I 116TH CONGRESS 1ST SESSION H. R. 1120 To amend the Internal Revenue Code of 1986 to provide for the taxation and regulation of marijuana products, and for other purposes. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 8, 2019 Mr. BLUMENAUER introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on the Judiciary, Energy and Commerce, Natural Resources, and Agri- culture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdic- tion of the committee concerned A BILL To amend the Internal Revenue Code of 1986 to provide for the taxation and regulation of marijuana products, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Marijuana Revenue and Regulation Act’’. 5 (b) TABLE OF CONTENTS.—The table of contents of 6 this Act is as follows: 7 Sec. 1. Short title; table of contents. VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 2 •HR 1120 IH TITLE I—TAXATION Sec. 101. Establishment of taxes relating to marijuana products. TITLE II—REGULATION Subtitle A—Amendments To Decriminalize Marijuana at the Federal Level Sec. 201. Decriminalization of marijuana. Sec. 202. Application of the Controlled Substances Act and Controlled Sub- stances Import and Export Act to marijuana. Sec. 203. Conforming and ancillary amendments. Subtitle B—Federal Marijuana Licensing and Related Matters Sec. 211. Federal marijuana administration. Sec. 212. Addition of marijuana to certain legal authorities relating to intoxi- cating liquors. Subtitle C—Other Amendments Relating to Federal Authority Regarding Marijuana Sec. 221. Food and Drug Administration. Sec. 222. Transferring agency functions with regard to marijuana. Sec. 223. Unfair advertising practices. Sec. 224. Comptroller General review of laws and regulations. Sec. 225. Principal trade negotiating objective regarding marijuana, marijuana derivatives, and marijuana products. TITLE III—FUNDING Sec. 301. Increased funding for the Alcohol, Tobacco, and Marijuana Tax and Trade Bureau. TITLE I—TAXATION 1 SEC. 101. ESTABLISHMENT OF TAXES RELATING TO MARI- 2 JUANA PRODUCTS. 3 (a) IN GENERAL.—Subtitle E of title I of the Inter- 4 nal Revenue Code of 1986 is amended by adding at the 5 end the following new chapter: 6 ‘‘CHAPTER 56—MARIJUANA PRODUCTS 7 ‘‘SUBCHAPTER A. TAX ON MARIJUANA PRODUCTS ‘‘SUBCHAPTER B. OCCUPATIONAL TAX ‘‘SUBCHAPTER C. BOND AND PERMITS ‘‘SUBCHAPTER D. OPERATIONS ‘‘SUBCHAPTER E. PENALTIES VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 3 •HR 1120 IH ‘‘Subchapter A—Tax on Marijuana Products 1 ‘‘Sec. 5901. Imposition of tax. ‘‘Sec. 5902. Definitions. ‘‘Sec. 5903. Liability and method of payment. ‘‘Sec. 5904. Exemption from tax. ‘‘Sec. 5905. Credit, refund, or drawback of tax. ‘‘SEC. 5901. IMPOSITION OF TAX. 2 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 3 on any marijuana product produced in or imported into 4 the United States a tax equal to— 5 ‘‘(1) for any such product sold during the first 6 5 calendar years in which this chapter becomes ef- 7 fective, the applicable percentage of the price for 8 which such product is sold, and 9 ‘‘(2) for any product sold during any calendar 10 year after the period described in paragraph (1), the 11 applicable equivalent rate. 12 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 13 subsection (a)(1), the applicable percentage shall be deter- 14 mined as follows: 15 ‘‘(1) For any marijuana product sold during the 16 first 2 calendar years in which this chapter becomes 17 effective, 10 percent. 18 ‘‘(2) For any marijuana product sold during the 19 calendar year after the period described in para- 20 graph (1), 15 percent. 21 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 4 •HR 1120 IH ‘‘(3) For any marijuana product sold during the 1 calendar year after the period described in para- 2 graph (2), 20 percent. 3 ‘‘(4) For any marijuana product sold during the 4 calendar year after the period described in para- 5 graph (3), 25 percent. 6 ‘‘(c) APPLICABLE EQUIVALENT RATE.— 7 ‘‘(1) IN GENERAL.—For purposes of subsection 8 (a)(2), the applicable equivalent rate for each cal- 9 endar year shall be equal to— 10 ‘‘(A) in the case of any marijuana product 11 not described in subparagraph (B) which is sold 12 during such year, the applicable rate per ounce 13 of such product (and a proportionate tax at the 14 like rate on all fractional parts of an ounce of 15 such product), and 16 ‘‘(B) in the case of any marijuana product 17 containing a marijuana derivative which is sold 18 during such year, the applicable rate per gram 19 of tetrahydrocannabinol in such product (and a 20 proportionate tax at the like rate on all frac- 21 tional parts of a gram of tetrahydrocannabinol 22 in such product). 23 ‘‘(2) APPLICABLE RATE.— 24 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 5 •HR 1120 IH ‘‘(A) IN GENERAL.—For purposes of para- 1 graph (1)(A), the applicable rate per ounce for 2 any calendar year shall be equal to 25 percent 3 of the prevailing sales price of marijuana sold 4 in the United States during the 12-month pe- 5 riod ending one calendar quarter before such 6 calendar year, expressed on a per ounce basis, 7 as determined by the Secretary. 8 ‘‘(B) MARIJUANA DERIVATIVES.—For pur- 9 poses of paragraph (1)(B), the applicable rate 10 per gram of tetrahydrocannabinol shall be equal 11 to the quotient obtained by dividing— 12 ‘‘(i) the applicable rate per ounce (as 13 determined under subparagraph (A)), by 14 ‘‘(ii) 2.83495. 15 ‘‘(d) TIME OF ATTACHMENT ON MARIJUANA PROD- 16 UCTS.—The tax under this section shall attach to any 17 marijuana product as soon as such product is in existence 18 as such, whether it be subsequently separated or trans- 19 ferred into any other substance, either in the process of 20 original production or by any subsequent process. 21 ‘‘SEC. 5902. DEFINITIONS. 22 ‘‘For purposes of this chapter: 23 ‘‘(1) EXPORT WAREHOUSE.—The term ‘export 24 warehouse’ means a bonded internal revenue ware- 25 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 6 •HR 1120 IH house for the storage of marijuana products, upon 1 which the internal revenue tax has not been paid— 2 ‘‘(A) for subsequent shipment to a foreign 3 country, Puerto Rico, the Virgin Islands, or a 4 possession of the United States, or 5 ‘‘(B) for consumption beyond the jurisdic- 6 tion of the internal revenue laws of the United 7 States. 8 ‘‘(2) EXPORT WAREHOUSE PROPRIETOR.—The 9 term ‘export warehouse proprietor’ means any per- 10 son who operates an export warehouse. 11 ‘‘(3) IMPORTER.—The term ‘importer’ means 12 any person who— 13 ‘‘(A) is in the United States and to whom 14 nontaxpaid marijuana products, produced in a 15 foreign country, Puerto Rico, the Virgin Is- 16 lands, or a possession of the United States, are 17 shipped or consigned, 18 ‘‘(B) removes marijuana products for sale 19 or consumption in the United States from a 20 customs bonded warehouse, or 21 ‘‘(C) smuggles or otherwise unlawfully 22 brings marijuana or marijuana products into 23 the United States. 24 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 7 •HR 1120 IH ‘‘(4) MARIJUANA.—The term ‘marijuana’ has 1 the meaning given the term ‘marihuana’ under sec- 2 tion 102(16) of the Controlled Substances Act (21 3 U.S.C. 802(16)). 4 ‘‘(5) MARIJUANA DERIVATIVE.—The term 5 ‘marijuana derivative’ means any article containing 6 marijuana, or any derivative thereof, which is not a 7 naturally grown and unadulterated marijuana flow- 8 er. 9 ‘‘(6) MARIJUANA ENTERPRISE.—The term 10 ‘marijuana enterprise’ means a producer, export 11 warehouse proprietor, or importer. 12 ‘‘(7) MARIJUANA PRODUCT.— 13 ‘‘(A) IN GENERAL.—Except as provided in 14 subparagraph (B), the term ‘marijuana prod- 15 uct’ means any article which contains mari- 16 juana or any marijuana derivative. 17 ‘‘(B) EXCEPTIONS.— 18 ‘‘(i) IN GENERAL.—The term ‘mari- 19 juana product’ shall not include— 20 ‘‘(I) any article containing mari- 21 juana which has been approved by the 22 Food and Drug Administration for 23 sale for therapeutic purposes and is 24 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 8 •HR 1120 IH marketed and sold solely for such pur- 1 pose, or 2 ‘‘(II) industrial hemp. 3 ‘‘(ii) INDUSTRIAL HEMP.—For pur- 4 poses of clause (i)(II), the term ‘industrial 5 hemp’ means the plant Cannabis sativa L. 6 and any part of such plant, whether grow- 7 ing or not, with a delta-9 tetrahydrocan- 8 nabinol concentration of not more than 0.3 9 percent on a dry weight basis. 10 ‘‘(8) MARIJUANA PRODUCTION FACILITY.—The 11 term ‘marijuana production facility’ means an estab- 12 lishment which is qualified under subchapter C to 13 perform any operation for which such qualification is 14 required under such subchapter. 15 ‘‘(9) PRODUCER.—The term ‘producer’ means 16 any person who— 17 ‘‘(A) plants, cultivates, harvests, or other- 18 wise produces marijuana or marijuana prod- 19 ucts, or 20 ‘‘(B) manufactures, compounds, converts, 21 processes, prepares, or packages marijuana 22 products. 23 ‘‘(10) REMOVAL; REMOVE.—The terms ‘re- 24 moval’ or ‘remove’ mean— 25 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 9 •HR 1120 IH ‘‘(A) the removal of marijuana products 1 from the premises of a producer, or from inter- 2 nal revenue bond under section 5904, as the 3 Secretary shall by regulation prescribe, 4 ‘‘(B) release of such products from cus- 5 toms custody, or 6 ‘‘(C) smuggling or other unlawful importa- 7 tion of such products into the United States. 8 ‘‘(11) RETAILER.—The term ‘retailer’ means a 9 person who sells marijuana products to consumers. 10 ‘‘SEC. 5903. LIABILITY AND METHOD OF PAYMENT. 11 ‘‘(a) LIABILITY FOR TAX.— 12 ‘‘(1) ORIGINAL LIABILITY.—The producer or 13 importer of any marijuana product shall be liable for 14 the taxes imposed thereon by section 5901. 15 ‘‘(2) TRANSFER OF LIABILITY.— 16 ‘‘(A) IN GENERAL.—When marijuana 17 products are transferred, without payment of 18 tax, pursuant to section 5904, the liability for 19 tax shall be transferred in accordance with the 20 provisions of this paragraph. 21 ‘‘(B) TRANSFER BETWEEN PRODUCER AND 22 EXPORT WAREHOUSE PROPRIETOR.—In the 23 case of marijuana products which are trans- 24 ferred between the bonded premises of pro- 25 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 10 •HR 1120 IH ducers and export warehouse proprietors, the 1 transferee shall become liable for the tax upon 2 receipt by the transferee of such articles, and 3 the transferor shall thereupon be relieved of 4 their liability for such tax. 5 ‘‘(C) TRANSFER FROM CUSTOMS CUSTODY 6 TO PRODUCER.—In the case of marijuana prod- 7 ucts which are released in bond from customs 8 custody for transfer to the bonded premises of 9 a producer, the transferee shall become liable 10 for the tax on such articles upon release from 11 customs custody, and the importer shall there- 12 upon be relieved of their liability for such tax. 13 ‘‘(D) RETURNED TO BOND.—All provisions 14 of this chapter applicable to marijuana products 15 in bond shall be applicable to such articles re- 16 turned to bond upon withdrawal from the mar- 17 ket or returned to bond after previous removal 18 for a tax-exempt purpose. 19 ‘‘(b) METHOD OF PAYMENT OF TAX.— 20 ‘‘(1) IN GENERAL.— 21 ‘‘(A) DETERMINATION AND PAYMENT OF 22 TAX.—The taxes imposed by section 5901 shall 23 be determined at the time of removal of the 24 marijuana products. Such taxes shall be paid on 25 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 11 •HR 1120 IH the basis of return. The Secretary shall, by reg- 1 ulations, prescribe the period or the event for 2 which such return shall be made and the infor- 3 mation to be furnished on such return. 4 ‘‘(B) POSTPONEMENT.—Any postponement 5 under this subsection of the payment of taxes 6 determined at the time of removal shall be con- 7 ditioned upon the filing of such additional 8 bonds, and upon compliance with such require- 9 ments, as the Secretary may prescribe for the 10 protection of the revenue. The Secretary may, 11 by regulations, require payment of tax on the 12 basis of a return prior to removal of the mari- 13 juana products where a person defaults in the 14 postponed payment of tax on the basis of a re- 15 turn under this subsection or regulations pre- 16 scribed thereunder. 17 ‘‘(C) ADMINISTRATION AND PENALTIES.— 18 All administrative and penalty provisions of this 19 title, insofar as applicable, shall apply to any 20 tax imposed by section 5901. 21 ‘‘(2) TIME FOR PAYMENT OF TAXES.— 22 ‘‘(A) IN GENERAL.—Except as otherwise 23 provided in this paragraph, in the case of taxes 24 on marijuana products removed during any 25 VerDate Sep 11 2014 19:47 Feb 11, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1120.IH H1120 pamtmann on DSKBFK8HB2PROD with BILLS 12 •HR 1120 IH semimonthly period under bond for deferred 1 payment of tax, the last day for payment of 2 such taxes shall be the 14th day after the last 3 day of such semimonthly period. 4 ‘‘(B) IMPORTED ARTICLES.—In the case of 5 marijuana products which are imported into the 6 United States, the following provisions shall 7 apply: 8 ‘‘(i) IN GENERAL.—The last day for 9 payment of tax shall be the 14th day after 10 the last day of the semimonthly period 11 during which the article is entered into the 12 customs territory of the United States. 13 ‘‘(ii) SPECIAL RULE FOR ENTRY OF 14 WAREHOUSING.—Except as provided in 15 clause (iv), in the case of an entry for 16 warehousing, the last day for payment o [Text truncated for display. 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