Sec. 401. Creation of Opportunity Trust Fund and imposition of taxes with respect to cannabis products
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/bill/117/s/4591/is/section-401A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Subtitle E of the Internal Revenue Code of 1986 is amended by adding at the end the following new chapter: Subchapter A. Tax on Cannabis Products Subchapter B. Authorization and Bond Requirements Subchapter C. Operations Subchapter D. Penalties Sec. 5901. Imposition of tax. Sec. 5902. Definitions. Sec. 5903. Liability and method of payment. Sec. 5904. Exemption from tax; transfers in bond. Sec. 5905. Credit, refund, or drawback of tax. There is hereby imposed on any cannabis product produced in or imported into the United States a tax equal to— for any such product removed during the first 5 calendar years ending after the date on which this chapter becomes effective, the applicable percentage of such product’s removal price, and for any product removed during any calendar year after the calendar years described in paragraph (1), the applicable equivalent amount.
For purposes of subsection (a)(1), the applicable percentage shall be determined as follows: For any cannabis product sold during the first 2 calendar years in which this chapter becomes effective, 10 percent. For any cannabis product sold during the calendar year after the period described in paragraph (1), 15 percent. For any cannabis product sold during the calendar year after the period described in paragraph (2), 20 percent. For any cannabis product sold during the calendar year after the period described in paragraph (3), 25 percent.
For purposes of subsection (a)(2), the term applicable equivalent amount means, with respect to any cannabis product removed during any calendar year, an amount equal to— in the case of any cannabis product not described in subparagraph (B), the product of the applicable rate per ounce multiplied by the number of ounces of such product (and a proportionate tax at the like rate on all fractional parts of an ounce of such product), and in the case of any THC product, the product of the applicable rate per gram multiplied by the number of grams of tetrahydrocannabinol in such product (and a proportionate tax at the like rate on all fractional parts of a gram of tetrahydrocannabinol in such product).
For purposes of paragraph (1)(A), the term applicable rate per ounce means, with respect to any cannabis product removed during any calendar year, 25 percent of the prevailing sales price of cannabis flowers sold in the United States during the 12-month period ending one calendar quarter before such calendar year, expressed on a per ounce basis, as determined by the Secretary. For purposes of paragraph (1)(B), the term applicable rate per gram means, with respect to any cannabis product removed during any calendar year, 25 percent of the prevailing sales price of tetrahydrocannabinol sold in the United States during the 12-month period ending one calendar quarter before such calendar year, expressed on a per gram basis, as determined by the Secretary.
The tax under this section shall attach to any cannabis product as soon as such product is in existence as such, whether it be subsequently separated or transferred into any other substance, either in the process of original production or by any subsequent process. The tax imposed by this section shall be a first lien on the cannabis product from the time the product is in existence as such until the tax is paid. The lien imposed by this paragraph shall terminate in the case of products produced at a cannabis production facility when such products are— withdrawn from bonded premises on determination of tax, withdrawn from bonded premises free of tax under provisions of section 5904(a), or exported, deposited in a foreign-trade zone, or deposited in a customs bonded warehouse.
In the case of a qualified domestic manufacturer of cannabis products, there shall be allowed as a credit against any tax imposed by subsection
(a)for the calendar year an amount equal to 50 percent of the applicable tax amount for such calendar year. For purposes of this subsection, the applicable tax amount shall be an amount equal to the lesser of— the amount of any tax imposed by subsection
(a)for the calendar year, or the phase-in amount. For purposes of subparagraph (A), the phase-in amount shall be an amount equal to— for the calendar year which includes the date on which this chapter first becomes effective, $2,000,000, for the first calendar year subsequent to the calendar year described in clause (i), $2,000,000, for the second calendar year subsequent to the calendar year described in clause (i), $3,000,000, for the third calendar year subsequent to the calendar year described in clause (i), $4,000,000, and for any calendar years subsequent to the calendar year described in clause (iv), $5,000,000. The credit under this subsection shall not apply in the case of any cannabis which is— received in bond, imported, smuggled into the United States, or produced other than as authorized by this chapter. Subparagraph (A)(i) shall not apply with respect to any cannabis which is transferred in bond solely as unprocessed plant matter if such cannabis is processed by the taxpayer to produce an extract which contains no plant matter. In the case of cannabis transferred in bond from the person who produced such cannabis (hereinafter referred to as transferor ) to another person for packaging or labeling of such cannabis, and returned to the transferor for removal, subparagraph (A)(i) shall not apply, but only if the transferor retains title during the entire period between such production and removal. Pursuant to rules issued by the Secretary, 2 or more entities (whether or not under common control) that produce any cannabis product under a license, franchise, or other arrangement shall be treated as a single taxpayer for purposes of the application of this subsection. The credit allowable by paragraph (1)— shall be determined at the same time the tax is determined under subsection
(a)of this section, and shall be allowable at the time the tax described in such subsection is payable as if the credit allowable by this subsection constituted a reduction in the rate of such tax. Rules similar to rules of section 5051(a)(5) shall apply for purposes of this subsection. For purposes of this subtitle— The terms cannabis and cannabis product have the same meaning given such terms under subsection
(ss)of section 201 of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 321 ). The term cannabis flower means any cannabis plant product consisting of the flower of the plant Cannabis sativa L., or any other part of such plant with significant concentrations of tetrahydrocannabinol as designated by the Secretary. The term cannabis plant product means any part of the plant Cannabis sativa L. which— is a cannabis product, and does not contain any cannabis that has been processed, extracted, or concentrated (other than harvesting, drying, curing, or trimming). The term THC product means any cannabis product other than a cannabis plant product. The term tetrahydrocannabinol means total tetrahydrocannabinol equivalent (as defined in paragraph (1)(B) of section 297A of the Agricultural Marketing Act of 1946 ( 7 U.S.C. 1639o )). For purposes of this chapter— The term cannabis enterprise means a producer, importer, or export warehouse proprietor. The term producer means any person who plants, cultivates, harvests, grows, manufactures, produces, compounds, converts, processes, prepares, or packages any cannabis product. Subject to such regulations as the Secretary shall prescribe, the term producer shall not include any individual otherwise described in subparagraph
(A)if the only cannabis product described in such subparagraph with respect to such individual is for personal or family use and not for sale, provided— such individual is solely involved in the planting, cultivation, and growing of such cannabis, the planting, cultivation, and growing of such cannabis occurs only in such individual’s dwelling house, or in any shed, yard, or inclosure connected with such individual’s dwelling house, and the quantity of cannabis products planted, cultivated, and grown by such individual does not exceed the personal use production limitations determined by the Secretary as are necessary to protect the public and protect the revenue. The term importer means any person who— is in the United States and to whom non-tax-paid cannabis products, produced in a foreign country or a possession of the United States, are shipped or consigned, removes cannabis products for sale or consumption in the United States from a customs bonded warehouse, or smuggles or otherwise unlawfully brings any cannabis product into the United States. The term export warehouse proprietor means any person who operates an export warehouse. The term export warehouse means a bonded internal revenue warehouse for the storage of cannabis products, upon which the internal revenue tax has not been paid— for subsequent shipment to a foreign country or a possession of the United States, or for consumption beyond the jurisdiction of the internal revenue laws of the United States. The term cannabis production facility means an establishment which is qualified under subchapter B to perform any operation for which such qualification is required under such subchapter. For purposes of this chapter— The term produce includes any activity described in subsection (b)(2)(A). The terms removal or remove means— the transfer of cannabis products from the premises of a producer (or the transfer of such products from the bonded premises of a producer to a non-bonded premises of such producer), release of such products from customs custody, or smuggling or other unlawful importation of such products into the United States. The term removal price means— except as otherwise provided in this paragraph, the price for which the cannabis product is sold in the sale which occurs in connection with the removal of such product, in the case of any such sale which is described in section 5903(c), the price determined under such section, and if there is no sale which occurs in connection with such removal, the price which would be determined under section 5903(c) if such product were sold at a price which cannot be determined. The producer or importer of any cannabis product shall be liable for the taxes imposed thereon by section 5901. When cannabis products are transferred, without payment of tax, pursuant to subsection
(b)or
(c)of section 5904— except as provided in clause (ii), the transferee shall become liable for the tax upon receipt by the transferee of such articles, and the transferor shall thereupon be relieved of their liability for such tax, and in the case of cannabis products which are released in bond from customs custody for transfer to the bonded premises of a producer, the transferee shall become liable for the tax on such articles upon release from customs custody, and the importer shall thereupon be relieved of their liability for such tax. All provisions of this chapter applicable to cannabis products in bond shall be applicable to such articles returned to bond upon withdrawal from the market or returned to bond after previous removal for a tax-exempt purpose. The taxes imposed by section 5901 shall be paid on the basis of return. The Secretary shall, by regulations, prescribe the period or the event to be covered by such return and the information to be furnished on such return. In the case of any transfer to which subsection (a)(2)(A) applies, the tax under section 5901 on the transferee shall (if not otherwise relieved by reason of a subsequent transfer to which such subsection applies) be imposed with respect to the removal of the cannabis product from the bonded premises of the transferee. Any postponement under this subsection of the payment of taxes determined at the time of removal shall be conditioned upon the filing of such additional bonds, and upon compliance with such requirements, as the Secretary may prescribe for the protection of the revenue. The Secretary may, by regulations, require payment of tax on the basis of a return prior to removal of the cannabis products where a person defaults in the postponed payment of tax on the basis of a return under this subsection or regulations prescribed thereunder. All administrative and penalty provisions of this title, insofar as applicable, shall apply to any tax imposed by section 5901. Except as otherwise provided in this paragraph, in the case of taxes on cannabis products removed during any semimonthly period under bond for deferred payment of tax, the last day for payment of such taxes shall be the 14th day after the last day of such semimonthly period. In the case of cannabis products which are imported into the United States, the following provisions shall apply: The last day for payment of tax shall be the 14th day after the last day of the semimonthly period during which the article is entered into the customs territory of the United States. Except as provided in clause (iv), in the case of an entry for warehousing, the last day for payment of tax shall not be later than the 14th day after the last day of the semimonthly period during which the article is removed from the first such warehouse. Except as provided in clause
(iv)and in regulations prescribed by the Secretary, articles brought into a foreign trade zone shall, notwithstanding any other provision of law, be treated for purposes of this subsection as if such zone were a single customs warehouse. Clauses
(ii)and
(iii)shall not apply to any article which is shown to the satisfaction of the Secretary to be destined for export. In the case of cannabis products which are brought into the United States from Puerto Rico and subject to tax under section 7652, the last day for payment of tax shall be the 14th day after the last day of the semimonthly period during which the article is brought into the United States. Notwithstanding section 7503, if, but for this subparagraph, the due date under this paragraph would fall on a Saturday, Sunday, or a legal holiday (as defined in section 7503), such due date shall be the immediately preceding day which is not a Saturday, Sunday, or such a holiday. In the case of any cannabis products produced in the United States at any place other than the premises of a producer that has filed the bond and obtained the authorization required under this chapter, tax shall be due and payable immediately upon production. Except as provided in clause (ii), in the case of any taxpayer who reasonably expects to be liable for not more than $100,000 in taxes imposed with respect to cannabis products under sections 5901 and 7652 for the calendar year and who was liable for not more than $100,000 in such taxes in the preceding calendar year, the last day for the payment of tax on withdrawals, removals, and entries (and articles brought into the United States from Puerto Rico) shall be the 14th day after the last day of the calendar quarter during which the action giving rise to the imposition of such tax occurs. In the case of any taxpayer who reasonably expects to be liable for not more than $10,000 in taxes imposed with respect to cannabis products under sections 5901 and 7652 for the calendar year and who was liable for not more than $10,000 in such taxes in the preceding calendar year, the last day for the payment of tax on withdrawals, removals, and entries (and articles brought into the United States from Puerto Rico) shall be the 14th day after the last day of the calendar year. Subparagraph (A)(i) shall not apply to any taxpayer for any portion of the calendar year following the first date on which the aggregate amount of tax due under sections 5901 and 7652 from such taxpayer during such calendar year exceeds $100,000, and any tax under such sections which has not been paid on such date shall be due on the 14th day after the last day of the semimonthly period in which such date occurs. Subparagraph (A)(ii) shall not apply to any taxpayer for any portion of the calendar year following the first date on which the aggregate amount of tax due under sections 5901 and 7652 from such taxpayer during such calendar year exceeds $10,000, and any tax under such sections which has not been paid on such date shall be due on the 14th day after the last day of the calendar quarter in which such date occurs. For purposes of this paragraph, the term calendar quarter has the same meaning given such term under section 5061(d)(4)(C). Any person who in any 12-month period, ending December 31, was liable for a gross amount equal to or exceeding $5,000,000 in taxes imposed on cannabis products by section 5901 (or section 7652) shall pay such taxes during the succeeding calendar year by electronic fund transfer (as defined in section 5061(e)(2)) to a Federal Reserve Bank. Rules similar to the rules of section 5061(e)(3) shall apply to the $5,000,000 amount specified in the preceding sentence. If an article is sold directly to consumers, sold on consignment, or sold (otherwise than through an arm’s length transaction) at less than the fair market price, or if the price for which the article sold cannot be determined, the tax under section 5901(a) shall be— computed on the price for which such articles are sold, in the ordinary course of trade, by producers thereof, as determined by the Secretary, and imposed on either person involved in such sale, as determined by the Secretary. For purposes of this section, a sale is considered to be made under circumstances otherwise than at arm’s length if— the parties are members of the same controlled group, whether or not such control is actually exercised to influence the sale price, the parties are members of a family, as defined in section 267(c)(4), or the sale is made pursuant to special arrangements between a producer and a purchaser. The term controlled group has the meaning given to such term by subsection
(a)of section 1563, except that more than 50 percent shall be substituted for at least 80 percent each place it appears in such subsection. Under regulations prescribed by the Secretary, principles similar to the principles of subclause
(I)shall apply to a group of persons under common control where one or more of such persons is not a corporation. In determining, for the purposes of this chapter, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of tax imposed by this chapter, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the preceding sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary in accordance with regulations. Paragraphs
(1)and
(2)shall apply for purposes of section 5901(c) only to the extent that the Secretary determines appropriate. In the case of— a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments, a conditional sale, or a chattel mortgage arrangement wherein it is provided that the sales price shall be paid in installments, there shall be paid upon each payment with respect to the article a percentage of such payment equal to the rate of tax in effect on the date such payment is due. If installment accounts, with respect to payments on which tax is being computed as provided in paragraph (1), are sold or otherwise disposed of, then paragraph
(1)shall not apply with respect to any subsequent payments on such accounts (other than subsequent payments on returned accounts with respect to which credit or refund is allowable by reason of section 6416(b)(5)), but instead— there shall be paid an amount equal to the difference between— the tax previously paid on the payments on such installment accounts, and the total tax which would be payable if such installment accounts had not been sold or otherwise disposed of (computed as provided in paragraph (1)), except that if any such sale is pursuant to the order of, or subject to the approval of, a court of competent jurisdiction in a bankruptcy or insolvency proceeding, the amount computed under subparagraph
(A)shall not exceed the sum of the amounts computed by multiplying— the proportionate share of the amount for which such accounts are sold which is allocable to each unpaid installment payment, by the rate of tax under this chapter in effect on the date such unpaid installment payment is or was due. The sum of the amounts payable under this subsection in respect of the sale of any article shall not exceed the total tax. Cannabis products on which the internal revenue tax has not been paid or determined may, subject to such regulations as the Secretary shall prescribe, be withdrawn from the bonded premises of any producer in approved containers free of tax and not for resale for use— exclusively in scientific research by a laboratory, by a proprietor of a cannabis production facility in research, development, or testing (other than consumer testing or other market analysis) of processes, systems, materials, or equipment, relating to cannabis or cannabis operations, under such limitations and conditions as to quantities, use, and accountability as the Secretary may by regulations require for the protection of the revenue, in any drug containing cannabis which is in compliance with Federal and State law, or by the United States or any governmental agency thereof, any State, any political subdivision of a State, or the District of Columbia, for nonconsumption purposes. Subject to such regulations and under such bonds as the Secretary shall prescribe, a producer or export warehouse proprietor may transfer cannabis products, without payment of tax, to the bonded premises of another producer or export warehouse proprietor, or remove such articles, without payment of tax, for shipment to a foreign country or a possession of the United States, or for consumption beyond the jurisdiction of the internal revenue laws of the United States. Cannabis products may not be transferred or removed under this subsection unless such products bear such marks, labels, or notices as the Secretary shall by regulations prescribe. Cannabis products imported or brought into the United States may be released from customs custody, without payment of tax, for delivery to a producer or export warehouse proprietor if such articles are not put up in packages, in accordance with such regulations and under such bond as the Secretary shall prescribe. Cannabis products classifiable under item 9801.00.10 of the Harmonized Tariff Schedule of the United States (relating to duty on certain articles previously exported and returned), as in effect on the date of the enactment of the Cannabis Administration and Opportunity Act , may be released from customs custody, without payment of that part of the duty attributable to the internal revenue tax for delivery to the original producer of such cannabis products or to the export warehouse proprietor authorized by such producer to receive such products, in accordance with such regulations and under such bond as the Secretary shall prescribe. Upon such release such products shall be subject to this chapter as if they had not been exported or otherwise removed from internal revenue bond. Credit or refund of any tax imposed by this chapter or section 7652 shall be allowed or made (without interest) to the cannabis enterprise on proof satisfactory to the Secretary that the claimant cannabis enterprise has paid the tax on— cannabis products withdrawn from the market by the claimant, or such products lost (otherwise than by theft) or destroyed, by fire, casualty, or act of God, while in the possession or ownership of the claimant. No tax shall be collected in respect of cannabis products lost or destroyed while in bond, except that such tax shall be collected— in the case of loss by theft, unless the Secretary finds that the theft occurred without connivance, collusion, fraud, or negligence on the part of the proprietor of the cannabis production facility, owner, consignor, consignee, bailee, or carrier, or their employees or agents, in the case of voluntary destruction, unless such destruction is carried out as provided in paragraph (3), and in the case of an unexplained shortage of cannabis products. In any case in which cannabis products are lost or destroyed, whether by theft or otherwise, the Secretary may require the proprietor of a cannabis production facility or other person liable for the tax to file a claim for relief from the tax and submit proof as to the cause of such loss. In every case where it appears that the loss was by theft, the burden shall be upon the proprietor of the cannabis production facility or other person responsible for the tax under section 5901 to establish to the satisfaction of the Secretary that such loss did not occur as the result of connivance, collusion, fraud, or negligence on the part of the proprietor of the cannabis production facility, owner, consignor, consignee, bailee, or carrier, or their employees or agents. In any case where the tax would not be collectible by virtue of subparagraph (A), but such tax has been paid, the Secretary shall refund such tax. Except as provided in subparagraph (E), no tax shall be abated, remitted, credited, or refunded under this paragraph where the loss occurred after the tax was determined. The abatement, remission, credit, or refund of taxes provided for by subparagraphs
(A)and
(C)in the case of loss of cannabis products by theft shall only be allowed to the extent that the claimant is not indemnified against or recompensed in respect of the tax for such loss. The provisions of this paragraph shall extend to and apply in respect of cannabis products lost after the tax was determined and before completion of the physical removal of the cannabis products from the bonded premises. The proprietor of a cannabis production facility or other persons liable for the tax imposed by this chapter or by section 7652 with respect to any cannabis product in bond may voluntarily destroy such products, but only if such destruction is under such supervision and under such regulations as the Secretary may prescribe. Any claim for credit or refund of tax under this subsection shall be filed within 6 months after the date of the withdrawal from the market, loss, or destruction of the products to which the claim relates, and shall be in such form and contain such information as the Secretary shall by regulations prescribe. There shall be an allowance of drawback of tax paid on cannabis products, when shipped from the United States, in accordance with such regulations and upon the filing of such bond as the Secretary shall prescribe. Any person using cannabis on which the tax under this subchapter has been determined, in the manufacture or production of— a drug containing cannabis which is in compliance with Federal and State law, or extracts with a tetrahydrocannabinol concentration of not more than the allowable tetrahydrocannabinol equivalent amount as described in paragraph (1)(C) of section 297A of the Agricultural Marketing Act of 1946 ( 7 U.S.C. 1639o ), shall be eligible for drawback at the time when such cannabis is used in the manufacture of such products as provided for in this section. Every person claiming drawback under this section shall— register annually with the Secretary, keep such books and records as may be necessary to establish the fact that cannabis received by such person and on which the tax has been determined were used in a manner described in subsection (a), and be subject to such rules and regulations in relation thereto as the Secretary shall prescribe to secure the Treasury against frauds. For the purpose of ascertaining the correctness of any claim filed under this section, the Secretary is authorized to— examine any books, papers, records, or memoranda bearing upon the matters required to be alleged in the claim, require the attendance of the person filing the claim or of any officer or employee of such person or the attendance of any other person having knowledge in the premises, and take testimony with reference to any matter covered by the claim and to administer oaths to any person giving such testimony. In the case of cannabis on which the tax under this subchapter has been paid or determined, and which has been used as provided in this section, a drawback shall be allowed at a rate equal to 90 percent of the amount of such tax which has been paid or determined. Subject to subparagraph (B), such drawback shall be due and payable quarterly upon filing of a proper claim with the Secretary. In the case of any person entitled to such drawback who elects in writing to file monthly claims therefor, such drawback shall be due and payable monthly upon filing of a proper claim with the Secretary. The Secretary may require persons electing to file monthly drawback claims under this subparagraph to file with the Secretary a bond or other security in such amount and with such conditions as the Secretary shall by regulations prescribe. Any election under clause
(i)may be revoked on filing of notice thereof with the Secretary. No claim under this section shall be allowed unless filed with the Secretary within the 6 months next succeeding the quarter in which the cannabis covered by the claim was used as provided in this section. No claim for drawback under this subsection shall be denied in the case of a failure to comply with any requirement imposed under this section or any rule or regulation issued thereunder upon the claimant's establishing to the satisfaction of the Secretary that cannabis on which the tax has been paid or determined was in fact used in a manner described in subsection (a). In the case of a failure to comply with any requirement imposed under this section or any rule or regulation issued thereunder, the claimant shall be liable for a penalty of $1,000 for each failure to comply unless it is shown that the failure to comply was due to reasonable cause. The aggregate amount of the penalties imposed under clause
(i)for failures described in subparagraph
(A)in respect of any claim shall not exceed the amount of such claim (determined without regard to clause (i)). The penalty imposed by subparagraph
(B)shall be assessed, collected, and paid in the same manner as taxes, as provided in section 6665(a). Sec. 5911. Establishment and bond. Sec. 5912. Application. Sec. 5913. Cannabis production facility. Except as authorized by the Secretary or on the bonded premises of a cannabis production facility duly authorized to produce cannabis products according to law, no cannabis product may be planted, cultivated, harvested, grown, manufactured, produced, compounded, converted, processed, prepared, or packaged in any building or on any premises. Any person establishing a cannabis production facility shall, prior to commencing operations— make application to the Secretary pursuant to section 5912, file the bond required under subsection (b), and receive authorization from the Secretary to operate. This subsection shall not apply with respect the activities of an individual who is not treated as a producer by reason of section 5902(b)(2)(B). Every person, before commencing business as a producer or an export warehouse proprietor, shall file such bond, conditioned upon compliance with this chapter and regulations issued thereunder, in such form, amount, and manner as the Secretary shall by regulation prescribe. A new or additional bond may be required whenever the Secretary considers such action necessary for the protection of the revenue. No person shall engage in such business until he receives notice of approval of such bond. A bond may be disapproved, upon notice to the principal on the bond, if the Secretary determines that the bond is not adequate to protect the revenue. Any bond filed hereunder may be canceled, upon notice to the principal on the bond, whenever the Secretary determines that the bond no longer adequately protects the revenue. During any period to which subparagraph
(A)of section 5903(b)(3) applies to a taxpayer (determined after application of subparagraph
(B)thereof), such taxpayer shall not be required to furnish any bond with respect to engaging in any business as a producer or an export warehouse proprietor. Any taxpayer for any period described in subparagraph
(A)shall be treated as if sufficient bond has been furnished for purposes of engaging in such business for purposes of any requirements relating to bonds under this chapter. The application required pursuant to this section shall disclose, as regulations issued by the Secretary shall provide, such information as may be necessary to enable the Secretary to determine the location and extent of the premises, the type of operations to be conducted on such premises, and whether the operations will be in conformity with law and regulations, consistent with the requirements under section 302 of the Federal Alcohol Administration Act. A cannabis production facility, including noncontiguous portions thereof, shall be so located, constructed, and equipped, as to afford adequate protection to the revenue, as regulations prescribed by the Secretary may provide. Sec. 5921. Inventories, reports, and records. Sec. 5922. Packaging and labeling. Sec. 5923. Purchase, receipt, possession, or sale of cannabis products after removal. Sec. 5924. Restrictions relating to marks, labels, notices, and packages. Sec. 5925. Restriction on importation of previously exported cannabis products. Every cannabis enterprise shall— make a true and accurate inventory at the time of commencing business, at the time of concluding business, and at such other times, in such manner and form, and to include such items, as the Secretary shall by regulation prescribe, with such inventories to be subject to verification by any internal revenue officer, make reports containing such information, in such form, at such times, and for such periods as the Secretary shall by regulation prescribe, and keep such records in such manner as the Secretary shall by regulation prescribe, with such records to be available for inspection by any internal revenue officer during business hours. All cannabis products shall, before removal, be put up in such packages as the Secretary shall by regulation prescribe. Every package of cannabis products shall, before removal, bear the marks, labels, and notices if any, that the Secretary by regulation prescribes. No certificate, coupon, or other device purporting to be or to represent a ticket, chance, share, or an interest in, or dependent on, the event of a lottery shall be contained in, attached to, or stamped, marked, written, or printed on any package of cannabis products. No indecent or immoral picture, print, or representation shall be contained in, attached to, or stamped, marked, written, or printed on any package of cannabis products. Subject to regulations prescribed by the Secretary, cannabis products may be exempted from subsections
(a)and
(b)if such products are— for experimental purposes, or transferred to the bonded premises of another producer or export warehouse proprietor or released in bond from customs custody for delivery to a producer. No person shall— with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, after removal, any cannabis products— upon which the tax has not been paid or determined in the manner and at the time prescribed by this chapter or regulations thereunder, or which, after removal without payment of tax pursuant to section 5904(a), have been diverted from the applicable purpose or use specified in that section, with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, after removal, any cannabis products which are not put up in packages as required under section 5922 or which are put up in packages not bearing the marks, labels, and notices, as required under such section, or otherwise than with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, after removal, any cannabis products which are not put up in packages as required under section 5922 or which are put up in packages not bearing the marks, labels, and notices, as required under such section. Paragraph
(3)of subsection
(a)shall not prevent the sale or delivery of cannabis products directly to consumers from proper packages, nor apply to such articles when so sold or delivered. Any person who possesses cannabis products in violation of paragraph
(1)or
(2)of subsection
(a)shall be liable for a tax equal to the tax on such articles. No person shall, with intent to defraud the United States, destroy, obliterate, or detach any mark, label, or notice prescribed or authorized, by this chapter or regulations thereunder, to appear on, or be affixed to, any package of cannabis products before such package is emptied. Cannabis products produced in the United States and labeled for exportation under this chapter— may be transferred to or removed from the premises of a producer or an export warehouse proprietor only if such articles are being transferred or removed without tax in accordance with section 5904, may be imported or brought into the United States, after their exportation, only if such articles either are eligible to be released from customs custody with the partial duty exemption provided in section 5904(d) or are returned to the original producer of such article as provided in section 5904(c), and may not be sold or held for sale for domestic consumption in the United States unless such articles are removed from their export packaging and repackaged by the original producer into new packaging that does not contain an export label. This section shall apply to articles labeled for export even if the packaging or the appearance of such packaging to the consumer of such articles has been modified or altered by a person other than the original producer so as to remove or conceal or attempt to remove or conceal (including by the placement of a sticker over) any export label. For purposes of this section, section 5904(d), section 5931, and such other provisions as the Secretary may specify by regulations, references to exportation shall be treated as including a reference to shipment to the Commonwealth of Puerto Rico. For purposes of this section, an article is labeled for export or contains an export label if it bears the mark, label, or notice required under section 5904(b). Sec. 5931. Civil penalties. Sec. 5932. Criminal penalties. Whoever willfully omits, neglects, or refuses to comply with any duty imposed upon them by this chapter, or to do, or cause to be done, any of the things required by this chapter, or does anything prohibited by this chapter, shall in addition to any other penalty provided in this title, be liable to a penalty of $10,000, to be recovered, with costs of suit, in a civil action, except where a penalty under subsection
(b)or
(c)or under section 6651 or 6653 or part II of subchapter A of chapter 68 may be collected from such person by assessment. Whoever fails to pay any tax imposed by this chapter at the time prescribed by law or regulations, shall, in addition to any other penalty provided in this title, be liable to a penalty of 10 percent of the tax due but unpaid. Every person who sells, relands, or receives within the jurisdiction of the United States any cannabis products which have been labeled or shipped for exportation under this chapter, every person who sells or receives such relanded cannabis products, and every person who aids or abets in such selling, relanding, or receiving, shall, in addition to the tax and any other penalty provided in this title, be liable for a penalty equal to the greater of $10,000 or 10 times the amount of the tax imposed by this chapter. All cannabis products relanded within the jurisdiction of the United States shall be forfeited to the United States and destroyed. All vessels, vehicles, and aircraft used in such relanding or in removing such cannabis products from the place where relanded, shall be forfeited to the United States. The penalties imposed by subsections
(b)and
(c)shall be assessed, collected, and paid in the same manner as taxes, as provided in section 6665(a). For penalty for failure to make deposits or for overstatement of deposits, see section 6656. Whoever, with intent to defraud the United States— engages in business as a cannabis enterprise without filing the application and obtaining the authorization where required by this chapter or regulations thereunder, fails to keep or make any record, return, report, or inventory, or keeps or makes any false or fraudulent record, return, report, or inventory, required by this chapter or regulations thereunder, refuses to pay any tax imposed by this chapter, or attempts in any manner to evade or defeat the tax or the payment thereof, sells or otherwise transfers, contrary to this chapter or regulations thereunder, any cannabis products subject to tax under this chapter, or purchases, receives, or possesses, with intent to redistribute or resell, any cannabis product— upon which the tax has not been paid or determined in the manner and at the time prescribed by this chapter or regulations thereunder, or which, without payment of tax pursuant to section 5904, have been diverted from the applicable purpose or use specified in that section, shall, for each such offense, be fined not more than $10,000, or imprisoned not more than 5 years, or both. Any person who possesses cannabis products in violation of subsection
(a)shall be liable for a tax equal to the tax on such articles. . Subchapter A of chapter 98 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: There is established in the Treasury of the United States a trust fund to be known as the Opportunity Trust Fund (referred to in this section as the Trust Fund ), consisting of such amounts as may be appropriated or credited to such fund as provided in this section or section 9602(b). There are hereby appropriated to the Trust Fund amounts equivalent to the net revenues received in the Treasury from the taxes imposed under subchapter A of chapter 56. The Secretary shall pay from time to time from the Trust Fund into the general fund of the Treasury amounts equivalent to the amounts appropriated under the Cannabis Administration and Opportunity Act . . Not later than 2 years after the date of the enactment of this Act, and every 5 years thereafter, the Secretary of the Treasury, or the Secretary’s delegate, shall— conduct a study concerning the characteristics of the cannabis industry, including— the number of persons operating cannabis enterprises at each level of such industry, the volume of sales, the amount of tax collected each year, the areas of evasion, and the impact of disparate State taxes on diversion and smuggling of cannabis products, and submit to Congress recommendations to improve the regulation of the industry and the administration of the related tax. Not later than 6 months before the beginning of each calendar year to which section 5901(a)(2) of the Internal Revenue Code of 1986 (as added by this section) applies, the Secretary of the Treasury, or the Secretary’s delegate, shall make publicly available a detailed description of the methodology which the Secretary anticipates using to determine the applicable rate per ounce and the applicable rate per gram which will apply for such calendar year under section 5901(c)(2) of such Code. Section 5111 of the Internal Revenue Code of 1986 is amended by striking or perfume and inserting perfume, cannabis products, or hemp-derived products . Section 7214(b) of the Internal Revenue Code of 1986 is amended— in the heading, by striking and inserting tobacco or liquor production , and production of tobacco, liquor, or cannabis products by striking or cigarettes and inserting cigarettes, or cannabis products (as defined in section 5902(a)(1)) . Section 5702 of the Internal Revenue Code of 1986 is amended— in subsection (e)— by inserting or a cannabis product after tobacco , and by inserting (including for use as a cannabis cigarette wrapper) after cigarette wrapper , in subsection (f), by inserting (including for use in making cannabis cigarettes) after making cigarettes , and in subsection (o), by inserting (including for use in making cannabis cigarettes) after wrapper thereof . Section 6103(o)(1)(A) of the Internal Revenue Code of 1986 is amended by striking and firearms and inserting firearms, and cannabis products . The heading of subsection
(a)of section 7608 of such Code is amended by inserting after cannabis products, . tobacco, The table of chapters for subtitle E of such Code is amended by adding at the end the following new item: Chapter 56. Cannabis Products . The table of sections for subchapter A of chapter 98 of such Code is amended by adding at the end the following new item: Sec. 9512. Opportunity Trust Fund. . Except as otherwise provided in this subsection, the amendments made by this section shall apply to removals, and applications under section 5912 of the Internal Revenue Code of 1986 (as added by subsection (a)), after 180 days after the date of the enactment of this Act. The amendments made by subsections (b), (c), (d), (f), (g), and
(h)shall take effect on the date of the enactment of this Act.
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Sec. 401
Creation of Opportunity Trust Fund and imposition of taxes with respect to cannabis products
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