S.F. _____ Section 1. Section 453A.1, subsections 1 and 29, Code 2026, 1 are amended to read as follows: 2 1. “Alternative nicotine product” means a product, not 3 consisting of or containing tobacco, that provides for the 4 ingestion into the body of nicotine, or a nicotine analog, 5 whether by chewing, absorbing, dissolving, inhaling, snorting, 6 or sniffing, or by any other means. “Alternative nicotine 7 product” does not include cigarettes, tobacco products, or vapor 8 products, or a product that is regulated as a drug or device by 9 the United States food and drug administration under chapter V 10 of the Federal Food, Drug, and Cosmetic Act. 11 29. a. “Vapor product” means any noncombustible product, 12 which may or may not contain nicotine or a nicotine analog , 13 that employs a heating element, power source, electronic 14 circuit, or other electronic, chemical, or mechanical means, 15 regardless of shape or size, that can be used to produce vapor 16 from a solution or other substance. “Vapor product” includes an 17 but is not limited to the following: 18 (1) Any product or device marketed, manufactured, 19 distributed, or sold as an electronic cigarette, electronic 20 cigar, electronic cigarillo, electronic pipe, or similar 21 product or device , and any . 22 (2) Any cartridge or other container of a solution or other 23 substance, which may or may not contain nicotine or a nicotine 24 analog , that is intended to be used with or in an electronic 25 cigarette, electronic cigar, electronic cigarillo, electronic 26 pipe, or similar product or device. 27 (3) Any component, part, or accessory of such a product 28 or device that is used during the operation of the product or 29 device when sold in combination with any substance containing 30 nicotine, a nicotine analog, tobacco, or tobacco derivative. 31 b. “Vapor product” does not include a any of the following: 32 (1) A product regulated as a drug or device by the United 33 States food and drug administration under chapter V of the 34 Federal Food, Drug, and Cosmetic Act. 35 -1- LSB 6950XC (7) 91 jm/jh 1/ 14

S.F. _____ (2) Any component, part, or accessory of such a product 1 or device that is used during the operation of the product 2 or device when not sold in combination with any substance 3 containing nicotine, a nicotine analog, tobacco, or tobacco 4 derivative. 5 Sec. 2. Section 453A.1, Code 2026, is amended by adding the 6 following new subsection: 7 NEW SUBSECTION . 18A. “Nicotine analog” means a substance 8 that has a chemical structure that is substantially similar to 9 nicotine, or that has an effect on the central nervous system 10 that is substantially similar to, or greater than, the effects 11 of nicotine on the central nervous system. 12 Sec. 3. Section 453A.35A, subsection 1, Code 2026, is 13 amended to read as follows: 14 1. a. A health care trust fund is created in the office 15 of the treasurer of state. The fund consists of the revenues 16 generated from the tax on cigarettes pursuant to section 17 453A.6, subsection 1 , from the tax on tobacco products as 18 specified in section 453A.43, subsections 1, 2, 3, and 4 , 19 from the additional taxes on alternative nicotine and vapor 20 products pursuant to section 453A.43A, and from the fees and 21 penalties specified in subchapter III , that are credited to 22 the health care trust fund, annually, pursuant to section 23 453A.35 . Moneys in the fund shall be separate from the 24 general fund of the state and shall not be considered part of 25 the general fund of the state. Moneys Except as otherwise 26 provided, moneys in the fund shall be used only as specified 27 in this section and shall be appropriated only for the uses 28 specified. Moneys in the fund are not subject to section 8.33 29 and shall not be transferred, used, obligated, appropriated, 30 or otherwise encumbered, except as provided in this section . 31 Notwithstanding section 12C.7, subsection 2 , interest or 32 earnings on moneys deposited in the fund shall be credited to 33 the fund. 34 b. (1) For the fiscal year beginning July 1, 2027, and 35 -2- LSB 6950XC (7) 91 jm/jh 2/ 14

S.F. _____ each fiscal year thereafter, an amount not to exceed three 1 million dollars from the amount of tax collected that is 2 attributable to the additional taxes on alternative nicotine 3 products and vapor products pursuant to section 453A.43A shall 4 be appropriated to the state board of regents for the purpose 5 of conducting pediatric cancer research, clinical therapy 6 access, and for providing physician-scientist leadership at the 7 university of Iowa stead family children’s hospital. 8 (2) By December 1, 2028, and each December 1 thereafter, 9 the state board of regents shall submit a report to the general 10 assembly describing the research programs initiated or advanced 11 as a result of the appropriations made to the hospital, the 12 number of patients served, including patients enrolled in 13 clinical trials or therapy, and any outcomes to the extent 14 available, on the efficacy of the funded programs, trials, or 15 therapies. 16 Sec. 4. Section 453A.40, subsections 1 and 3, Code 2026, are 17 amended to read as follows: 18 1. All persons required to obtain a permit or to be licensed 19 under section 453A.13 or section 453A.44 having in their 20 possession and held for resale on the effective date of an 21 increase in the tax rate cigarettes, little cigars, or tobacco 22 products , alternative nicotine products, or vapor products upon 23 which the tax under section 453A.6 , or 453A.43 , or 453A.43A 24 has been paid, unused cigarette tax stamps which have been 25 paid for under section 453A.8 , unused metered imprints which 26 have been paid for under section 453A.12 , or tobacco products , 27 alternative nicotine products, or vapor products for which the 28 tax has not been paid under section 453A.46 shall be subject to 29 an inventory tax on the items as provided in this section . 30 3. The rate of the inventory tax on each item subject to 31 the tax as specified in subsection 1 is equal to the difference 32 between the amount paid on each item under section 453A.6 , 33 453A.8 , 453A.12 , or 453A.43 , or 453A.43A prior to the tax 34 increase and the amount that is to be paid on each similar item 35 -3- LSB 6950XC (7) 91 jm/jh 3/ 14

S.F. _____ under section 453A.6 , 453A.8 , 453A.12 , or 453A.43 , or 453A.43A 1 after the tax increase except that in computing the rate of the 2 inventory tax any discount allowed or allowable under section 3 453A.8 shall not be considered. 4 Sec. 5. Section 453A.42, subsections 5, 7, 15, and 18, Code 5 2026, are amended to read as follows: 6 5. “Distributor” means any and each of the following: 7 a. Any person engaged in the business of selling tobacco 8 products , alternative nicotine products, or vapor products 9 in this state who brings, or causes to be brought, into this 10 state from without the state any tobacco products , alternative 11 nicotine products, or vapor products for sale ; . 12 b. Any person who makes, manufactures, or fabricates tobacco 13 products , alternative nicotine products, or vapor products in 14 this state for sale in this state ; . 15 c. Any person engaged in the business of selling tobacco 16 products , alternative nicotine products, or vapor products 17 without this state who ships or transports tobacco products , 18 alternative nicotine products, or vapor products to retailers 19 in this state, to be sold by those retailers. 20 7. “Manufacturer” means a person who manufactures and sells 21 tobacco products , alternative nicotine products, or vapor 22 products . 23 15. “Subjobber” means any person, other than a manufacturer 24 or distributor, who buys tobacco products , alternative nicotine 25 products, or vapor products from a distributor and sells them 26 to persons other than the ultimate consumers. 27 18. “Wholesale sales price” means the established price 28 for which a manufacturer sells a tobacco product , alternative 29 nicotine product, or vapor product to a distributor, exclusive 30 of any discount or other reduction. 31 Sec. 6. NEW SECTION . 453A.43A Additional taxes on 32 alternative nicotine and vapor products. 33 1. a. (1) A tax is imposed upon all alternative nicotine 34 products and all vapor products in this state and upon any 35 -4- LSB 6950XC (7) 91 jm/jh 4/ 14

S.F. _____ person engaged as a distributor of alternative nicotine 1 products and vapor products, at the following rates: 2 (a) On alternative nicotine products, five cents per 3 container containing up to twenty units, and a proportionate 4 tax at the same rate on each unit in excess of twenty units. 5 (b) On vapor products, five cents per milliliter of nicotine 6 in a solution and a proportionate tax at the same rate on any 7 fractions of a milliliter. 8 (2) The tax imposed pursuant to subparagraph (1) shall be 9 imposed based on the net volume of the solution as listed by 10 the manufacturer. 11 b. The tax on alternative nicotine products and vapor 12 products shall be imposed at the time the distributor does any 13 of the following: 14 (1) Brings, or causes to be brought, into this state from 15 outside the state alternative nicotine products or vapor 16 products for sale. 17 (2) Makes, manufactures, or fabricates alternative nicotine 18 products or vapor products in this state for sale in this 19 state. 20 (3) Ships or transports alternative nicotine products or 21 vapor products to retailers in this state, to be sold by the 22 retailers. 23 2. A tax is imposed upon the use or storage of alternative 24 nicotine products or vapor products in this state, and upon 25 any person who uses or stores alternative nicotine products 26 or vapor products, at the following rates, if the tax imposed 27 under subsection 1 has not been paid: 28 a. (1) On alternative nicotine products, five cents per 29 container containing up to twenty units, and a proportionate 30 tax at the same rate on each unit in excess of twenty units. 31 (2) On vapor products, five cents per milliliter of nicotine 32 in a solution and a proportionate tax at the same rate on any 33 fractions of a milliliter. 34 b. The tax imposed pursuant to paragraph “a” shall be 35 -5- LSB 6950XC (7) 91 jm/jh 5/ 14

S.F. _____ imposed based on the net volume of the solution as listed by 1 the manufacturer. 2 3. Any alternative nicotine product or vapor product 3 with respect to which a tax has once been imposed under 4 this subchapter shall not again be subject to tax under this 5 subchapter. 6 4. The tax imposed by this section shall not apply with 7 respect to any alternative nicotine product or vapor product 8 which under the constitution and laws of the United States may 9 not be made the subject of taxation by this state. 10 5. The tax imposed by this section shall be in addition to 11 any other taxes imposed by law. 12 6. All excise taxes collected under this section by any 13 person are deemed to be held in trust for the state of Iowa. 14 Sec. 7. Section 453A.44, subsections 1, 3, and 10, Code 15 2026, are amended to read as follows: 16 1. No A person shall not engage in the business of a 17 distributor or subjobber of tobacco products at any place of 18 business without first having received a license from the 19 director to engage in that business at that place of business. 20 3. A person without this state who ships or transports 21 tobacco products , alternative nicotine products, or vapor 22 products to retailers in this state, to be sold by those 23 retailers, may make application for a license as a distributor, 24 be granted a license by the director, and thereafter be subject 25 to all the provisions of this subchapter and entitled to act as 26 a licensed distributor. 27 10. The director may revoke, cancel, or suspend the 28 license or licenses of any distributor or subjobber for 29 violation of any of the provisions of this subchapter , or 30 any other act applicable to the sale of tobacco products, 31 alternative nicotine products, or vapor products, or any rule 32 or regulations promulgated by the director in furtherance of 33 this subchapter . No A license shall not be revoked, canceled, 34 or suspended except after notice and a hearing by the director 35 -6- LSB 6950XC (7) 91 jm/jh 6/ 14

S.F. _____ as provided in section 453A.48 . 1 Sec. 8. Section 453A.45, Code 2026, is amended to read as 2 follows: 3 453A.45 Licensees, duties. 4 1. a. Every distributor shall keep at each licensed 5 place of business complete and accurate records for that 6 place of business, including itemized invoices, of tobacco 7 products , alternative nicotine products, or vapor products 8 held, purchased, manufactured, brought in or caused to be 9 brought in from without the state, or shipped or transported to 10 retailers in this state, and of all sales of tobacco products , 11 alternative nicotine products, or vapor products made, except 12 sales to the ultimate consumer. 13 b. When a licensed distributor sells tobacco products , 14 alternative nicotine products, or vapor products exclusively to 15 the ultimate consumer at the address given in the license, an 16 invoice of those sales is not required, but itemized invoices 17 shall be made of all tobacco products , alternative nicotine 18 products, or vapor products transferred to other retail 19 outlets owned or controlled by that licensed distributor. All 20 books, records, and other papers and documents required by 21 this subsection to be kept shall be preserved for a period 22 of at least three years after the date of the documents or 23 the date of the entries appearing in the records, unless the 24 director, in writing, authorized their destruction or disposal 25 at an earlier date. At any time during usual business hours, 26 the director, or the director’s duly authorized agents or 27 employees, may enter any place of business of a distributor, 28 without a search warrant, and inspect the premises, the records 29 required to be kept under this subsection , and the tobacco 30 products , alternative nicotine products, or vapor products 31 contained therein, to determine if all the provisions of this 32 subchapter are being fully complied with. If the director, 33 or any such agent or employee, is denied free access or is 34 hindered or interfered with in making the examination, the 35 -7- LSB 6950XC (7) 91 jm/jh 7/ 14

S.F. _____ license of the distributor at that premises is subject to 1 revocation by the director. 2 2. Every person who sells tobacco products , alternative 3 nicotine products, or vapor products to persons other than the 4 ultimate consumer shall render with each sale itemized invoices 5 showing the seller’s name and address, the purchaser’s name and 6 address, the date of sale, and all prices and discounts. The 7 person shall preserve legible copies of all these invoices for 8 three years from the date of sale. 9 3. Every retailer and subjobber shall procure itemized 10 invoices of all tobacco products , alternative nicotine 11 products, or vapor products purchased. The invoices shall show 12 the name and address of the seller and the date of purchase. 13 The retailer and subjobber shall preserve a legible copy 14 of each invoice for three years from the date of purchase. 15 Invoices shall be available for inspection by the director or 16 the director’s authorized agents or employees at the retailer’s 17 or subjobber’s place of business. 18 4. Records of all deliveries or shipments of tobacco 19 products , alternative nicotine products, or vapor products from 20 any public warehouse of first destination in this state which 21 is subject to the provisions of and licensed under chapter 22 554 shall be kept by the warehouse and be available to the 23 director for inspection. They The records shall show the name 24 and address of the consignee, the date, the quantity of tobacco 25 products , alternative nicotine products, or vapor products 26 delivered, and such other information as the commissioner may 27 require. These The records shall be preserved for three years 28 from the date of delivery of the tobacco products , alternative 29 nicotine products, or vapor products . 30 5. a. The transportation of tobacco products , alternative 31 nicotine products, or vapor products into this state by means 32 other than common carrier must be reported to the director 33 within thirty days with the following exceptions: 34 (1) The transportation of not more than fifty cigars, not 35 -8- LSB 6950XC (7) 91 jm/jh 8/ 14

S.F. _____ more than ten ounces of snuff or snuff powder, or not more 1 than one pound of smoking or chewing tobacco or other tobacco 2 products not specifically mentioned herein; 3 (2) Transportation by a person with a place of business 4 outside the state, who is licensed as a distributor under 5 section 453A.44 , or tobacco products , alternative nicotine 6 products, or vapor products sold by such person to a retailer 7 in this state. 8 b. The report shall be made on forms provided by the 9 director. A report required under this subsection shall be 10 filed electronically. A report required to be submitted 11 electronically under this subsection that is filed in a manner 12 other than in an electronic format specified by the department 13 shall not be considered a valid submission unless the director 14 has permitted the submission of such a report through an 15 alternative method pursuant to section 453A.57 . 16 c. Common carriers transporting tobacco products , 17 alternative nicotine products, or vapor products into this 18 state shall file with the director reports of all such 19 shipments other than those which are delivered to public 20 warehouses of first destination in this state which are 21 licensed under the provisions of chapter 554 . Such reports 22 shall be filed electronically with the department on or before 23 the tenth day of each month and shall show with respect to 24 deliveries made in the preceding month all of the following: 25 (1) The date. 26 (2) The point of origin. 27 (3) The point of delivery. 28 (4) The name of the consignee. 29 (5) A description and the quantity of tobacco products , 30 alternative nicotine products, or vapor products delivered. 31 (6) Such other information as the director may require. 32 d. Any person who fails or refuses to transmit to the 33 director the required reports or whoever refuses to permit the 34 examination of the records by the director shall be guilty 35 -9- LSB 6950XC (7) 91 jm/jh 9/ 14

S.F. _____ of a serious misdemeanor. In addition, any person who fails 1 to timely submit a report required under this section is 2 subject to a penalty in the amount of fifty dollars for each 3 occurrence. 4 Sec. 9. Section 453A.46, subsection 1, paragraph a, 5 subparagraph (1), Code 2026, is amended to read as follows: 6 (1) On or before the twentieth day of each calendar month 7 every distributor with a place of business in this state shall 8 file a return with the director showing for the preceding 9 calendar month the quantity and wholesale sales price of 10 each tobacco product , alternative nicotine product, or vapor 11 product brought, or caused to be brought, into this state for 12 sale; made, manufactured, or fabricated in this state for sale 13 in this state; and any other information the director may 14 require. Every licensed distributor outside this state shall 15 in like manner file a return with the director showing for the 16 preceding calendar month the quantity and wholesale sales price 17 of each tobacco product , alternative nicotine product, or vapor 18 product shipped or transported to retailers in this state to be 19 sold by those retailers and any other information the director 20 may require. Returns shall be made upon forms made available 21 in electronic form and prescribed by the director and shall 22 contain other information as the director may require. Each 23 return shall be accompanied by a remittance for the full tax 24 liability shown on the return, less a discount as fixed by the 25 director not to exceed five percent of the tax. Within three 26 years after the return is filed or within three years after the 27 return became due, whichever is later, the department shall 28 examine it, determine the correct amount of tax, and assess the 29 tax against the taxpayer for any deficiency. The period for 30 examination and determination of the correct amount of tax is 31 unlimited in the case of a false or fraudulent return made with 32 the intent to evade tax, or in the case of a failure to file a 33 return. 34 Sec. 10. Section 453A.46, subsection 6, Code 2026, is 35 -10- LSB 6950XC (7) 91 jm/jh 10/ 14

S.F. _____ amended to read as follows: 1 6. On or before the twentieth day of each calendar month, 2 every consumer who, during the preceding calendar month, 3 has acquired title to or possession of tobacco products , 4 alternative nicotine products, or vapor products for use or 5 storage in this state, and upon which tobacco products the 6 tax taxes imposed by section 453A.43 has or 453A.43A have not 7 been paid, shall file a return with the director showing the 8 quantity of tobacco products , alternative nicotine products, 9 or vapor products so acquired. The return shall be made upon 10 a form furnished and prescribed by the director, and shall 11 contain other information as the director may require. The 12 return shall be accompanied by a remittance for the full unpaid 13 tax liability shown by it. Within three years after the return 14 is filed or within three years after the return became due, 15 whichever is later, the department shall examine it, determine 16 the correct amount of tax, and assess the tax against the 17 taxpayer for any deficiency. The period for examination and 18 determination of the correct amount of tax is unlimited in the 19 case of a false or fraudulent return made with the intent to 20 evade tax, or in the case of a failure to file a return. 21 Sec. 11. Section 453A.47, Code 2026, is amended to read as 22 follows: 23 453A.47 Refunds, credits. 24 Where tobacco products , alternative nicotine products, or 25 vapor products upon which the tax imposed by this subchapter 26 has been reported and paid are shipped or transported by the 27 distributor to consumers to be consumed without the state or 28 to retailers or subjobbers without the state to be sold by 29 those retailers or subjobbers without the state or are returned 30 to the manufacturer by the distributor or destroyed by the 31 distributor, refund of such tax or credit may be made to the 32 distributor in accordance with regulations prescribed by the 33 director. Any overpayment of the tax imposed under section 34 453A.43 or 453A.43A may be made to the taxpayer in accordance 35 -11- LSB 6950XC (7) 91 jm/jh 11/ 14

S.F. _____ with regulations prescribed by the director. The director 1 shall cause any such refund of tax to be paid out of the general 2 fund of the state, and so much of said fund as may be necessary 3 is hereby appropriated for that purpose. 4 Sec. 12. Section 453A.47C, subsections 3 and 4, Code 2026, 5 are amended to read as follows: 6 3. A retailer required to possess or possessing a permit 7 under section 453A.13 or 453A.47A to make delivery sales 8 of alternative nicotine products or vapor products within 9 this state shall be deemed to have waived all claims that 10 such retailer lacks physical presence within this state for 11 purposes of collecting and remitting sales and use tax and the 12 additional tax provided in section 453A.43A . 13 4. A retailer making taxable delivery sales of alternative 14 nicotine products or vapor products within this state shall 15 remit to the department all sales and use tax due on such sales 16 at the times and in the manner provided by chapter 423 , and 17 remit the additional tax as provided in section 453A.43A . 18 Sec. 13. Section 453A.48, subsection 3, Code 2026, is 19 amended to read as follows: 20 3. The director may exchange information with the officers 21 and agencies of other states administering laws relating to the 22 taxation of tobacco products , alternative nicotine products, 23 and vapor products . 24 Sec. 14. EFFECTIVE DATE. This Act takes effect January 1, 25 2027. 26 EXPLANATION 27 The inclusion of this explanation does not constitute agreement with 28 the explanation’s substance by the members of the general assembly. 29 This bill regulates alternative nicotine products and vapor 30 products and imposes taxes upon the wholesale sales price of 31 such products, and makes numerous conforming changes to Code 32 chapter 453A (cigarettes and tobacco-related products). 33 The bill defines “nicotine analog” to mean a substance that 34 has a chemical structure that is substantially similar to 35 -12- LSB 6950XC (7) 91 jm/jh 12/ 14

S.F. _____ nicotine, or that has an effect on the central nervous system 1 that is substantially similar to, or greater than, the effects 2 of nicotine on the central nervous system. 3 The bill adds “nicotine analog” to the definitions of 4 “alternative nicotine product” and “vapor product”. 5 The bill imposes an additional tax on alternative 6 nicotine products upon any person engaged as a distributor 7 of alternative nicotine products, at the rate of 5 cents per 8 container containing up to 20 units, and a proportionate tax at 9 the same rate on each unit in excess of 20 units. 10 The bill imposes an additional tax on vapor products upon 11 any person engaged as a distributor of vapor products, at the 12 rate of 5 cents per milliliter of nicotine in a solution and 13 a proportionate tax at the same rate on any fractions of a 14 milliliter. The tax imposed upon the vapor products shall be 15 imposed based on the net volume of the solution as listed by 16 the manufacturer. 17 In the alternative, the bill imposes the additional 18 alternative nicotine products tax or vapor products tax, as 19 applicable, upon the use or storage of the alternative nicotine 20 products or vapor products, at the same rates as the tax on the 21 distributor, if the tax on the distributor has not been paid 22 by the distributor. 23 The revenues generated in the bill are deposited into the 24 health care trust fund created in Code section 453A.35A. 25 Beginning with FY 2027-2028, and for each fiscal year 26 thereafter, the bill appropriates not more than $3 million 27 of the taxes that are attributable to the additional taxes 28 on alternative nicotine products or vapor products from the 29 health care trust fund to the state board of regents. The bill 30 specifies the purpose of the appropriation is for conducting 31 pediatric cancer research, clinical therapy access, and for 32 providing physician-scientist leadership at the university 33 of Iowa Stead family children’s hospital. The bill requires 34 the state board of regents to file an annual report with the 35 -13- LSB 6950XC (7) 91 jm/jh 13/ 14