Tax Issues
Federal Excise Tax Proposals • Estate Tax • LIFO
Federal Excise Tax on Tobacco and Nicotine Products
BACKGROUND: Excise taxes are seen as discouraging certain behaviors, but they are also extremely regressive, taking a larger percentage of income from low-income earners than from high-income earners.
The often-used health argument for taxing of non-combustible nicotine products doesn’t hold up – all the innovative products - vapor products, heated tobacco, snus and nicotine pouches - are all thought to be considerably less harmful than cigarettes. Encouraging adult smokers to switch should not be discouraged or disincentivized.
STATUS: A nicotine tax provision was removed from President Biden’s Build Back Better plan several years ago. Legislation has been introduced in both the House and Senate more recently that would increase and expand the federal excise tax on tobacco and nicotine, although none of the bills have come under review. CDA will monitor all future tax bills closely for any increases in taxes on products distributed by CDA members.
Estate Tax
BACKGROUND: In 2001, Congress enacted legislation (PL 107-16) that made significant changes in the federal estate tax – or “death” tax – over the 2001 to 2009 period by gradually increasing the size of estates exempt from the tax and gradually reducing the tax rate applied.
Since that time, CDA has been supportive of various efforts in Congress aimed at making the repeal of the estate tax permanent. We believe that permanent repeal of the estate tax will ensure the vitality of America’s small businesses – the backbone of our nation’s economy.
STATUS: While the estate tax has not been repealed, H.R. 1, known as the “One Big Beautiful Bill Act”, makes permanent an increase in estate tax exemption amounts. The higher exemption is now $15 million for single filers and $30 million for married filing joint couples. President Trump signed H.R. 1, the “One Big Beautiful Bill Act” (OBBBA) on July 4, 2025.
LIFO
Background: The “Last In/First Out” method of accounting is used by many companies in the wholesaler and retail industry. Under LIFO, the cost of the most recent products purchased (“last in”) are the first to be expensed as cost of goods sold, which means the lower cost of older products will be reported as inventory. Over the course of many Congresses and many tax bills, there have been proposals to repeal this method of accounting. Repealing LIFO would increase tax revenues because the value of inventories held by businesses would be increased.
Status: On July 4, 2025, President Trump signed into law H.R. 1 or the “One Big Beautiful Bill Act” (OBBBA). This legislation retained the LIFO inventory accounting method.
Questions? Contact Tom Briant (tomb@cdaweb.net; (703) 208-1641),
Kathee Facchiano (kfacchiano@capitoldecisions.com; (202) 638-1950)
or Sarah Herbert (sherbert@capitoldecisions.com; (202) 638-0326).