Monday, June 08 2009
By Chris McCalla, Legislative Dir., IPCPR
The following is a summary of issues we are currently monitoring, and where called for, taking action. Bills may be viewed on IPCPR's legislation database at
California
Tobacco tax increase: As California's budget deficit balloons to $24+ billion, it is not difficult to see that a cigarette tax increase being considered to raise needed revenues (as some in the state assembly claim, "it's not a deficit issue but a revenue issue." In California, as the excise tax on other tobacco products (OTP) is linked to the cigarette tax, we will closely monitor this situation.
Illinois
Watching legislation that proposes to increase the OTP excise tax from 18% to 40%. To date, the bill has not advanced.
Louisiana
Smoking ban expansion, tax increase-attempts to expand the statewide smoking ban eliminating smoking in bars that serve food and casinos, failed to the pass the House by a wide margin. Though there is greater support for similar legislation in the state Senate, it may be a moot point considering the House's vote on the proposed legislation. Actively challenging legislation that proposes an increase in the OTP excise tax from 20% 30%.
Massachusetts
Potential tax increase: recently a joint committee on revenue held a hearing to discuss the merits of yet another tobacco tax increase bill. Currently 30%, the bill proposes to increase the OTP excise tax to as high as 80%. Presently the bill remains in committee with little details being released. At this time we do not foresee the legislation moving and will continue to monitor.
Michigan
Smoking ban bill, potential tobacco tax increase: the House approved a statewide smoking ban bill that includes exemptions for retail tobacco shops, cigar bars, and casinos, while banning smoking statewide in bars and restaurants. The bill is in the Senate where it may come to a vote in the next few weeks.
Minnesota
Tax increase-presently, legislation to increase the OTP excise tax rate from the current rate of 70% to 140% has not advanced and at this time, we do not expect it to advance. Will continue monitoring. State-level group currently has its own lobbyist also monitoring issue.
Nebraska
Cigar bar exemption approved: hats off to retailers and their coalition in the state who worked to secure an exemption for the state's cigar bars. The exemption comes on the heels of a statewide smoking ban passed last year that has been implemented. This smoking ban already exempts retail tobacco shops. The cigar bar exempt also preempts any local ordinances (Lincoln as one example). The cigar bar exemption goes into effect September 1, 2009.
Nevada
Exemption to allow smoking in convention centers approved: Following the voter-approved ballot initiative that banned smoking throughout the state with limited exmeptions for casinos, some bars, and brothels, the state legislature approved legislation that carried an amendment to again allow smoking in convention centers in the state. The legislation, an anti-stalking bill, was approved on the last day of the legislative calendar and the governor is expected to sign the bill (Nevada governors historically rarely veto bills approved by the legislature). As the amendment was a rider to an anti-stalking bill, that further lessens the probability of a veto. The exemption goes into effect Dec. 10, 2009.
New Hampshire
The Senate recently passed the House-approved proposal to begin taxing bring large cigars (as defined by the federal government) into the OTP excise tax category for the first time, and increase the exise tax from the present rate of 19% rate to 48.5%. Under this propsal, cigars wholesaling for $2 or more would be exempt. The tax increases are a small part of the budget bills enacted by each chamber. Because those budgets differ, the differences will have to be resolved by a conference committee. We expect some kind of resolution by the end of June.
New Jersey
Several bills currently in the state assembly proposing increases to little cigar tax rates to as high as 150%. Currently nothing to report on these specific bills.
North Carolina
Smoking ban passed-tobacco tax looming. The state that is home to several larger tobacco companies and IPCPR members passed a strict smoking ban. While retail tobacco shops and cigar bars are exempt, the approved bill's parameters may prove difficult for future premium tobacco businesses to open in the state. Also on the legislative docket is the potential for an increase to the state's tobacco taxes. Proposed legislation calls for an increase from 10% to 28% on the OTP excise tax rate, including all cigars. All tobacco industries interests will be keeping a close eye on events if and when they come to light.
Ohio
Tax increase: presently, Ohio's budget being considered includes no new tobacco tax increases, though as the state, like most others, faces budget shortfalls, nothing is guaranteed. We will closely monitor the legislature for any tobacco tax proposals.
Oregon
Legislation proposing to increase the OTP excise tax rate from 65% to 90% (while maintaining the 50-cent tax cap) currently remains inactive in the state legislature.
Pennsylvania
To date, nothing new on the state's proposal to initiate a tax on cigars and other tobacco products. Several proposals have been included, including a flat-tax on cigars. We continue closely monitoring the legislature. Pennsylvania is one of the few states still without a tax on cigars.
Texas
Smoking ban defeated: IPCPR retailers, working with the CAA and other concerned groups, managed to again hold off a statewide smoking ban. As the state legislature meets every other year, this gives retailers a bit of a break from state-level legislation dictating their businesses. Because of the state's inability to reach a compromise on a statewide ban, it may be possible for more local governments to press forward with their own anti-tobacco agendas.
Vermont
The state now has the sad distinction of having the highest OTP excise tax rate in the nation as the legislature overrode a governor's veto of the legislature's approved budget and rejecting the governor's proposal. The governor attempted to keep all large cigars at the previous rate of 41%. The Democratic-control legislature rejected that proposal.
Wisconsin
Smoking ban approved and increase in tax and cigar tax cap: a statewide smoking ban was approved by state legislators and is expected to be signed by the governor. The prohibition, while having a few details that need clarification, does exempt retail tobacco shops and cigar bars from the bill. Legislation is also being currently considered to raise the OTP excise tax rate from the current rate of 50% to 71% with an increase in the cigar tax cap from 50 cents per cigar to 71 cents per cigar.
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Federal Legislation
FDA Legislation: With the House having passed legislation giving the FDA authority over tobacco products, the measure is currently being debated on the Senate floor and is expected to pass early next week. It is not expected to be altered significantly by the Senate. The products which will be regulated first by the FDA are cigarettes, roll-your-own cigarette tobacco, and smokeless tobacco. The FDA will publish a final rule regarding those products approximately 180 days (six months) after the legislation is enacted into law. That rule, which will become effective no later than one year after the FDA legislation is enacted, will be almost identical to the rules promulgated by the agency in 1996.
Should the agency decide to regulate any other tobacco product, it is required to publish a proposed rulemaking in the Federal Register, include supporting justification and findings and provide a comment period of not less than 60 days. No such regulation may take effect before one year after its publication "unless necessary for the protection of the public health."
Beginning three months after enactment of the legislation, flavorings (other than tobacco or menthol) will be banned in cigarettes only. The cost of regulating tobacco products will be provided through user fees assessed on tobacco manufacturers and importers. However, user fees will not be imposed on an industry unless and until it is formally regulated by the FDA. Thus, user fees will be paid initially only by cigarette, ryo cigarette tobacco, and smokeless tobacco companies.
SCHIP -- Permits, Reports and Recordkeeping Requirements for Manufacturers and Importers of Processed Tobacco: The SCHIP legislation requires that manufacturers and importers of processed tobacco be qualified for and obtain a permit from TTB, take inventories, submit reports, and keep records as required by regulation. There is no tax liability on processed tobacco and no bond requirement. Under the SCHIP Act, the processing of tobacco does not include the farming or growing of tobacco or the handling of tobacco solely for sale, shipment, or delivery to a manufacturer of tobacco products or processed tobacco.
The Act includes a transitional rule whereby any person engaged in the business as a manufacturer or importer of processed tobacco on April 1, 2009, who submits an application to the TTB within 90 days after April 1, 2009 (that is, on or before June 30, 2009) may continue to engage in that business pending final action by TTB on the permit application. Information will be available on the TTB's website, www.ttb.gov, as they make it available.
(courtesy Norm Sharp, President, Cigar Assocaition of America (CAA))
For more information visit the International Premium Cigar & Pipe Retailers Association website at www.ipcpr.org.
