MEASURE: Conference Committee Substitute for House Bill 2660
SUBJECT: Cigarette and Tobacco Products Tax
AUTHORS: Speaker Adair and Representative Pope and Senators Hobson and Monson
PROVISIONS: SECTION 1: Sends to a vote of the people at the November 2004 General Election for their approval or rejection Sections 2 through 19 of this act.
SECTIONS 2 and 10: Levies an additional excise tax on cigarettes by 80¢ per 20 cigarette pack or 40 mills per cigarette for a total tax of $1.03 per 20 cigarette pack. Levies an additional tax on tobacco products in the following amounts: 27 mills for each little cigar (total tax of 36 mills); $90 per thousand upon all other cigars ( total tax of $120 per thousand); 40% of the factory list price on smoking tobacco (80% of the factory list price); and 30% of the factory list price of chewing tobacco (60% of the factory list price). Apportions the revenue from the additional taxes as follows: 22.06% to the Health Employee and Economy Improvement Act Revolving Fund; 3.09% to the Comprehensive Cancer Center Debt Service Revolving Fund; 7.50% to the Trauma Care Assistance Revolving Fund; 3.09% to the Oklahoma State University College of Osteopathic Medicine Revolving Fund; 26.38% to the Oklahoma Health Care Authority Medicaid Program Fund for the purposes of maintaining programs and services funded under federal law, reimbursing city/county owned-hospitals, increasing emergency room physician rates and providing TEFRA 134 (Katie Beckett) services; 2.65% to the Department of Mental Health and Substance Abuse Services Revolving Fund; 0.44% to the Belle Maxine Hilliard Breast and Cervical Cancer Treatment Revolving Fund; 1% to the Teachers’ Retirement System Revolving Fund; 2.07% to the Education Reform Revolving Fund; 0.66% to the Tobacco Prevention and Cessation Revolving Fund; 16.83% to the General Revenue Fund; and for Fiscal Years 2004 and 2005, 14.23% to be apportioned to each municipality and county that levies a sales tax in the proportions which total municipal and county tax revenue was apportioned by the Tax Commission in the preceding month. Specifies the procedures for determining the amount of the percentage going to municipalities and counties for Fiscal Year 2006 and thereafter.
Distributes the net revenue resulting from a payment in lieu of taxes on cigarettes and tobacco products levied by this act pursuant to a compact with an Indian tribe after deductions for deposits into trust accounts as follows: 33.49% to the Health Employee and Economy Improvement Act Revolving Fund; 4.69% to the Comprehensive Cancer Center Debt Service Revolving Fund; 11.39% to the Trauma Care Assistance Revolving Fund; 4.69% to the Oklahoma State University College of Osteopathic Medicine Revolving Fund; 40.06% to the Oklahoma Health Care Authority Medicaid Program Fund; 4.01% to the Department of Mental Health and Substance Abuse Services Revolving Fund; 0.67% to the Belle Maxine Hilliard Breast and Cervical Cancer Treatment Revolving Fund; and 1.00% to the Tobacco Prevention and Cessation Revolving Fund.
SECTION 3: Creates the Cigarette and Tobacco Tax Advisory Committee to consist of 9 members appointed by the Governor, the President Pro Tempore of the Senate and the Speaker of the House of Representatives. Provides that the Committee shall meet to review proposed rules of the Tax Commission and discuss other issues relating to the implementation and enforcement of the levy and collection of taxes on cigarettes and tobacco products.
SECTIONS 4 and 11: Specifies that the Tax Commission shall not administer the additional excise taxes provided for in this act in a manner that results in collection of such tax upon any inventory of cigarettes or tobacco products held for sale before the effective date of the tax levy. Provides that the new levies shall only be imposed upon inventory of cigarettes or tobacco products acquired on or after the effective date of the tax levy.
SECTION 5: Creates for the Oklahoma University Health Sciences Center the Comprehensive Cancer Center Debt Service Revolving Fund.
SECTION 6: Creates the Oklahoma State University College of Osteopathic Medicine Revolving Fund.
SECTION 7: Sets the discount for purchase of tax stamps at 1.5 cents per stamp.
SECTION 8: Provides that if a compacting tribe fails to comply with all terms and conditions of the cigarette and tobacco products tax compacts, the tribe shall not be eligible to receive any payment due from the state pursuant to the terms of the compact for the tax-reporting period during which the noncompliance occurred. Requires the Tax Commission to regularly conduct an audit of wholesalers, distributors, jobbers and warehousemen selling cigarettes or tobacco products to an Indian tribe to determine if the correct amount of tax payable under this act has been collected and to determine compliance with any and all compacts.
SECTION 9: Makes exception for the distribution of certain revenues generated from a payment in lieu of excise taxes on cigarettes.
SECTION 12: Exempts the sale of cigarettes and tobacco products from sales tax.
SECTIONS 13, 15 and 18: Sets the top marginal rate for Method I filers at 6.65% . Eliminates the “trigger” mechanism as it relates to income tax rates and the qualifying income limits for the Sales Tax Relief Act. Repeals the section of law which provides the procedures for the determination of the application of the “trigger” mechanism.
SECTION 14: Increases from $5,500 to $7,500 the amount of the income tax exemption for public and private sector retirement benefits. Increases the income threshold for qualification for the private sector exemption from $25,000 to $37,500 for single filers and from $50,000 to $75,000 for joint filers. Provides an income tax deduction for any individual taxpayer for qualifying gains receiving capital treatment earned by the taxpayer and included in the federal taxable income of such taxpayer. Defines qualifying gains to mean the amount of net gains included in an individual’s federal income tax return that was earned on real or tangible personal property located within Oklahoma that had been owned for a holding period of at least five years prior to the date of the transaction from which capital gains arise or earned on the sale of stock in an Oklahoma company where such stock or interest has been owned for at least three years prior to the date of the transaction from which capital gains arise.
SECTION 16: Expands sources of revenues that may be deposited in the Education Reform Revolving Fund.
SECTION 17: Specifies that the funds apportioned by this act shall be exempt from any budgetary limitation imposed upon the Oklahoma Health Care Authority, the Department of Mental Health and Substance Abuse Services and the State Health Department for the Fiscal Year 2005.
EFFECTIVE DATE: December 1, 2004
Upon voter approval