Tobacco Tax and Enforcement Reform Act - Amends the Internal Revenue Code, with respect to the taxation of tobacco products, to:
Requires the Secretary of the Treasury to coordinate with other federal agencies and officials to prevent and reduce tobacco tax evasion and contraband trafficking in tobacco products and processed tobacco and to enforce settlement agreements between tobacco companies and governmental entities.
Amends the Tariff Act of 1930 to impose a civil penalty for the importation of tobacco products and cigarette papers and tubes by fraudulent means.
Provides for the enforcement of this Act in Indian tribal areas.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 826 Introduced in Senate (IS)]
113th CONGRESS
1st Session
S. 826
To amend the Internal Revenue Code of 1986 to reform and enforce
taxation of tobacco products.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 25, 2013
Mr. Reid (for Mr. Lautenberg (for himself, Mr. Blumenthal, Mr. Harkin,
and Mr. Durbin)) 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 reform and enforce
taxation of tobacco products.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Tobacco Tax and
Enforcement Reform Act''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title and table of contents.
TITLE I--TOBACCO TAX INCREASE AND PARITY
Sec. 101. Tobacco tax increase and parity.
TITLE II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
Sec. 201. Amendment of 1986 code.
Sec. 202. Machines used to manufacture or package tobacco products or
processed tobacco.
Sec. 203. Improved marking and labeling.
Sec. 204. Wholesalers and manufacturers, importers, and sellers of
tobacco production machines required to
have permit.
Sec. 205. Conditions of permit.
Sec. 206. Records to be maintained.
Sec. 207. Reports.
Sec. 208. Fraudulent offenses.
Sec. 209. Penalties.
Sec. 210. Coordination with other government officials.
Sec. 211. Definitions.
Sec. 212. Conforming amendments.
Sec. 213. Effective date.
TITLE III--IMPORT FRAUD
Sec. 301. Maximum penalty for importation of tobacco products and
cigarette papers and tubes by fraudulent
means.
TITLE IV--EXCLUSIONS REGARDING INDIAN TRIBES AND TRIBAL MATTERS
Sec. 401. Exclusions regarding Indian Tribes and Tribal matters.
TITLE I--TOBACCO TAX INCREASE AND PARITY
SEC. 101. TOBACCO TAX INCREASE AND PARITY.
(a) Increase in Excise Tax on Small Cigars and Cigarettes.--
(1) Small cigars.--Section 5701(a)(1) of the Internal
Revenue Code of 1986 is amended by striking ``$50.33'' and
inserting ``$97.55''.
(2) Cigarettes.--Section 5701(b) of such Code is amended--
(A) by striking ``$50.33'' in paragraph (1) and
inserting ``$97.55'', and
(B) by striking ``$105.69'' in paragraph (2) and
inserting ``$204.09''.
(b) Tax Parity for Pipe Tobacco and Roll-Your-Own Tobacco.--
(1) Pipe tobacco.--Section 5701(f) of the Internal Revenue
Code of 1986 is amended by striking ``$2.8311 cents'' and
inserting ``$49.55''.
(2) Roll-your-own tobacco.--Section 5701(g) of such Code is
amended by striking ``$24.78'' and inserting ``$49.55''.
(c) Clarification of Definition of Small Cigars.--Paragraphs (1)
and (2) of section 5701(a) of the Internal Revenue Code of 1986 are
each amended by striking ``three pounds per thousand'' and inserting
``four and one-half pounds per thousand''.
(d) Clarification of Definition of Cigarette.--Paragraph (2) of
section 5702(b) of the Internal Revenue Code of 1986 is amended by
inserting before the final period the following: ``, which includes any
roll for smoking containing tobacco that weighs no more than four and a
half pounds per thousand, unless it is wrapped in whole tobacco leaf
and does not have a cellulose acetate or other cigarette-style
filter''.
(e) Tax Parity for Smokeless Tobacco.--
(1) In general.--Section 5701(e) of the Internal Revenue
Code of 1986 is amended--
(A) in paragraph (1), by striking ``$1.51'' and
inserting ``$25.91'';
(B) in paragraph (2), by striking ``50.33 cents''
and inserting ``$10.37''; and
(C) by adding at the end the following:
``(3) Smokeless tobacco sold in discrete single-use
units.--On discrete single-use units, $97.55 per each 1,000
single-use units.''.
(2) Discrete single-use unit.--Section 5702(m) of such Code
is amended--
(A) in paragraph (1), by striking ``or chewing
tobacco'' and inserting ``chewing tobacco, 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 intended or expected to be consumed
without being combusted; and
``(B) is in the form of a lozenge, tablet, pill,
pouch, dissolvable strip, or other discrete single-use
or single-dose unit.''.
(3) Other tobacco products.--Section 5701 of such Code 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 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.''.
(f) Clarifying Other Tobacco Tax Definitions.--
(1) Tobacco product definition.--Section 5702(c) of the
Internal Revenue Code of 1986 is amended by inserting before
the period the following: ``, and any other product containing
tobacco that is intended or expected to be consumed''.
(2) Cigarette tube definition.--Section 5702(f) of such
Code is amended by inserting before the period ``or cigars''.
(3) Importer definition.--Section 5702(k) of such Code is
amended by inserting ``or any other tobacco product'' after
``cigars or cigarettes''.
(4) Pipe tobacco definition.--Section 5702(n) of such Code
is amended--
(A) by striking ``The term'' and inserting the
following:
``(1) In general.--The term''; and
(B) by adding at the end the following:
``(2) Roll-your-own tobacco.--Any tobacco that meets the
definition under both this subsection and section 5702(o) shall
be treated as roll-your-own tobacco under section 5702(o).
``(3) Exception.--Paragraph (2) shall not apply to a
product that, as of January 1, 2009, was either commercially
marketed in the United States in packaging that bore, pursuant
to part 40 or 41 of title 27, Code of Federal Regulations, a
designation as `pipe tobacco' or `Tax Class L', or is
substantially equivalent to such product, provided that such
product is widely used as pipe tobacco.''.
(g) Inflation Adjustment.--Section 5701 of the Internal Revenue
Code of 1986, as amended by subsection (f)(3), is amended by adding at
the end the following new subsection:
``(j) Inflation Adjustment.--In the case of any calendar year after
2013, each amount set forth in this section shall be increased by an
amount equal to--
``(1) such amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting
`calendar year 2012' for `calendar year 1992' in subparagraph
(B) thereof.''.
(h) 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
(g) 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.
(i) Effective Date.--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 December 31, 2013.
TITLE II--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
SEC. 201. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 202. MACHINES USED TO MANUFACTURE OR PACKAGE TOBACCO PRODUCTS OR
PROCESSED TOBACCO.
(a) In General.--Section 5762 is amended--
(1) by redesignating subsection (b) as subsection (c), and
(2) by inserting after subsection (a) the following new
subsection:
``(b) Machines Used To Manufacture or Package Tobacco Products or
Processed Tobacco.--
``(1) Transfer of manufacturing machines to licensed
persons.--Any tobacco production machine may be sold, leased,
imported, exported, delivered, or otherwise made available only
to persons--
``(A) lawfully engaged in--
``(i) the sale, lease, importation,
exportation, or delivery of such machines,
``(ii) the manufacture or packaging of
tobacco products or processed tobacco, or
``(iii) the application of unique
identification markings onto tobacco product or
processed tobacco packages pursuant to section
5723, and
``(B) that have all Federal, State, local, and
Indian tribal government permits, registrations, and
licenses required to engage in such activities.
``(2) Transfer of machines to persons engaged in illegal
manufacture of contraband.--No tobacco production machine shall
knowingly be manufactured for or be (directly or indirectly)
sold, leased, imported, exported, delivered, or otherwise made
available to any person engaged in the illegal manufacture,
distribution, or sale of counterfeit or contraband tobacco
products or processed tobacco, unique identification markings,
or other tax-payment indicia.
``(3) Registration of machines.--
``(A) In general.--Every person having possession
or custody of, or having control over, the installation
of any tobacco production machine shall register such
machine with the Secretary immediately on its being
installed, by subscribing and filing with the Secretary
a statement, in writing, setting forth the particular
place where such machine is installed, the kind of
machine and its capacity, the owner thereof, the
owner's place of residence, and the purpose for which
the machine has been or is intended to be used.
``(B) Exception.--Under regulations prescribed by
the Secretary, this paragraph shall not apply to any
tobacco production machine not used or intended to be
used--
``(i) for the manufacture or production of
cigarette or cigars, or to manufacture any
other tobacco product or processed tobacco,
``(ii) to package any tobacco product or
processed tobacco, or
``(iii) to apply unique identification
markings to any package.
``(4) Records.--
``(A) In general.--Any person selling, leasing,
importing, exporting, delivering, or otherwise making
available a tobacco production machine shall maintain
and keep records, as the Secretary prescribes by
regulation, relating to any transfers of the machine,
including the name, address, other contact information,
and any permit, registration, or license number of the
person receiving delivery of the machine, or to whom
the machine is otherwise transferred, as the case may
be.
``(B) 5-year holding period for records.--Any
record required to be maintained and kept under
subparagraph (A) shall be kept for the 5-year period
beginning on the first date such record is required to
be so maintained and kept.
``(C) Availability of records.--Such records shall
be available for inspection by any internal revenue
officer during business hours.
``(D) Safe harbor.--An ordinary commercial record
or invoice shall satisfy the requirements of this
paragraph if such record or invoice contains all of the
information required under subparagraph (A).
``(5) Violations.--
``(A) In general.--Whoever knowingly violates
paragraph (1), (2), or (3) shall, for each offense, be
fined not more than $10,000 or an amount equal to 3
times the fair market value of the tobacco product
machine involved (whichever is greater), or imprisoned
not more than five years, or both.
``(B) Recordkeeping.--Whoever knowingly violates
paragraph (4) shall, for each offense, be fined not
more than $10,000.''.
(b) Tobacco Production Machine.--Section 5702 is amended by adding
at the end the following new subsection:
``(q) Tobacco Production Machine.--The term `tobacco production
machine' means any machine (or component integral to the operation of
such a machine) used to manufacture or package tobacco products or
processed tobacco or to apply unique identification markings or other
tax-payment indicia to packages of tobacco products or processed
tobacco. Such term includes any machine used to produce tobacco
products for compensation, lease, or hire, or otherwise used in a
commercial setting.''.
(c) Conforming Amendment.--Subsection (c) of section 5762 (as so
redesignated) is amended by striking ``subsection (a)'' and inserting
``subsections (a) and (b)''.
(d) Effective Date.--The amendment made by this section shall apply
to transfers more than 6 months after the date of the enactment of this
Act.
SEC. 203. IMPROVED MARKING AND LABELING.
(a) In General.--Subsection (b) of section 5723 is amended to read
as follows:
``(b) Marks, Labels, and Notices.--
``(1) In general.--Subject to paragraphs (2), (3), and (4),
every package of tobacco products, processed tobacco, or
cigarette papers or tubes shall, before removal, bear the
marks, labels, and notices that the Secretary by regulation
prescribes.
``(2) Marking requirements for domestic market.--
``(A) In general.--Each person who is a
manufacturer or importer of tobacco products or
processed tobacco shall (in accordance with regulations
prescribed by the Secretary) ensure that, before any
product intended for sale or distribution within the
United States is removed, a unique identification
marking is affixed to or forms part of each package of
tobacco product or processed tobacco manufactured or
imported by such person for sale or distribution.
``(B) Markings on individual packages.--Any
markings required to be placed on a tobacco product or
processed tobacco package by this subsection shall be
placed on the innermost sealed container visible from
the outside of the individual package. For any tobacco
product or processed tobacco package that contains
multiple smaller packages of tobacco products or
processed tobacco, any markings required to be so
placed on tobacco product or processed tobacco packages
shall be placed on all the individual tobacco product
or processed tobacco packages.
``(C) Markings on aggregate packing modes.--To
facilitate efficient tracking and tracing of tobacco
products or processed tobacco through the distribution
system, all manufacturers or importers of tobacco
products or processed tobacco shall, in addition to
such unique identification marking, also, in accordance
with regulations prescribed by the Secretary, ensure
that unique identification markings are affixed to or
form part of aggregate packing modes (such as cartons,
cases, and master cases for cigarettes). The Secretary
shall determine the size, location, and methods for
such markings. The Secretary shall establish
regulations requiring that all persons within the
distribution chain, up to but not including the
ultimate retailer, utilize the unique identification
markings on aggregate packing modes to facilitate the
tracking and tracing of tobacco products or processed
tobacco through the distribution system.
``(3) Marking requirements for exports.--A unique
identification marking shall be affixed to or form part of each
package of tobacco product or processed tobacco that is
exported, or sold for export, that distinguishes it from those
products or processed tobacco intended for sale or distribution
within the United States. The Secretary shall by regulation
prescribe the size, location, and other characteristics of such
marking, and it may contain a serial number that is assigned to
the country of export, except that no such serial number shall
be required on tobacco products or processed tobacco sold at
retail to consumers by duty free stores for consumption beyond
the jurisdiction of the internal revenue laws of the United
States. Such tobacco products or processed tobacco shall
instead bear markings indicating the tobacco product or
processed tobacco is only for duty-free sale to consumers, as
prescribed through regulation by the Secretary, before the
product or processed tobacco is removed.
``(4) Authorization of federal unique identification
marking.--Not later than 3 years after the date of the
enactment of the Tobacco Tax and Enforcement Reform Act, the
Secretary shall by regulation require the use of a unique
identification marking on all products subject to tax under
this chapter.''.
(b) Unique Identification Marking.--Section 5723 is amended by
adding at the end the following new subsection:
``(f) Unique Identification Marking.--
``(1) In general.--No tobacco product or processed tobacco
may be sold, offered for sale, distributed, mailed, or
otherwise delivered for final sale to any consumer in the
United States unless the unique identification marking that
meets the requirements of this section (and any regulations
prescribed thereunder) is affixed to or forms part of the
package in which it is contained.
``(2) System specifications.--
``(A) The Secretary shall design such system to
coordinate and avoid interference with State, local,
and Indian tribal tax stamps and markings, facilitate
collection of the tax imposed by this chapter, impede
contraband tobacco trafficking, minimize counterfeit
marking, allow for more effective tracking and tracing
of tobacco products and processed tobacco, facilitate
the enforcement of related Federal laws, and utilize
such available technology as may promote the purposes
of this chapter.
``(B) The Secretary shall prescribe the method and
manner in which such unique identification markings are
to be distributed, purchased, and applied to or made
part of tobacco product and processed tobacco packages,
and may provide for the cancellation of such markings.
``(C) The unique identification marking must
provide (through the marking or record associated with
the marking) such information as the Secretary by
regulation prescribes, including:
``(i) A unique serial number or tracking
code for each tobacco product or processed
tobacco package or aggregate package.
``(ii) The name and address of the person
purchasing the marking (and, if different, of
the person ensuring the marking is affixed to
or made part of the package).
``(iii) The name and address of the first
unrelated person purchasing or otherwise
receiving the tobacco product or processed
tobacco from the person who ensures the marking
is affixed to or made part of the package and
the date of such purchase or receipt.
``(D) The information described in subparagraph (C)
may be required to, to the extent practicable--
``(i) be cryptographically encrypted, and
``(ii)(I) be readable by a portable
scanning device (or similar device) to be
utilized by regulatory and law enforcement
officials at the time and place of inspection,
or
``(II) be otherwise accessible remotely at
such time and place.
``(3) Unrelated person.--For purposes of this subsection,
the term `unrelated person' means a person other than a related
person within the meaning of section 267(b) or 707(b)(1).''.
(c) Definitions.--Section 5723, as amended by subsection (b), is
amended by adding at the end the following new subsections:
``(g) Package Defined.--For purposes of this section, the term
`package' means a pack, box, carton, or container of any kind or, if no
other container, any wrapping (including cellophane), in which a
tobacco product or processed tobacco is sold, offered for sale,
distributed, or otherwise delivered for final sale to any consumer.
``(h) Unique Identification Marking Defined.--For purposes of this
section, the term `unique identification marking' means a device in
such design and denomination as the Secretary authorizes by regulation
that is affixed to or made part of a package of a tobacco product or
processed tobacco. Such markings shall contain overt security features
for public authentication and covert security features embedding a
unique, secure, encrypted identifier onto the marking, enabling law
enforcement authentication, production control, and tracking and
tracing of the product or processed tobacco bearing the marking.''.
(d) Regulations.--The Secretary of the Treasury shall consult with
the Secretary of Health and Human Services as may be appropriate to
carry out the purposes of subsection (f), and paragraphs (2), (3), and
(4) of subsection (b), of section 5723 of the Internal Revenue Code of
1986 (as added by this section).
SEC. 204. WHOLESALERS AND MANUFACTURERS, IMPORTERS, AND SELLERS OF
TOBACCO PRODUCTION MACHINES REQUIRED TO HAVE PERMIT.
(a) Wholesalers.--Section 5712 is amended by inserting ``, as a
wholesaler,'' after ``or processed tobacco''.
(b) Manufacturers, Importers, and Sellers of Tobacco Production
Machines.--Section 5712 is amended by striking ``or as an export
warehouse proprietor'' and inserting ``, as an export warehouse
proprietor, or as a manufacturer, seller, or importer of tobacco
production machines''.
SEC. 205. CONDITIONS OF PERMIT.
(a) Issuance.--Subsection (a) of section 5713 is amended to read as
follows:
``(a) Issuance.--
``(1) In general.--A person shall not engage in business as
a manufacturer or importer of tobacco products or processed
tobacco, as a wholesaler, as an export warehouse proprietor, or
as a manufacturer, seller, lessor, or importer of tobacco
production machines without a permit to engage in such
business. Such permit, conditioned upon compliance with this
chapter and regulations issued thereunder, shall be issued in
such form and in such manner as the Secretary shall by
regulation prescribe, to every person properly qualified under
sections 5711 and 5712. Any entity granted such a permit is not
eligible to provide any services the Secretary may elect to
procure to facilitate the purposes of section 5723. Permit
holders shall automatically count output and register, record,
and transmit the quantities measured, in the form, conditions,
and time limits established by the Secretary. A new permit may
be required at such other time as the Secretary shall by
regulation prescribe.
``(2) Conditions.--The Secretary shall not issue a permit
under this section unless--
``(A) the applicant is in compliance with the
requirements of--
``(i) this chapter,
``(ii) chapter 114 of title 18, United
States Code,
``(iii) the Act of October 19, 1949 (15
U.S.C. 375 et seq.; commonly referred to as the
`Jenkins Act'),
``(iv) the Fair and Equitable Tobacco
Reform Act of 2004, and any amendments made
thereby,
``(v) the Family Smoking Prevention and
Tobacco Control Act, and any amendments made
thereby,
``(vi) the Prevent All Cigarette
Trafficking Act of 2009, and any amendments
made thereby, and
``(vii) any related regulations thereunder,
as in effect on the date of the issuance of the permit,
``(B) the applicant certifies that the applicant is
in compliance with all other Federal, State, local, and
Indian tribal laws relating to the taxation,
manufacture, importation, exportation, distribution,
marketing, sale, or transportation of tobacco products,
processed tobacco, or tobacco production machines, as
in effect on the date of the issuance of the permit,
and
``(C) the applicant identifies in the application
any violation of a law described in subparagraph (A) or
(B) by the applicant resulting in a penalty under any
such law during the 5-year period ending on the date of
the application.''.
(b) Suspension or Revocation.--Subparagraph (A) of section
5713(b)(1) is amended by inserting ``or any other law described in
subparagraph (A) or (B) of subsection (a)(2)'' after ``this chapter''.
SEC. 206. RECORDS TO BE MAINTAINED.
(a) In General.--Section 5741 is amended--
(1) by inserting ``(a) In General.--'' before ``Every
manufacturer'',
(2) by inserting ``every wholesaler,'' after ``every
importer,'',
(3) by striking ``such records'' and inserting ``records
concerning the chain of custody of the tobacco products and
processed tobacco (including the foreign country of final
destination for packages marked for export) and the serial
numbers, marks, labels, and notices required under section
5723, and such other records'', and
(4) by adding at the end the following new subsections:
``(b) Retailers.--Retailers shall maintain records of receipt, and
any non-retail sale or delivery, of tobacco products and processed
tobacco. Such records shall be available to the Secretary for
inspection and audit. An ordinary commercial record or invoice shall
satisfy the requirements of this subsection if such record shows the
date of receipt, from whom tobacco products or processed tobacco were
received, and the quantity of tobacco products or processed tobacco
received (or, in the case of non-retail sale or delivery, the date of
sale or delivery, to whom the tobacco products or processed tobacco
were sold or delivered, and the quantity of the tobacco products or
processed tobacco sold or delivered). To the extent the Secretary
determines that the records maintained by retail entities licensed
pursuant to section 555(b) of the Tariff Act of 1930 (19 U.S.C.
1555(b)) satisfy the recordkeeping requirements of this section, no
additional records shall be required for such entities under this
section. The preceding provisions of this subsection shall not be
construed to limit or preclude other recordkeeping requirements imposed
on any retailer.
``(c) Records Concerning Marks and Chain of Custody.--Records
concerning the chain of custody and the marks, labels, and notices
required under section 5723 shall be available for inspection by any
internal revenue officer during business hours.''.
(b) Consultation With Health and Human Services.--The Secretary of
the Treasury shall consult with the Secretary of Health and Human
Services as may be appropriate to carry out the purposes of section
5741 of the Internal Revenue Code of 1986.
SEC. 207. REPORTS.
Section 5722 is amended--
(1) by inserting ``(a) In General.--'' before ``Every
manufacturer'', and
(2) by adding at the end the following new subsection:
``(b) Reports by Export Warehouse Proprietors.--Prior to
exportation of tobacco products or processed tobacco from the United
States, the export warehouse proprietor shall submit a report (in such
manner and form as the Secretary may by regulation prescribe) to enable
the Secretary to identify the shipment and assure that it reaches its
intended destination.''.
SEC. 208. FRAUDULENT OFFENSES.
(a) In General.--Subsection (a) of section 5762 is amended--
(1) by striking paragraph (1) and redesignating paragraphs
(2) through (6) as paragraphs (1) through (5), respectively,
and
(2) by striking ``not more than $10,000'' and inserting
``not more than $10,000 or an amount equal to 3 times the
amount of the tax imposed under this chapter on the tobacco
product involved (whichever is greater)''.
(b) Offenses Relating to Distribution of Tobacco Products, etc.--
(1) In general.--Section 5762 (as amended by section 202 of
this Act) is amended--
(A) by redesignating subsection (c) as subsection
(d), and
(B) by inserting after subsection (b) the following
new subsection:
``(c) Offenses Relating to Distribution of Tobacco Products, etc.--
It shall be unlawful--
``(1) for any person to engage in business as a
manufacturer or importer of tobacco products, processed
tobacco, or cigarette papers and tubes, as a wholesaler, or an
export warehouse proprietor, or as a manufacturer, seller, or
importer of tobacco production machines without filing the bond
and obtaining the permit where required by this chapter or
regulations thereunder,
``(2) for a manufacturer or importer of tobacco products,
or wholesaler to knowingly ship, transport, deliver, or receive
any tobacco products from or to any person other than a person
who has obtained the permit required by this chapter, a
retailer, or a person handling such products solely for
purposes of shipment or delivery; except that an importer who
has obtained the permit required by this chapter may receive,
from a foreign manufacturer or a foreign distributor, foreign
tobacco products that have not previously entered the United
States,
``(3) for a manufacturer or importer of processed tobacco
or a wholesaler to knowingly ship, transport, deliver, or
receive any tobacco products or processed tobacco from or to
any person other than a person who has obtained the permit
required by this chapter,
``(4) for a manufacturer or importer of processed tobacco
to knowingly ship, transport, sell, or deliver processed
tobacco to any person other than a manufacturer of processed
tobacco, a manufacturer of tobacco products, or an export
warehouse proprietor,
``(5) for any person (other than the original manufacturer
of such tobacco products or processed tobacco or an export
warehouse proprietor authorized to receive any tobacco products
or processed tobacco that have previously been exported and
returned to the United States) to knowingly receive any tobacco
products or processed tobacco that have previously been
exported and returned to the United States,
``(6) for any export warehouse proprietor to knowingly
ship, transport, sell, or deliver for sale any tobacco products
or processed tobacco to any person other than the original
manufacturer of such tobacco products or processed tobacco,
another export warehouse proprietor, a duty free store, or a
foreign purchaser,
``(7) for any person (other than a manufacturer,
wholesaler, or an export warehouse proprietor permitted under
this chapter) to knowingly ship, transport, receive, or
possess, for purposes of resale, any tobacco product or
processed tobacco not in packages marked pursuant to
regulations issued under section 5723, other than for direct
return to a manufacturer for repacking or for re-exportation or
to an export warehouse proprietor for re-exportation,
``(8) for any manufacturer, importer, export warehouse
proprietor, or wholesaler permitted under this chapter to make
any false entry in, to fail to make an entry in, or to
knowingly fail to maintain properly any record or report
required by this chapter or the regulations promulgated
thereunder with the intent to defraud the United States,
``(9) for any person, with the intent to defraud the United
States, to alter, mutilate, destroy, obliterate, or remove any
mark or label required under this chapter upon a tobacco
product or processed tobacco held for sale, or to create,
possess, or apply on any tobacco product or processed tobacco
or its packaging any counterfeit versions of any such marks or
labels, and
``(10) for any person to sell at retail more than 3,000
cigarettes in any single transaction (or series of related
transactions), or, in the case of other tobacco products, an
equivalent quantity as determined by regulation.
Any person violating any of the provisions of this subsection shall,
upon conviction, be fined as provided in section 3571 of title 18,
United States Code, or imprisoned for not more than 5 years, or
both.''.
(2) Conforming amendment.--Section 5762(d) (as so
redesignated) is amended by striking ``and (b)'' inserting ``,
(b), and (c)''.
(c) Other Offenses.--Subsection (d) of section 5762 (as so
redesignated) is amended by striking ``not more than $1,000'' and
inserting ``not more than $2,500 or an amount equal to the tax imposed
under this chapter on the tobacco product or processed tobacco involved
(whichever is greater)''.
SEC. 209. PENALTIES.
(a) In General.--
(1) Subsection (a) of section 5761 is amended--
(A) by striking ``willfully'' and inserting
``knowingly'', and
(B) by striking ``$1,000'' and inserting
``$10,000''.
(2) Subsection (b) of section 5761 is amended by striking
``5 percent'' and inserting ``10 percent''.
(b) Penalty Amounts Adjusted for Inflation.--Section 5761 is
amended by redesignating subsection (f) as subsection (g) and inserting
after subsection (e) the following new subsection:
``(f) Inflation Adjustment.--
``(1) In general.--In the case of a calendar year beginning
after 2013, the penalty 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 2012' for `calendar year
1992' in subparagraph (B) thereof.
``(2) Rounding.--If any amount as adjusted under paragraph
(1) is not a multiple of $10, such amount shall be rounded to
the next highest multiple of $10.''.
SEC. 210. COORDINATION WITH OTHER GOVERNMENT OFFICIALS.
(a) In General.--Subchapter F of chapter 52 is amended by adding at
the end the following new section:
``SEC. 5755. COORDINATION WITH OTHER GOVERNMENT OFFICIALS.
``The Secretary shall make reasonable efforts to coordinate with
other Federal agencies and with officials of foreign, State, local,
Indian tribal, and other governments to promote the purposes of this
chapter, to prevent and reduce tobacco tax evasion and contraband
trafficking in tobacco products and processed tobacco, to enforce
settlement agreements between tobacco companies and State or other
governments and related laws, or for other law enforcement or
administration purposes.''.
(b) Information Sharing.--
(1) In general.--Paragraph (1) of section 6103(o) is
amended by adding at the end the following new subparagraph:
``(C) Information sharing for tobacco product law
administration and enforcement purposes.--
``(i) Federal, state, local, and tribal
governments.--Returns and return information
with respect to taxes imposed by chapter 52 may
be open to inspection by or disclosure to
officers and employees of any Federal agency,
the State Tax Administrators, or any other
agency of any State, local, or Indian tribal
government responsible for the administration
and enforcement of laws and regulations
relating to tobacco products and processed
tobacco, or their legal representative, solely
for use in such administration and enforcement,
unless the Secretary determines that such
disclosure would seriously impair Federal tax
administration.
``(ii) Foreign governments and
organizations.--The Secretary shall, upon
written request, disclose returns and return
information with respect to taxes imposed by
chapter 52 to officers and employees of any
agency of any foreign government, OLAF
(European Anti-Fraud Office), EUROPOL,
INTERPOL, or the World Customs Organization
responsible for the administration and
enforcement of laws and regulations relating to
tobacco products and processed tobacco, or
their legal representative, solely for use in
such administration and enforcement, if the
Secretary obtains written assurances from such
government or organization that the information
will be held in confidence and used only for
such use. No return or return information shall
be disclosed under this clause if the Secretary
determines that such disclosure would seriously
impair Federal tax administration.
``(iii) Public information.--The identity
and business address of those persons that have
a valid permit, pursuant to chapter 52, to
engage in business as a manufacturer,
wholesaler, or importer of tobacco products or
processed tobacco, as an export warehouse
proprietor, or as a manufacturer, seller, or
importer of tobacco production machines (as
defined in section 5702(q)) shall be made
publicly available at such time and in such
manner as the Secretary may prescribe.''.
(2) Conforming amendments.--
(A) Subsection (a) of section 6103 is amended--
(i) by striking ``or any local'' in
paragraph (2) and inserting ``any local'',
(ii) by inserting ``, or any agency
described in subsection (o)(1)(C)(i)'' after
``subsection (l)(7)(D)'' in paragraph (2),
(iii) by striking ``or subsection (n)'' in
paragraph (3) and inserting ``subsection (n),
or subsection (o)(1)(C)(i)''.
(B) Paragraph (4) of section 6103(p) is amended--
(i) by striking ``(o)(1)(A)'' both places
it appears and inserting ``(o)(1)(A) or
(C)(i)'', and
(ii) by striking ``(15), or (16),'' and
inserting ``(15), or (16), or (o)(1)(C)(i),''.
(C) Paragraph (2) of section 7213(a) is amended--
(i) by striking ``(21) or'' and inserting
``(21),'', and
(ii) by striking ``or (7)'' and inserting
``or (7), or (o)(1)(C)(i)''.
(c) Clerical Amendment.--The table of sections for subchapter F of
chapter 52 is amended by adding at the end the following new item:
``Sec. 5755. Coordination with other government officials.''.
SEC. 211. DEFINITIONS.
(a) Export Warehouse Proprietor.--Subsection (i) of section 5702 is
amended by inserting before the period the following: ``or any person
engaged in the business of exporting tobacco products from the United
States for purposes of sale or distribution. Any duty free store that
sells, offers for sale, or otherwise distributes to any person in any
single transaction (or series of related transactions) more than 3,000
cigarettes, or an equivalent quantity of other tobacco products as the
Secretary shall by regulation prescribe, shall be deemed an export
warehouse proprietor under this chapter''.
(b) Retailer; Wholesaler.--Section 5702, as amended by this Act, is
amended by adding at the end the following new subsections:
``(r) Retailer.--The term `retailer' means any person who sells, or
offers for sale, any tobacco product at retail. The term `retailer'
includes any duty free store that sells, offers for sale, or otherwise
distributes at retail in any single transaction (or series of related
transactions) not more than 3,000 cigarettes, or not more than an
equivalent quantity of other tobacco products as the Secretary shall by
regulation prescribe.
``(s) Wholesaler.--The term `wholesaler' means any person engaged
in the business of purchasing tobacco products for resale at wholesale,
or any person acting as an agent or broker for any person engaged in
the business of purchasing tobacco products for resale at wholesale.''.
SEC. 212. CONFORMING AMENDMENTS.
(a) Paragraph (2)(C) of section 2341 of title 18, United States
Code is amended by inserting ``in regard to State, local, or Indian
tribal government taxes,'' before ``a person''.
(b) Sections 2314 and 2315 of title 18, United States Code, are
each amended--
(1) by striking ``state'' in the heading thereof; and
(2) by striking ``tax stamps'' each place it appears and
inserting ``tax stamps or markings''.
(c) The headings for subchapters B, C, and E of chapter 52 are each
amended by inserting ``, Processed Tobacco,'' after ``Products''.
(d) The items relating to subchapters B, C, and E in the table of
subchapters for chapter 52 are each amended by inserting ``, processed
tobacco,'' after ``products''.
(e) The heading for chapter 52 is amended by inserting ``,
PROCESSED TOBACCO,'' after ``PRODUCTS''.
(f) The item relating to chapter 52 in the table of chapters for
subtitle E is amended by inserting ``, processed tobacco,'' after
``products''.
SEC. 213. EFFECTIVE DATE.
Except as otherwise provided in this title, the amendments made by
this title shall take effect 1 year after the date of the enactment of
this Act.
TITLE III--IMPORT FRAUD
SEC. 301. MAXIMUM PENALTY FOR IMPORTATION OF TOBACCO PRODUCTS AND
CIGARETTE PAPERS AND TUBES BY FRAUDULENT MEANS.
(a) Maximum Penalty.--Section 592(c)(1) of the Tariff Act of 1930
(19 U.S.C. 1592(c)(1)) is amended--
(1) by striking ``A fraudulent violation of subsection
(a)'' and inserting the following:
``(A) In general.--Except as provided in
subparagraph (B), a fraudulent violation of subsection
(a)''; and
(2) by adding at the end the following:
``(B) Tobacco products and cigarette papers and
tubes.--In the case of importation of tobacco products
and cigarette papers and tubes subject to tax under
chapter 52 of the Internal Revenue Code of 1986, a
fraudulent violation of subsection (a) is punishable by
a civil penalty in an amount not to exceed the sum of--
``(i) the domestic value of the
merchandise, and
``(ii) four times the amount of Federal
excise tax that could be imposed on the
merchandise, if applicable.''.
(b) Effective Date.--The amendments made by subsection (a) shall
take effect on the date which is 90 days after the date of the
enactment of this Act, and shall apply with respect to violations of
section 592 of the Tariff Act of 1930 (as so amended) that occur on or
after that date.
TITLE IV--EXCLUSIONS REGARDING INDIAN TRIBES AND TRIBAL MATTERS
SEC. 401. EXCLUSIONS REGARDING INDIAN TRIBES AND TRIBAL MATTERS.
(a) In General.--Nothing in this Act or the amendments made by this
Act shall be construed to amend, modify, or otherwise affect--
(1) any agreements, compacts, or other intergovernmental
arrangements between any State or local government and any
government of an Indian tribe relating to the collection of
taxes on tobacco products sold in Indian country;
(2) any State laws that authorize or otherwise pertain to
any such intergovernmental arrangements or create special rules
or procedures for the collection of State, local, or tribal
taxes on tobacco products sold in Indian country;
(3) any limitations under Federal or State law, including
Federal common law and treaties, on State, local, and tribal
tax and regulatory authority with respect to the sale, use, or
distribution of tobacco products or processed tobacco by or to
Indian tribes, tribal members, tribal enterprises, or in Indian
country;
(4) any Federal law, including Federal common law and
treaties, regarding State jurisdiction, or lack thereof, over
any Indian tribe, tribal member, tribal enterprise, Indian
reservations, or other land held by the United States in trust
for one or more Indian tribes; or
(5) any State or local government authority to bring
enforcement actions against persons located in Indian country.
(b) Coordination of Law Enforcement.--Nothing in this Act or the
amendments made by this Act (other than the amendments relating to
section 6103 of the Internal Revenue Code of 1986) shall be construed
to inhibit or otherwise affect any coordinated law enforcement effort
by one or more States or other jurisdictions, including Indian tribes,
through interstate compact or otherwise, that--
(1) provides for the administration of tobacco product laws
or laws pertaining to interstate sales or other sales of
tobacco products or processed tobacco;
(2) provides for the seizure of tobacco products, processed
tobacco, or other property related to a violation of such laws;
or
(3) establishes cooperative programs for the administration
of such laws.
(c) Treatment of State and Local Governments.--Nothing in this Act
or the amendments made by this Act shall be construed to authorize,
deputize, or commission States or local governments as
instrumentalities of the United States.
(d) Enforcement Within Indian Country.--Nothing in this Act or the
amendments made by this Act shall prohibit, limit, or restrict
enforcement by the Attorney General of the United States of this Act or
an amendment made by this Act within Indian country.
(e) Ambiguity.--Any ambiguity between the language of this section
or its application and any other provision of this Act shall be
resolved in favor of this section.
(f) Definitions.--In this section--
(1) the term ``Indian country'' has the meaning given that
term in section 1151 of title 18, United States Code;
(2) the term ``tribal enterprise'' means any business
enterprise, regardless of whether incorporated or
unincorporated under Federal or tribal law, of an Indian tribe
or group of Indian tribes;
(3) the term ``Indian reservation'' has the meaning given
that term in section 168(j)(6) of the Internal Revenue Code of
1986;
(4) the term ``Indian tribe'' has the meaning given that
term in section 4(e) of the Indian Self-Determination and
Education Assistance Act (25 U.S.C. 450b(e)); and
(5) the terms ``tobacco products'' and ``processed
tobacco'' have the meanings given such terms by section 5702 of
the Internal Revenue Code of 1986.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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