The Alabama House General Fund Committee is scheduled to consider a tobacco-based device on Wednesday that heats tobacco rather than burns it, allowing nicotine to be inhaled into the lungs.

From a regulatory perspective, this product Already approved for sale In the U.S., controversy is brewing over a bespoke tax stance that critics say has no clear benefit to Alabama consumers and could hurt local and state revenues.

HB438 State Assemblywoman Rolanda Hollis (D-Birmingham) has proposed creating a new tax bracket just for heated tobacco products, with a tax rate 50% lower than traditional cigarettes.

“Many states already have low taxes on these products, and we are modernizing our tax code to capture new and innovative products through the appropriate channels to provide smokers with better options to lower their ongoing risk,” Hollis told the committee during a hearing on the bill.

Among those speaking in favor of the bill at the hearing was a representative from Philip Morris International. Heated tobacco products Available over the counter. Opponents, including the American Cancer Society and the American Lung Foundation, have raised concerns about the health effects of bringing another nicotine product to the market.

But at the heart of the House of Representatives' decision Wednesday is a potential tax imbalance and a premature decision on Alabama's excise tax at a time when local revenue from tobacco taxes has declined over the past decade. It also represents another potential hit to the Omnibus Settlement Agreement, which has brought Alabama $108.5 million in revenue in 2023.

Representatives from Alabama Children First told the committee the proposed tax could reduce revenue for the Children First Trust Fund, which gets the majority of its funding from tobacco taxes.

“Each year, the Children First Trust Fund allocates more than $40 million of Alabama's tobacco tax settlement funds directly to children's programs, and these programs operate across the state,” Rep. Katie Jeter told lawmakers. “This money directly benefits kids — your kids, your grandkids, the kids in your districts and neighborhoods.”

Opponents also argue the bill could complicate compliance between state and federal regulations. If the federal government classifies these products as tobacco and states classify them differently, it could create legal issues and require lawmakers to amend or revise the law in future sessions.

Members of the House committee asked questions about the product itself and the potential tax havens Hollis proposed. “Are you currently selling this product in the state of Alabama?” Rep. Brett Easterbrook of Alabama asked Jake Jacobs, president of Philip Morris International.

“No, we were approved to sell this product on April 30th. In fact, it will be available for sale in Alabama at some point in the future, so we're trying to get the tax system in place before then, so that when it gets to the tax office, when it gets to the stores, everyone knows how it's going to be treated and it's going to be regulated and those regulations are going to be enforced,” Jacobs said.

“But doesn't giving tax breaks to people who smoke reduce a source of revenue?” Eaterbrook replied.

Grayson Everett is the state and politics editor for Yellow Hammer News. You can follow him on Twitter. Grayson