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S. 2517 (116th): Tobacco Tax Equity Act of 2019


The text of the bill below is as of Sep 19, 2019 (Introduced). The bill was not enacted into law.


II

116th CONGRESS

1st Session

S. 2517

IN THE SENATE OF THE UNITED STATES

September 19, 2019

(for himself, Mr. Brown, Mr. Markey, Mr. Blumenthal, Mr. Reed, Ms. Hirono, Mr. Wyden, Mrs. Murray, and Mr. Merkley) 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.

1.

Short title

This Act may be cited as the Tobacco Tax Equity Act of 2019.

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 tobacco that—

(A)

is not intended to be smoked; and

(B)

is in the form of a lozenge, tablet, pill, pouch, dissolvable strip, or other discrete single-use or single-dose unit.

.

(d)

Tax parity for small cigars

Paragraph (1) of section 5701(a) of the Internal Revenue Code of 1986 is amended by striking $50.33 and inserting $100.66.

(e)

Tax parity for large cigars

(1)

In general

Paragraph (2) of section 5701(a) of the Internal Revenue Code of 1986 is amended by striking 52.75 percent and all that follows through the period and inserting the following: $49.56 per pound and a proportionate tax at the like rate on all fractional parts of a pound but not less than 10.066 cents per cigar..

(2)

Guidance

The Secretary of the Treasury, or the Secretary's delegate, may issue guidance regarding the appropriate method for determining the weight of large cigars for purposes of calculating the applicable tax under section 5701(a)(2) of the Internal Revenue Code of 1986.

(f)

Tax parity for Roll-Your-Own tobacco and certain processed tobacco

Subsection (o) of section 5702 of the Internal Revenue Code of 1986 is amended by inserting , and includes processed tobacco that is removed for delivery or delivered to a person other than a person with a permit provided under section 5713, but does not include removals of processed tobacco for exportation after wrappers thereof.

(g)

Clarifying tax rate for other tobacco products

(1)

In general

Section 5701 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(i)

Other tobacco products

Any product not otherwise described under this section that has been determined to be a tobacco product by the Food and Drug Administration through its authorities under the Family Smoking Prevention and Tobacco Control Act shall be taxed at a level of tax equivalent to the tax rate for cigarettes on an estimated per use basis as determined by the Secretary.

.

(2)

Establishing per use basis

For purposes of section 5701(i) of the Internal Revenue Code of 1986, not later than 12 months after the later of the date of the enactment of this Act or the date that a product has been determined to be a tobacco product by the Food and Drug Administration, the Secretary of the Treasury (or the Secretary of the Treasury's delegate) shall issue final regulations establishing the level of tax for such product that is equivalent to the tax rate for cigarettes on an estimated per use basis.

(h)

Clarifying definition of tobacco products

(1)

In general

Subsection (c) of section 5702 of the Internal Revenue Code of 1986 is amended to read as follows:

(c)

Tobacco products

The term tobacco products means—

(1)

cigars, cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco, and

(2)

any other product subject to tax pursuant to section 5701(i).

.

(2)

Conforming amendments

Subsection (d) of section 5702 of such Code is amended by striking cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own tobacco each place it appears and inserting tobacco products.

(i)

Increasing tax on cigarettes

(1)

Small cigarettes

Section 5701(b)(1) of such Code is amended by striking $50.33 and inserting $100.66.

(2)

Large cigarettes

Section 5701(b)(2) of such Code is amended by striking $105.69 and inserting $211.38.

(j)

Tax rates adjusted for inflation

Section 5701 of such Code, as amended by subsection (g), is amended by adding at the end the following new subsection:

(j)

Inflation adjustment

(1)

In general

In the case of any calendar year beginning after 2019, 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 2018’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.

(2)

Rounding

If any amount as adjusted under paragraph (1) is not a multiple of $0.01, such amount shall be rounded to the next highest multiple of $0.01.

.

(k)

Floor Stocks Taxes

(1)

Imposition of tax

On tobacco products manufactured in or imported into the United States which are removed before any tax increase date and held on such date for sale by any person, there is hereby imposed a tax in an amount equal to the excess of—

(A)

the tax which would be imposed under section 5701 of the Internal Revenue Code of 1986 on the article if the article had been removed on such date, over

(B)

the prior tax (if any) imposed under section 5701 of such Code on such article.

(2)

Credit against tax

Each person shall be allowed as a credit against the taxes imposed by paragraph (1) an amount equal to $500. Such credit shall not exceed the amount of taxes imposed by paragraph (1) on such date for which such person is liable.

(3)

Liability for tax and method of payment

(A)

Liability for tax

A person holding tobacco products on any tax increase date to which any tax imposed by paragraph (1) applies shall be liable for such tax.

(B)

Method of payment

The tax imposed by paragraph (1) shall be paid in such manner as the Secretary shall prescribe by regulations.

(C)

Time for payment

The tax imposed by paragraph (1) shall be paid on or before the date that is 120 days after the effective date of the tax rate increase.

(4)

Articles in foreign trade zones

Notwithstanding the Act of June 18, 1934 (commonly known as the Foreign Trade Zone Act, 48 Stat. 998, 19 U.S.C. 81a et seq.), or any other provision of law, any article which is located in a foreign trade zone on any tax increase date shall be subject to the tax imposed by paragraph (1) if—

(A)

internal revenue taxes have been determined, or customs duties liquidated, with respect to such article before such date pursuant to a request made under the 1st 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 2d proviso of such section 3(a).

(5)

Definitions

For purposes of this subsection—

(A)

In general

Any term used in this subsection which is also used in section 5702 of such Code shall have the same meaning as such term has in such section.

(B)

Tax increase date

The term tax increase date means the effective date of any increase in any tobacco product excise tax rate pursuant to the amendments made by this section (other than subsection (j) thereof).

(C)

Secretary

The term Secretary means the Secretary of the Treasury or the Secretary’s delegate.

(6)

Controlled groups

Rules similar to the rules of section 5061(e)(3) of such Code shall apply for purposes of this subsection.

(7)

Other laws applicable

All provisions of law, including penalties, applicable with respect to the taxes imposed by section 5701 of such Code shall, insofar as applicable and not inconsistent with the provisions of this subsection, apply to the floor stocks taxes imposed by paragraph (1), to the same extent as if such taxes were imposed by such section 5701. The Secretary may treat any person who bore the ultimate burden of the tax imposed by paragraph (1) as the person to whom a credit or refund under such provisions may be allowed or made.

(l)

Effective dates

(1)

In general

Except as provided in paragraphs (2) through (4), the amendments made by this section shall apply to articles removed (as defined in section 5702(j) of the Internal Revenue Code of 1986) after the last day of the month which includes the date of the enactment of this Act.

(2)

Discrete single-use units and processed tobacco

The amendments made by subsections (c)(1)(C), (c)(2), and (f) shall apply to articles removed (as defined in section 5702(j) of the Internal Revenue Code of 1986) after the date that is 6 months after the date of the enactment of this Act.

(3)

Large cigars

The amendments made by subsection (e) shall apply to articles removed after December 31, 2019.

(4)

Other tobacco products

The amendments made by subsection (g)(1) shall apply to products removed after the last day of the month which includes the date that the Secretary of the Treasury (or the Secretary of the Treasury's delegate) issues final regulations establishing the level of tax for such product.