[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1798 Introduced in House (IH)]
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119th CONGRESS
1st Session
H. R. 1798
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
March 3, 2025
Mr. Krishnamoorthi 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 ``End Tobacco Loopholes Act''.
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 2026, 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 2025' 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, 2025.
(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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