119-s819

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 819 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 819

 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

 March 3, 2025

Mr. Durbin (for himself, Mr. Wyden, Mrs. Murray, Mr. Reed, Mr. Merkley, 
 Mr. Blumenthal, Mr. Markey, and Ms. Hirono) 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 ``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 2025, 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 2024' 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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