1) In general.--The term `noneconomic substance 
        transaction understatement' means any amount which would be an 
        understatement under section 6662A(b)(1) if section 6662A were 
        applied by taking into account items attributable to 
        noneconomic substance transactions rather than items to which 
        section 6662A would apply without regard to this paragraph.
            ``(2) Noneconomic substance transaction.--The term 
        `noneconomic substance transaction' means any transaction if--
                    ``(A) there is a lack of economic substance (within 
                the meaning of section 7701(n)(1)) for the transaction 
                giving rise to the claimed benefit or the transaction 
                was not respected under section 7701(n)(2), or
                    ``(B) the transaction fails to meet the 
                requirements of any similar rule of law.
    ``(d) Rules Applicable To Compromise of Penalty.--
            ``(1) In general.--If the 1st letter of proposed deficiency 
        which allows the taxpayer an opportunity for administrative 
        review in the Internal Revenue Service Office of Appeals has 
        been sent with respect to a penalty to which this section 
        applies, only the Commissioner of Internal Revenue may 
        compromise all or any portion of such penalty.
            ``(2) Applicable rules.--The rules of paragraphs (2), (3), 
        (4), and (5) of section 6707A(d) shall apply for purposes of 
        paragraph (1).
    ``(e) Coordination With Other Penalties.--Except as otherwise 
provided in this part, the penalty imposed by this section shall be in 
addition to any other penalty imposed by this title.
    ``(f) Cross References.--

                                ``(1) For coordination of penalty with 
understatements under section 6662 and other special rules, see section 
6662A(e).
                                ``(2) For reporting of penalty imposed 
under this section to the Securities and Exchange Commission, see 
section 6707A(e).''.
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter A of chapter 68 is amended by inserting after the item 
relating to section 6662A the following new item:

                              ``Sec. 6662B. Penalty for understatements 
                                        attributable to transactions 
                                        lacking economic substance, 
                                        etc.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 705. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY FOR 
              NONREPORTABLE TRANSACTIONS.

    (a) Substantial Understatement of Corporations.--Section 
6662(d)(1)(B) (relating to special rule for corporations) is amended to 
read as follows:
                    ``(B) Special rule for corporations.--In the case 
                of a corporation other than an S corporation or a 
                personal holding company (as defined in section 542), 
                there is a substantial understatement of income tax for 
                any taxable year if the amount of the understatement 
                for the taxable year exceeds the lesser of--
                            ``(i) 10 percent of the tax required to be 
                        shown on the return for the taxable year (or, 
                        if greater, $10,000), or
                            ``(ii) $10,000,000.''.
    (b) Reduction for Understatement of Taxpayer Due to Position of 
Taxpayer or Disclosed Item.--
            (1) In general.--Section 6662(d)(2)(B)(i) (relating to 
        substantial authority) is amended to read as follows:
                            ``(i) the tax treatment of any item by the 
                        taxpayer if the taxpayer had reasonable belief 
                        that the tax treatment was more likely than not 
                        the proper treatment, or''.
            (2) Conforming amendment.--Section 6662(d) is amended by 
        adding at the end the following new paragraph:
            ``(3) Secretarial list.--For purposes of this subsection, 
        section 6664(d)(2), and section 6694(a)(1), the Secretary may 
        prescribe a list of positions for which the Secretary believes 
        there is not substantial authority or there is no reasonable 
        belief that the tax treatment is more likely than not the 
        proper tax treatment. Such list (and any revisions thereof) 
        shall be published in the Federal Register or the Internal 
        Revenue Bulletin.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 706. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES RELATING 
              TO TAXPAYER COMMUNICATIONS.

    (a) In General.--Section 7525(b) (relating to section not to apply 
to communications regarding corporate tax shelters) is amended to read 
as follows:
    ``(b) Section Not To Apply to Communications Regarding Tax 
Shelters.--The privilege under subsection (a) shall not apply to any 
written communication which is--
            ``(1) between a federally authorized tax practitioner and--
                    ``(A) any person,
                    ``(B) any director, officer, employee, agent, or 
                representative of the person, or
                    ``(C) any other person holding a capital or profits 
                interest in the person, and
            ``(2) in connection with the promotion of the direct or 
        indirect participation of the person in any tax shelter (as 
        defined in section 1274(b)(3)(C)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to communications made on or after the date of the enactment of this 
Act.

SEC. 707. DISCLOSURE OF REPORTABLE TRANSACTIONS.

    (a) In General.--Section 6111 (relating to registration of tax 
shelters) is amended to read as follows:

``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

    ``(a) In General.--Each material advisor with respect to any 
reportable transaction shall make a return (in such form as the 
Secretary may prescribe) setting forth--
            ``(1) information identifying and describing the 
        transaction,
            ``(2) information describing any potential tax benefits 
        expected to result from the transaction, and
            ``(3) such other information as the Secretary may 
        prescribe.
Such return shall be filed not later than the date specified by the 
Secretary.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Material advisor.--
                    ``(A) In general.--The term `material advisor' 
                means any person--
                            ``(i) who provides any material aid, 
                        assistance, or advice with respect to 
                        organizing, managing, promoting, selling, 
                        implementing, insuring, or carrying out any 
                        reportable transaction, and
                            ``(ii) who directly or indirectly derives 
                        gross income in excess of the threshold amount 
                        for such aid, assistance, or advice.
                    ``(B) Threshold amount.--For purposes of 
                subparagraph (A), the threshold amount is--
                            ``(i) $50,000 in the case of a reportable 
                        transaction substantially all of the tax 
                        benefits from which are provided to natural 
                        persons, and
                            ``(ii) $250,000 in any other case.
            ``(2) Reportable transaction.--The term `reportable 
        transaction' has the meaning given to such term by section 
        6707A(c).
    ``(c) Regulations.--The Secretary may prescribe regulations which 
provide--
            ``(1) that only 1 person shall be required to meet the 
        requirements of subsection (a) in cases in which 2 or more 
        persons would otherwise be required to meet such requirements,
            ``(2) exemptions from the requirements of this section, and
            ``(3) such rules as may be necessary or appropriate to 
        carry out the purposes of this section.''.
    (b) Conforming Amendments.--
            (1) The item relating to section 6111 in the table of 
        sections for subchapter B of chapter 61 is amended to read as 
        follows:

                              ``Sec. 6111. Disclosure of reportable 
                                        transactions.''.
            (2)(A) So much of section 6112 as precedes subsection (c) 
        thereof is amended to read as follows:

``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS MUST KEEP 
              LISTS OF ADVISEES.

    ``(a) In General.--Each material advisor (as defined in section 
6111) with respect to any reportable transaction (as defined in section 
6707A(c)) shall maintain, in such manner as the Secretary may by 
regulations prescribe, a list--
            ``(1) identifying each person with respect to whom such 
        advisor acted as such a material advisor with respect to such 
        transaction, and
            ``(2) containing such other information as the Secretary 
        may by regulations require.
This section shall apply without regard to whether a material advisor 
is required to file a return under section 6111 with respect to such 
transaction.''.
            (B) Section 6112 is amended by redesignating subsection (c) 
        as subsection (b).
            (C) Section 6112(b), as redesignated by subparagraph (B), 
        is amended--
                    (i) by inserting ``written'' before ``request'' in 
                paragraph (1)(A), and
                    (ii) by striking ``shall prescribe'' in paragraph 
                (2) and inserting ``may prescribe''.
            (D) The item relating to section 6112 in the table of 
        sections for subchapter B of chapter 61 is amended to read as 
        follows:

                              ``Sec. 6112. Material advisors of 
                                        reportable transactions must 
                                        keep lists of advisees.''.
            (3)(A) The heading for section 6708 is amended to read as 
        follows:

``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH RESPECT TO 
              REPORTABLE TRANSACTIONS.''.

            (B) The item relating to section 6708 in the table of 
        sections for part I of subchapter B of chapter 68 is amended to 
        read as follows:

                              ``Sec. 6708. Failure to maintain lists of 
                                        advisees with respect to 
                                        reportable transactions.''.
    (c) Required Disclosure Not Subject to Claim of Confidentiality.--
Subparagraph (A) of section 6112(b)(1), as redesignated by subsection 
(b)(2)(B), is amended by adding at the end the following new flush 
sentence:
        ``For purposes of this section, the identity of any person on 
        such list shall not be privileged.''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to transactions 
        with respect to which material aid, assistance, or advice 
        referred to in section 6111(b)(1)(A)(i) of the Internal Revenue 
        Code of 1986 (as added by this section) is provided after the 
        date of the enactment of this Act.
            (2) No claim of confidentiality against disclosure.--The 
        amendment made by subsection (c) shall take effect as if 
        included in the amendments made by section 142 of the Deficit 
        Reduction Act of 1984.

SEC. 708. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER TAX 
              SHELTERS.

    (a) In General.--Section 6707 (relating to failure to furnish 
information regarding tax shelters) is amended to read as follows:

``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING REPORTABLE 
              TRANSACTIONS.

    ``(a) In General.--If a person who is required to file a return 
under section 6111(a) with respect to any reportable transaction--
            ``(1) fails to file such return on or before the date 
        prescribed therefor, or
            ``(2) files false or incomplete information with the 
        Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return in the 
amount determined under subsection (b).
    ``(b) Amount of Penalty.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        penalty imposed under subsection (a) with respect to any 
        failure shall be $50,000.
            ``(2) Listed transactions.--The penalty imposed under 
        subsection (a) with respect to any listed transaction shall be 
        an amount equal to the greater of--
                    ``(A) $200,000, or
                    ``(B) 50 percent of the gross income derived by 
                such person with respect to aid, assistance, or advice 
                which is provided with respect to the listed 
                transaction before the date the return including the 
                transaction is filed under section 6111.
        Subparagraph (B) shall be applied by substituting `75 percent' 
        for `50 percent' in the case of an intentional failure or act 
        described in subsection (a).
    ``(c) Certain Rules To Apply.--The provisions of section 6707A(d) 
shall apply to any penalty imposed under this section.
    ``(d) Reportable and Listed Transactions.--The terms `reportable 
transaction' and `listed transaction' have the respective meanings 
given to such terms by section 6707A(c).''.
    (b) Clerical Amendment.--The item relating to section 6707 in the 
table of sections for part I of subchapter B of chapter 68 is amended 
by striking ``tax shelters'' and inserting ``reportable transactions''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns the due date for which is after the date of the 
enactment of this Act.

SEC. 709. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN LISTS OF 
              INVESTORS.

    (a) In General.--Subsection (a) of section 6708 is amended to read 
as follows:
    ``(a) Imposition of Penalty.--
            ``(1) In general.--If any person who is required to 
        maintain a list under section 6112(a) fails to make such list 
        available upon written request to the Secretary in accordance 
        with section 6112(b)(1)(A) within 20 business days after the 
        date of the Secretary's request, such person shall pay a 
        penalty of $10,000 for each day of such failure after such 20th 
        day.
            ``(2) Reasonable cause exception.--No penalty shall be 
        imposed by paragraph (1) with respect to the failure on any day 
        if such failure is due to reasonable cause.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to requests made after the date of the enactment of this Act.

SEC. 710. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT RELATED TO 
              TAX SHELTERS AND REPORTABLE TRANSACTIONS.

    (a) In General.--Section 7408 (relating to action to enjoin 
promoters of abusive tax shelters, etc.) is amended by redesignating 
subsection (c) as subsection (d) and by striking subsections (a) and 
(b) and inserting the following new subsections:
    ``(a) Authority To Seek Injunction.--A civil action in the name of 
the United States to enjoin any person from further engaging in 
specified conduct may be commenced at the request of the Secretary. Any 
action under this section shall be brought in the district court of the 
United States for the district in which such person resides, has his 
principal place of business, or has engaged in specified conduct. The 
court may exercise its jurisdiction over such action (as provided in 
section 7402(a)) separate and apart from any other action brought by 
the United States against such person.
    ``(b) Adjudication and Decree.--In any action under subsection (a), 
if the court finds--
            ``(1) that the person has engaged in any specified conduct, 
        and
            ``(2) that injunctive relief is appropriate to prevent 
        recurrence of such conduct,
the court may enjoin such person from engaging in such conduct or in 
any other activity subject to penalty under this title.
    ``(c) Specified Conduct.--For purposes of this section, the term 
`specified conduct' means any action, or failure to take action, which 
is--
            ``(1) subject to penalty under section 6700, 6701, 6707, or 
        6708, or
            ``(2) in violation of any requirement under regulations 
        issued under section 320 of title 31, United States Code.''.
    (b) Conforming Amendments.--
            (1) The heading for section 7408 is amended to read as 
        follows:

``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO TAX 
              SHELTERS AND REPORTABLE TRANSACTIONS.''.

            (2) The table of sections for subchapter A of chapter 67 is 
        amended by striking the item relating to section 7408 and 
        inserting the following new item:

        ``Sec. 7408. Actions to enjoin specified conduct related to tax 
                            shelters and reportable transactions.''.
    (c) Effective Date.--The amendment made by this section shall take 
effect on the day after the date of the enactment of this Act.

SEC. 711. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.

    (a) Penalty for Promoting Abusive Tax Shelters.--Section 6700 
(relating to promoting abusive tax shelters, etc.) is amended--
            (1) by redesignating subsections (b) and (c) as subsections 
        (d) and (e), respectively,
            (2) by striking ``a penalty'' and all that follows through 
        the period in the first sentence of subsection (a) and 
        inserting ``a penalty determined under subsection (b)'', and
            (3) by inserting after subsection (a) the following new 
        subsections:
    ``(b) Amount of Penalty; Calculation of Penalty; Liability for 
Penalty.--
            ``(1) Amount of penalty.--The amount of the penalty imposed 
        by subsection (a) shall not exceed 100 percent of the gross 
        income derived (or to be derived) from such activity by the 
        person or persons subject to such penalty.
            ``(2) Calculation of penalty.--The penalty amount 
        determined under paragraph (1) shall be calculated with respect 
        to each instance of an activity described in subsection (a), 
        each instance in which income was derived by the person or 
        persons subject to such penalty, and each person who 
        participated in such an activity.
            ``(3) Liability for penalty.--If more than 1 person is 
        liable under subsection (a) with respect to such activity, all 
        such persons shall be jointly and severally liable for the 
        penalty under such subsection.
    ``(c) Penalty Not Deductible.--The payment of any penalty imposed 
under this section or the payment of any amount to settle or avoid the 
imposition of such penalty shall not be deductible by the person who is 
subject to such penalty or who makes such payment.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to activities after the date of the enactment of this Act.

SEC. 712. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH REQUIRED 
              LISTED TRANSACTIONS NOT REPORTED.

    (a) In General.--Section 6501(c) (relating to exceptions) is 
amended by adding at the end the following new paragraph:
            ``(10) Listed transactions.--If a taxpayer fails to include 
        on any return or statement for any taxable year any information 
        with respect to a listed transaction (as defined in section 
        6707A(c)(2)) which is required under section 6011 to be 
        included with such return or statement, the time for assessment 
        of any tax imposed by this title with respect to such 
        transaction shall not expire before the date which is 1 year 
        after the earlier of--
                    ``(A) the date on which the Secretary is furnished 
                the information so required; or
                    ``(B) the date that a material advisor (as defined 
                in section 6111) meets the requirements of section 6112 
                with respect to a request by the Secretary under 
                section 6112(b) relating to such transaction with 
                respect to such taxpayer.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years with respect to which the period for assessing a 
deficiency did not expire before the date of the enactment of this Act.

SEC. 713. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
              ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND NONECONOMIC 
              SUBSTANCE TRANSACTIONS.

    (a) In General.--Section 163 (relating to deduction for interest) 
is amended by redesignating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following new subsection:
    ``(m) Interest on Unpaid Taxes Attributable To Nondisclosed 
Reportable Transactions and Noneconomic Substance Transactions.--No 
deduction shall be allowed under this chapter for any interest paid or 
accrued under section 6601 on any underpayment of tax which is 
attributable to--
            ``(1) the portion of any reportable transaction 
        understatement (as defined in section 6662A(b)) with respect to 
        which the requirement of section 6664(d)(2)(A) is not met, or
            ``(2) any noneconomic substance transaction understatement 
        (as defined in section 6662B(c)).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions in taxable years beginning after the date of the 
enactment of this Act.

SEC. 714. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT OF TAX 
              LIABILITY.

    (a) In General.--Section 6701(a) (relating to imposition of 
penalty) is amended--
            (1) by inserting ``the tax liability or'' after ``respect 
        to,'' in paragraph (1),
            (2) by inserting ``aid, assistance, procurement, or advice 
        with respect to such'' before ``portion'' both places it 
        appears in paragraphs (2) and (3), and
            (3) by inserting ``instance of aid, assistance, 
        procurement, or advice or each such'' before ``document'' in 
        the matter following paragraph (3).
    (b) Amount of Penalty.--Subsection (b) of section 6701 (relating to 
penalties for aiding and abetting understatement of tax liability) is 
amended to read as follows:
    ``(b) Amount of Penalty; Calculation of Penalty; Liability for 
Penalty.--
            ``(1) Amount of penalty.--The amount of the penalty imposed 
        by subsection (a) shall not exceed 100 percent of the gross 
        income derived (or to be derived) from such aid, assistance, 
        procurement, or advice provided by the person or persons 
        subject to such penalty.
            ``(2) Calculation of penalty.--The penalty amount 
        determined under paragraph (1) shall be calculated with respect 
        to each instance of aid, assistance, procurement, or advice 
        described in subsection (a), each instance in which income was 
        derived by the person or persons subject to such penalty, and 
        each person who made such an understatement of the liability 
        for tax.
            ``(3) Liability for penalty.--If more than 1 person is 
        liable under subsection (a) with respect to providing such aid, 
        assistance, procurement, or advice, all such persons shall be 
        jointly and severally liable for the penalty under such 
        subsection.''.
    (c) Penalty Not Deductible.--Section 6701 is amended by adding at 
the end the following new subsection:
    ``(g) Penalty Not Deductible.--The payment of any penalty imposed 
under this section or the payment of any amount to settle or avoid the 
imposition of such penalty shall not be deductible by the person who is 
subject to such penalty or who makes such payment.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to activities after the date of the enactment of this Act.
                                 <all>