[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2929 Introduced in Senate (IS)]

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118th CONGRESS
  1st Session
                                S. 2929

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

           September 26 (legislative day, September 22), 2023

 Mr. Durbin (for himself, Mr. Wyden, Mr. Blumenthal, Mr. Merkley, Mr. 
 Brown, Mr. Markey, Ms. Hirono, Mrs. Murray, and Mr. Reed) introduced 
the following bill; which was read twice and referred to the Committee 
                               on Finance

_______________________________________________________________________

                                 A BILL


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

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tobacco Tax Equity Act of 2023''.

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

    (a) Tax Parity for Roll-Your-Own Tobacco.--Section 5701(g) of the 
Internal Revenue Code of 1986 is amended by striking ``$24.78'' and 
inserting ``$49.56''.
    (b) Tax Parity for Pipe Tobacco.--Section 5701(f) of the Internal 
Revenue Code of 1986 is amended by striking ``$2.8311 cents'' and 
inserting ``$49.56''.
    (c) Tax Parity for Smokeless Tobacco.--
            (1) Section 5701(e) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) in paragraph (1), by striking ``$1.51'' and 
                inserting ``$26.84'';
                    (B) in paragraph (2), by striking ``50.33 cents'' 
                and inserting ``$10.74''; and
                    (C) by adding at the end the following:
            ``(3) Smokeless tobacco sold in discrete single-use 
        units.--On discrete single-use units, $100.66 per thousand.''.
            (2) Section 5702(m) of such Code is amended--
                    (A) in paragraph (1), by striking ``or chewing 
                tobacco'' and inserting ``, chewing tobacco, or 
                discrete single-use unit'';
                    (B) in paragraphs (2) and (3), by inserting ``that 
                is not a discrete single-use unit'' before the period 
                in each such paragraph; and
                    (C) by adding at the end the following:
            ``(4) Discrete single-use unit.--The term `discrete single-
        use unit' means any product containing, made from, or derived 
        from tobacco or nicotine that--
                    ``(A) is not intended to be smoked; and
                    ``(B) is in the form of a lozenge, tablet, pill, 
                pouch, dissolvable strip, or other discrete single-use 
                or single-dose unit.''.
    (d) Tax Parity for Small Cigars.--Paragraph (1) of section 5701(a) 
of the Internal Revenue Code of 1986 is amended by striking ``$50.33'' 
and inserting ``$100.66''.
    (e) Tax Parity for Large Cigars.--
            (1) In general.--Paragraph (2) of section 5701(a) of the 
        Internal Revenue Code of 1986 is amended by striking ``52.75 
        percent'' and all that follows through the period and inserting 
        the following: ``$49.56 per pound and a proportionate tax at 
        the like rate on all fractional parts of a pound but not less 
        than 10.066 cents per cigar.''.
            (2) Guidance.--The Secretary of the Treasury, or the 
        Secretary's delegate, may issue guidance regarding the 
        appropriate method for determining the weight of large cigars 
        for purposes of calculating the applicable tax under section 
        5701(a)(2) of the Internal Revenue Code of 1986.
            (3) Conforming amendment.--Section 5702 of such Code is 
        amended by striking subsection (l).
    (f) Tax Parity for Roll-Your-Own Tobacco and Certain Processed 
Tobacco.--Subsection (o) of section 5702 of the Internal Revenue Code 
of 1986 is amended by inserting ``, and includes processed tobacco that 
is removed for delivery or delivered to a person other than a person 
with a permit provided under section 5713, but does not include 
removals of processed tobacco for exportation'' after ``wrappers 
thereof''.
    (g) Imposition of Tax on Nicotine for Use in Vaping, etc.--
            (1) In general.--Section 5701 of the Internal Revenue Code 
        of 1986 is amended by redesignating subsection (h) as 
        subsection (i) and by inserting after subsection (g) the 
        following new subsection:
    ``(h) Nicotine.--On taxable nicotine, manufactured in or imported 
into the United States, there shall be imposed a tax equal to the 
dollar amount specified in section 5701(b)(1) per 1,810 milligrams of 
nicotine (and a proportionate tax at the like rate on any fractional 
part thereof).''.
            (2) Taxable nicotine.--Section 5702 of such Code is amended 
        by adding at the end the following new subsection:
    ``(q) Taxable Nicotine.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `taxable nicotine' means any nicotine 
        which has been extracted, concentrated, or synthesized.
            ``(2) Exception for products approved by food and drug 
        administration.--Such term shall not include any nicotine if 
        the manufacturer or importer thereof demonstrates to the 
        satisfaction of the Secretary of Health and Human Services that 
        such nicotine will be used in--
                    ``(A) a drug--
                            ``(i) that is approved under section 505 of 
                        the Federal Food, Drug, and Cosmetic Act or 
                        licensed under section 351 of the Public Health 
                        Service Act; or
                            ``(ii) for which an investigational use 
                        exemption has been authorized under section 
                        505(i) of the Federal Food, Drug, and Cosmetic 
                        Act or under section 351(a) of the Public 
                        Health Service Act; or
                    ``(B) a combination product (as described in 
                section 503(g) of the Federal Food, Drug, and Cosmetic 
                Act), the constituent parts of which were approved or 
                cleared under section 505, 510(k), or 515 of such Act.
            ``(3) Coordination with taxation of other tobacco 
        products.--Tobacco products meeting the definition of cigars, 
        cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own 
        tobacco in this section shall be classified and taxed as such 
        despite any concentration of the nicotine inherent in those 
        products or any addition of nicotine to those products during 
        the manufacturing process.
            ``(4) Regulations.--The Secretary shall prescribe such 
        regulations or other guidance as is necessary or appropriate to 
        carry out the purposes of this subsection, including 
        regulations or other guidance for coordinating the taxation of 
        tobacco products and taxable nicotine to protect revenue and 
        prevent double taxation.''.
            (3) Taxable nicotine treated as a tobacco product.--Section 
        5702(c) of such Code is amended by striking ``and roll-your-own 
        tobacco'' and inserting ``roll-your-own tobacco, and taxable 
        nicotine''.
            (4) Manufacturer of taxable nicotine.--Section 5702 of such 
        Code, as amended by paragraph (2), is amended by adding at the 
        end the following new subsection:
    ``(r) Manufacturer of Taxable Nicotine.--
            ``(1) In general.--Any person who extracts, concentrates, 
        or synthesizes nicotine shall be treated as a manufacturer of 
        taxable nicotine (and as manufacturing such taxable nicotine).
            ``(2) Application of rules related to manufacturers of 
        tobacco products.--Any reference to a manufacturer of tobacco 
        products, or to manufacturing tobacco products, shall be 
        treated as including a reference to a manufacturer of taxable 
        nicotine, or to manufacturing taxable nicotine, 
        respectively.''.
    (h) Increasing Tax on Cigarettes.--
            (1) Small cigarettes.--Section 5701(b)(1) of such Code is 
        amended by striking ``$50.33'' and inserting ``$100.66''.
            (2) Large cigarettes.--Section 5701(b)(2) of such Code is 
        amended by striking ``$105.69'' and inserting ``$211.38''.
    (i) Tax Rates Adjusted for Inflation.--Section 5701 of such Code, 
as amended by subsection (g), is amended by adding at the end the 
following new subsection:
    ``(j) Inflation Adjustment.--
            ``(1) In general.--In the case of any calendar year 
        beginning after 2023, the dollar amounts provided under this 
        chapter shall each be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year, determined 
                by substituting `calendar year 2022' for `calendar year 
                2016' in subparagraph (A)(ii) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $0.01, such amount shall be rounded to 
        the next highest multiple of $0.01.''.
    (j) Floor Stocks Taxes.--
            (1) Imposition of tax.--On tobacco products manufactured in 
        or imported into the United States which are removed before any 
        tax increase date and held on such date for sale by any person, 
        there is hereby imposed a tax in an amount equal to the excess 
        of--
                    (A) the tax which would be imposed under section 
                5701 of the Internal Revenue Code of 1986 on the 
                article if the article had been removed on such date, 
                over
                    (B) the prior tax (if any) imposed under section 
                5701 of such Code on such article.
            (2) Credit against tax.--Each person shall be allowed as a 
        credit against the taxes imposed by paragraph (1) an amount 
        equal to $500. Such credit shall not exceed the amount of taxes 
        imposed by paragraph (1) on such date for which such person is 
        liable.
            (3) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding tobacco 
                products on any tax increase date to which any tax 
                imposed by paragraph (1) applies shall be liable for 
                such tax.
                    (B) Method of payment.--The tax imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe by regulations.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) shall be paid on or before the date that is 120 
                days after the effective date of the tax rate increase.
            (4) Articles in foreign trade zones.--Notwithstanding the 
        Act of June 18, 1934 (commonly known as the Foreign Trade Zone 
        Act, 48 Stat. 998, 19 U.S.C. 81a et seq.), or any other 
        provision of law, any article which is located in a foreign 
        trade zone on any tax increase date shall be subject to the tax 
        imposed by paragraph (1) if--
                    (A) internal revenue taxes have been determined, or 
                customs duties liquidated, with respect to such article 
                before such date pursuant to a request made under the 
                first proviso of section 3(a) of such Act, or
                    (B) such article is held on such date under the 
                supervision of an officer of the United States Customs 
                and Border Protection of the Department of Homeland 
                Security pursuant to the second proviso of such section 
                3(a).
            (5) Definitions.--For purposes of this subsection--
                    (A) In general.--Any term used in this subsection 
                which is also used in section 5702 of such Code shall 
                have the same meaning as such term has in such section.
                    (B) Tax increase date.--The term ``tax increase 
                date'' means the effective date of any increase in any 
                tobacco product excise tax rate pursuant to the 
                amendments made by this section (other than subsection 
                (j) thereof).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
            (6) Controlled groups.--Rules similar to the rules of 
        section 5061(e)(3) of such Code shall apply for purposes of 
        this subsection.
            (7) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 5701 of such Code shall, insofar as 
        applicable and not inconsistent with the provisions of this 
        subsection, apply to the floor stocks taxes imposed by 
        paragraph (1), to the same extent as if such taxes were imposed 
        by such section 5701. The Secretary may treat any person who 
        bore the ultimate burden of the tax imposed by paragraph (1) as 
        the person to whom a credit or refund under such provisions may 
        be allowed or made.
    (k) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) 
        through (4), the amendments made by this section shall apply to 
        articles removed (as defined in section 5702(j) of the Internal 
        Revenue Code of 1986) after the last day of the month which 
        includes the date of the enactment of this Act.
            (2) Discrete single-use units and processed tobacco.--The 
        amendments made by subsections (c)(1)(C), (c)(2), and (f) shall 
        apply to articles removed (as defined in section 5702(j) of the 
        Internal Revenue Code of 1986) after the date that is 6 months 
        after the date of the enactment of this Act.
            (3) Large cigars.--The amendments made by subsection (e) 
        shall apply to articles removed after December 31, 2023.
            (4) Taxable nicotine.--The amendments made by subsection 
        (g) shall apply to articles removed in calendar quarters 
        beginning after the date which is 180 days after the date of 
        the enactment of this Act.
    (l) Transition Rule for Permit and Bond Requirements.--A person 
which is lawfully engaged in business as a manufacturer or importer of 
taxable nicotine (within the meaning of subchapter A of chapter 52 of 
the Internal Revenue Code of 1986, as amended by this section) on the 
date of the enactment of this Act, first becomes subject to the 
requirements of subchapter B of chapter 52 of such Code by reason of 
the amendments made by this section, and submits an application under 
such subchapter B to engage in such business not later than 90 days 
after the date of the enactment of this Act, shall not be denied the 
right to carry on such business by reason of such requirements before 
final action on such application.
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