[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2786 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 2786
To amend the Internal Revenue Code of 1986 to provide tax rate parity
among all tobacco products, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 22, 2021
Mr. Krishnamoorthi (for himself and Ms. DeLauro) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
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 2021''.
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.
(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 2021, 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 2020' 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
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.
(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, 2021.
(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.
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