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91_HB0004ham001
LRB9100347DJcdam
1 AMENDMENT TO HOUSE BILL 4
2 AMENDMENT NO. . Amend House Bill 4 as follows:
3 by replacing the title with the following:
4 "AN ACT concerning tobacco product manufacturers."; and
5 by replacing everything after the enacting clause with the
6 following:
7 "Section 1. Short title. This Act may be cited as the
8 Tobacco Product Manufacturers Settlement Act.
9 Section 5. Findings and purpose.
10 (a) Cigarette smoking presents serious public health
11 concerns to the State and to the citizens of the State. The
12 Surgeon General has determined that smoking causes lung
13 cancer, heart disease and other serious diseases, and that
14 there are hundreds of thousands of tobacco-related deaths in
15 the United States each year. These diseases most often do not
16 appear until many years after the person in question begins
17 smoking.
18 (b) Cigarette smoking also presents serious financial
19 concerns for the State. Under certain health-care programs,
20 the State may have a legal obligation to provide medical
21 assistance to eligible persons for health conditions
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1 associated with cigarette smoking, and those persons may
2 have a legal entitlement to receive such medical assistance.
3 (c) Under these programs, the State pays millions of
4 dollars each year to provide medical assistance for these
5 persons for health conditions associated with cigarette
6 smoking.
7 (d) It is the policy of the State that financial burdens
8 imposed on the State by cigarette smoking be borne by tobacco
9 product manufacturers rather than by the State to the extent
10 that such manufacturers either determine to enter into a
11 settlement with the State or are found culpable by the
12 courts.
13 (e) On November 23, 1998, leading United States tobacco
14 product manufacturers entered into a settlement agreement,
15 entitled the "Master Settlement Agreement", with the State.
16 The Master Settlement Agreement obligates these
17 manufacturers, in return for a release of past, present and
18 certain future claims against them as described therein, to
19 pay substantial sums to the State (tied in part to their
20 volume of sales); to fund a national foundation devoted to
21 the interests of public health; and to make substantial
22 changes in their advertising and marketing practices and
23 corporate culture, with the intention of reducing underage
24 smoking.
25 (f) It would be contrary to the policy of the State if
26 tobacco product manufacturers who determine not to enter into
27 such a settlement could use a resulting cost advantage to
28 derive large, short-term profits in the years before
29 liability may arise without ensuring that the State will have
30 an eventual source of recovery from them if they are proven
31 to have acted culpably. It is thus in the interest of the
32 State to require that such manufacturers establish a reserve
33 fund to guarantee a source of compensation and to prevent
34 such manufacturers from deriving large, short-term profits
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1 and then becoming judgment-proof before liability may arise.
2 Section 10. Definitions. In this Act:
3 (a) "Adjusted for inflation" means increased in
4 accordance with the formula for inflation adjustment set
5 forth in Exhibit C to the Master Settlement Agreement.
6 (b) "Affiliate" means a person who directly or indirectly
7 owns or controls, is owned or controlled by, or is under
8 common ownership or control with, another person. Solely for
9 purposes of this definition, the terms "owns", "is owned" and
10 "ownership" mean ownership of an equity interest, or the
11 equivalent thereof, of 10% or more, and the term "person"
12 means an individual, partnership, committee, association,
13 corporation or any other organization or group of persons.
14 (c) "Allocable share" means "allocable share" as that
15 term is defined in the Master Settlement Agreement.
16 (d) "Cigarette" means any product that contains nicotine,
17 is intended to be burned or heated under ordinary conditions
18 of use, and consists of or contains (1) any roll of tobacco
19 wrapped in paper or in any substance not containing tobacco;
20 or (2) tobacco, in any form, that is functional in the
21 product, which, because of its appearance, the type of
22 tobacco used in the filler, or its packaging and labeling, is
23 likely to be offered to, or purchased by, consumers as a
24 cigarette; or (3) any roll of tobacco wrapped in any
25 substance containing tobacco which, because of its
26 appearance, the type of tobacco used in the filler, or its
27 packaging and labeling, is likely to be offered to, or
28 purchased by, consumers as a cigarette described in clause
29 (1) of this definition. The term "cigarette" includes
30 "roll-your-own" (i.e., any tobacco which, because of its
31 appearance, type, packaging, or labeling, is suitable for
32 use and likely to be offered to, or purchased by, consumers
33 as tobacco for making cigarettes). For purposes of this
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1 definition of "cigarette", 0.09 ounces of "roll-your-own"
2 tobacco shall constitute one individual "cigarette".
3 (e) "Master Settlement Agreement" means the settlement
4 agreement (and related documents) entered into on November
5 23, 1998 by the State and leading United States tobacco
6 product manufacturers.
7 (f) "Qualified escrow fund" means an escrow arrangement
8 with a federally or State chartered financial institution
9 having no affiliation with any tobacco product manufacturer
10 and having assets of at least $1,000,000,000 where such
11 arrangement requires that such financial institution hold
12 the escrowed funds' principal for the benefit of releasing
13 parties and prohibits the tobacco product manufacturer
14 placing the funds into escrow from using, accessing or
15 directing the use of the funds' principal except as
16 consistent with subdivision (b)(2) of Section 15 of this
17 Act.
18 (g) "Released claims" means "released claims" as that
19 term is defined in the Master Settlement Agreement.
20 (h) "Releasing parties" means "releasing parties" as that
21 term is defined in the Master Settlement Agreement.
22 (i) "Tobacco product manufacturer" means an entity that
23 after the effective date of this Act directly (and not
24 exclusively through any affiliate):
25 (1) manufactures cigarettes anywhere that such
26 manufacturer intends to be sold in the United States,
27 including cigarettes intended to be sold in the United
28 States through an importer (except where such importer is
29 an original participating manufacturer (as that term is
30 defined in the Master Settlement Agreement) that will be
31 responsible for the payments under the Master Settlement
32 Agreement with respect to such cigarettes as a result of
33 the provisions of subsection II(mm) of the Master
34 Settlement Agreement and that pays the taxes specified in
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1 subsection II(z) of the Master Settlement Agreement, and
2 provided that the manufacturer of such cigarettes does
3 not market or advertise such cigarettes in the United
4 States);
5 (2) is the first purchaser anywhere for resale in
6 the United States of cigarettes manufactured anywhere
7 that the manufacturer does not intend to be sold in the
8 United States; or
9 (3) becomes a successor of an entity described in
10 paragraph (1) or (2).
11 The term "tobacco product manufacturer" shall not include an
12 affiliate of a tobacco product manufacturer unless such
13 affiliate itself falls within any of paragraphs (1) through
14 (3) of this definition.
15 (j) "Units sold" means the number of individual
16 cigarettes sold in the State by the applicable tobacco
17 product manufacturer (whether directly or through a
18 distributor, retailer or similar intermediary or
19 intermediaries) during the year in question, as measured by
20 excise taxes collected by the State on packs (or
21 "roll-your-own" tobacco containers) bearing the excise tax
22 stamp of the State. The Department of Revenue shall
23 promulgate such regulations as are necessary to ascertain the
24 amount of State excise tax paid on the cigarettes of such
25 tobacco product manufacturer for each year.
26 Section 15. Requirements. Any tobacco product
27 manufacturer selling cigarettes to consumers within the State
28 (whether directly or through a distributor, retailer or
29 similar intermediary or intermediaries) after the date of
30 enactment of this Act shall do one of the following:
31 (a) become a participating manufacturer (as that term is
32 defined in section II(jj) of the Master Settlement
33 Agreement) and generally perform its financial obligations
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1 under the Master Settlement Agreement; or
2 (b) (1) place into a qualified escrow fund by April 15 of
3 the year following the year in question the following
4 amounts (as such amounts are adjusted for inflation):
5 1999: $.0094241 per unit sold after the effective
6 date of this Act;
7 2000: $.0104712 per unit sold after the effective
8 date of this Act;
9 for each of 2001 and 2002: $.0136125 per unit sold
10 after the effective date of this Act;
11 for each of 2003 through 2006: $.0167539 per unit
12 sold after the effective date of this Act;
13 for each of 2007 and each year thereafter: $.0188482
14 per unit sold after the effective date of this Act.
15 (2) A tobacco product manufacturer that places funds
16 into escrow pursuant to paragraph (1) shall receive the
17 interest or other appreciation on such funds as earned.
18 Such funds themselves shall be released from escrow only
19 under the following circumstances:
20 (A) to pay a judgment or settlement on any
21 released claim brought against such tobacco product
22 manufacturer by the State or any releasing party
23 located or residing in the State. Funds shall be
24 released from escrow under this subparagraph (i) in
25 the order in which they were placed into escrow and
26 (ii) only to the extent and at the time necessary to
27 make payments required under such judgment or
28 settlement;
29 (B) to the extent that a tobacco product
30 manufacturer establishes that the amount it was
31 required to place into escrow in a particular year
32 was greater than the State's allocable share of the
33 total payments that such manufacturer would have
34 been required to make in that year under the Master
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1 Settlement Agreement (as determined pursuant to
2 section IX(i)(2) of the Master Settlement Agreement,
3 and before any of the adjustments or offsets
4 described in section IX(i)(3) of that Agreement
5 other than the Inflation Adjustment) had it been a
6 participating manufacturer, the excess shall be
7 released from escrow and revert back to such
8 tobacco product manufacturer; or
9 (C) to the extent not released from escrow
10 under subparagraph (A) or (B), funds shall be
11 released from escrow and revert back to such tobacco
12 product manufacturer 25 years after the date on
13 which they were placed into escrow.
14 (3) Each tobacco product manufacturer that elects to
15 place funds into escrow pursuant to this subsection
16 shall annually certify to the Attorney General that it is
17 in compliance with this subsection. The Attorney General
18 may bring a civil action on behalf of the State against
19 any tobacco product manufacturer that fails to place into
20 escrow the funds required under this Section. Any tobacco
21 product manufacturer that fails in any year to place into
22 escrow the funds required under this Section shall:
23 (A) be required within 15 days to place such
24 funds into escrow as shall bring it into compliance
25 with this Section. The court, upon a finding of a
26 violation of this subsection, may impose a civil
27 penalty to be paid to the General Revenue Fund in
28 an amount not to exceed 5% of the amount improperly
29 withheld from escrow per day of the violation and
30 in a total amount not to exceed 100% of the original
31 amount improperly withheld from escrow;
32 (B) in the case of a knowing violation, be
33 required within 15 days to place such funds into
34 escrow as shall bring it into compliance with this
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1 Section. The court, upon a finding of a knowing
2 violation of this subsection, may impose a civil
3 penalty to be paid to the General Revenue Fund in an
4 amount not to exceed 15% of the amount improperly
5 withheld from escrow per day of the violation and
6 in a total amount not to exceed 300% of the original
7 amount improperly withheld from escrow; and
8 (C) in the case of a second knowing violation,
9 be prohibited from selling cigarettes to consumers
10 within the State (whether directly or through a
11 distributor, retailer or similar intermediary) for
12 a period not to exceed 2 years.
13 Each failure to make an annual deposit required
14 under this Section shall constitute a separate
15 violation.
16 Section 99. Effective date. This Act takes effect upon
17 becoming law.".