HOUSE BILL NO. 358

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H0358......................................................by STATE AFFAIRS
MASTER SETTLEMENT AGREEMENT - Amends, adds to and repeals existing law to
revise how moneys in escrow pursuant to the Tobacco Master Settlement
Agreement may be released.
                                                                        
03/10    House intro - 1st rdg - to printing
03/11    Rpt prt - to St Aff
03/13    Rpt out - rec d/p - to 2nd rdg
03/14    2nd rdg - to 3rd rdg
03/17    3rd rdg - PASSED - 65-0-5
      AYES -- Barraclough, Barrett, Bauer, Bedke, Bell, Bieter, Black,
      Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins, Crow,
      Cuddy, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth, Eskridge,
      Field(18), Field(23), Garrett, Harwood, Henbest, Jaquet, Jones,
      Kellogg, Kulczyk, Lake, Langford, Langhorst, Martinez, McGeachin,
      McKague, Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen,
      Raybould, Ridinger, Ring, Ringo, Roberts, Robison, Rydalch, Sali,
      Sayler, Schaefer, Shepherd, Shirley, Skippen, Smylie, Snodgrass,
      Stevenson, Tilman, Trail, Wood, Mr. Speaker
      NAYS -- None
      Absent and excused -- Andersen, Gagner, Smith(30), Smith(24), Wills
    Floor Sponsor - Ellsworth
    Title apvd - to Senate
03/19    Senate intro - 1st rdg - to St Aff
04/01    Rpt out - rec d/p - to 2nd rdg
04/02    2nd rdg - to 3rd rdg
04/03    3rd rdg - PASSED - 28-0-7
      AYES -- Andreason, Bailey, Brandt, Bunderson, Burkett, Burtenshaw,
      Calabretta, Cameron, Compton, Darrington, Gannon, Goedde, Kennedy,
      Keough, Little, Lodge, Malepeai, Marley, McKenzie, Noh, Pearce,
      Schroeder, Sorensen, Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- Davis, Geddes, Hill, Ingram, McWilliams, Noble,
      Richardson
    Floor Sponsor - Sorensen
    Title apvd - to House
04/04    To enrol
04/07    Rpt enrol - Sp signed - Pres signed
04/08    To Governor
04/14    Governor signed
         Session Law Chapter 289
         Effective: 07/01/03

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 358
                                                                        
                                 BY STATE AFFAIRS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE TOBACCO MASTER SETTLEMENT AGREEMENT; AMENDING SECTION 39-7803,
  3        IDAHO CODE, TO REVISE HOW FUNDS PLACED IN ESCROW MAY BE RELEASED; TO  PRO-
  4        VIDE  SEVERABILITY AND TO PROVIDE A CONTINGENT EFFECTIVE DATE UPON CERTAIN
  5        CIRCUMSTANCES OCCURRING AND THE GOVERNOR ISSUING A PROCLAMATION AND FILING
  6        THE SAME WITH THE SECRETARY OF STATE;  REPEALING  SECTION  39-7803,  IDAHO
  7        CODE;  AND AMENDING CHAPTER 78, TITLE 39, IDAHO CODE, BY THE ADDITION OF A
  8        NEW SECTION 39-7803, IDAHO CODE,  TO  PROVIDE  REQUIREMENTS  UPON  TOBACCO
  9        PRODUCT MANUFACTURERS SELLING CIGARETTES TO CONSUMERS WITHIN THE STATE.
                                                                        
 10    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 11        SECTION  1.  That  Section 39-7803, Idaho Code, be, and the same is hereby
 12    amended to read as follows:
                                                                        
 13        39-7803.  REQUIREMENTS. Any tobacco  product  manufacturer  selling  ciga-
 14    rettes  to consumers within the state (whether directly or through a distribu-
 15    tor, retailer or similar intermediary or intermediaries)  after  the  date  of
 16    enactment of this act shall do one (1) of the following:
 17        (a)  Become  a participating manufacturer (as that term is defined in sec-
 18    tion II(jj) of the Master Settlement  Agreement)  and  generally  perform  its
 19    financial obligations under the Master Settlement Agreement; or
 20        (b)  (1) Place  into  a qualified escrow fund by April 15 of the year fol-
 21        lowing the year in question the following amounts  (as  such  amounts  are
 22        adjusted for inflation):
 23             1999:  $.0094241  per  unit  sold after the date of enactment of this
 24             act;
 25             2000:  $.0104712 per unit sold;
 26             For each of 2001 and 2002:  $.0136125 per unit sold;
 27             For each of 2003 through 2006:  $.0167539 per unit sold;
 28             For each of 2007 and each year thereafter:  $.0188482 per unit sold.
 29        (2)  A tobacco product manufacturer that places funds into escrow pursuant
 30        to paragraph (1) of this subsection shall receive the  interest  or  other
 31        appreciation  on  such  funds  as  earned.  Such funds themselves shall be
 32        released from escrow only under the following circumstances:
 33             (A)  To pay a judgment or settlement on any  released  claim  brought
 34             against such tobacco product manufacturer by the state or any releas-
 35             ing  party  located or residing in the state. Funds shall be released
 36             from escrow under this subparagraph: (i) in the order in  which  they
 37             were  placed into escrow; and (ii) only to the extent and at the time
 38             necessary to make payments required under such  judgment  or  settle-
 39             ment;
 40             (B)  To  the  extent  that a tobacco product manufacturer establishes
 41             that the amount it was required to place into escrow  on  account  of
 42             units  sold  in  the  state in a particular year was greater than the
 43             state's allocable share of the total payments that such  manufacturer
                                                                        
                                           2
                                                                        
  1             would  have  been required to make in that year under the Master Set-
  2             tlement Agreement (as determined pursuant to section IX(i)(2) of  the
  3             Master  Settlement  Agreement,  and  before any of the adjustments or
  4             offsets described in section IX(i)(3) of that  Agreement  other  than
  5             the  inflation  adjustment) the Master Settlement Agreement payments,
  6             as determined pursuant to section IX(i) of that  Agreement  including
  7             after final determination  of all adjustments, that such manufacturer
  8             would have been required to make on account of such units sold had it
  9             been  a participating manufacturer, the excess shall be released from
 10             escrow and revert back to such tobacco product manufacturer; or
 11             (C)  To the extent not released from escrow under  subparagraphs  (A)
 12             or  (B)  of  this  paragraph, funds shall be released from escrow and
 13             revert back to such tobacco  product  manufacturer  twenty-five  (25)
 14             years after the date on which they were placed into escrow.
 15        (3)  Each  tobacco  product  manufacturer  that elects to place funds into
 16        escrow pursuant to this section shall annually  certify  to  the  attorney
 17        general  that  it is in compliance with this section. The attorney general
 18        may bring a civil action on behalf of the state against any tobacco  prod-
 19        uct  manufacturer that fails to place into escrow the funds required under
 20        this section. Any tobacco product manufacturer that fails in any  year  to
 21        place into escrow the funds required under this section shall:
 22             (A)  Be  required  within  fifteen (15) days to place such funds into
 23             escrow as shall bring it  into  compliance  with  this  section.  The
 24             court,  upon  a  finding of a violation of this section, may impose a
 25             civil penalty to be paid to the general  fund  of  the  state  in  an
 26             amount not to exceed five percent (5%) of the amount improperly with-
 27             held  from  escrow per day of the violation and in a total amount not
 28             to exceed one hundred percent (100%) of the original  amount  improp-
 29             erly withheld from escrow;
 30             (B)  In  the  case of a knowing violation, be required within fifteen
 31             (15) days to place such funds into escrow as shall bring it into com-
 32             pliance with this section. The court, upon a  finding  of  a  knowing
 33             violation  of  this subsection, may impose a civil penalty to be paid
 34             to the general fund of the state in an amount not to  exceed  fifteen
 35             percent  (15%)  of the amount improperly withheld from escrow per day
 36             of the violation and in a total amount not to  exceed  three  hundred
 37             percent  (300%)  of  the  original  amount  improperly  withheld from
 38             escrow; and
 39             (C)  In the case of a second knowing violation,  be  prohibited  from
 40             selling cigarettes to consumers within the state (whether directly or
 41             through a distributor, retailer or similar intermediary) for a period
 42             not to exceed two (2) years.
 43        Each  failure  to make an annual deposit required under this section shall
 44        constitute a separate violation.
 45        (4)  In any action brought under this section, the court shall  award  the
 46        attorney  general,  if  he  is  the  prevailing  party,  reasonable costs,
 47        expenses and attorney's fees in bringing his action.
                                                                        
 48        SECTION 2.  SEVERABILITY.  If this act, or any portion of the amendment of
 49    subsection (b)(2)(B) of Section 39-7803, Idaho Code, made by this act, is held
 50    by a court of competent jurisdiction to be unconstitutional, then  Sections  3
 51    and  4  of this act shall be in full force and effect. If such finding occurs,
 52    the Governor shall, upon his determination that such event has occurred,  make
 53    a  proclamation  declaring  said  event  to have happened and the date of such
 54    event and file the same with the Secretary of State.
                                                                        
                                           3
                                                                        
  1        SECTION 3.  That Section 39-7803, Idaho Code, be, and the same  is  hereby
  2    repealed.
                                                                        
  3        SECTION  4.  That  Chapter  78,  Title 39, Idaho Code, be, and the same is
  4    hereby amended by the addition thereto of a NEW SECTION, to be known and  des-
  5    ignated as Section 39-7803, Idaho Code, and to read as follows:
                                                                        
  6        39-7803.  REQUIREMENTS.  Any  tobacco  product  manufacturer selling ciga-
  7    rettes to consumers within the state (whether directly or through a  distribu-
  8    tor,  retailer  or  similar  intermediary or intermediaries) after the date of
  9    enactment of this act shall do one (1) of the following:
 10        (a)  Become a participating manufacturer (as that term is defined in  sec-
 11    tion  II(jj)  of  the  Master  Settlement Agreement) and generally perform its
 12    financial obligations under the Master Settlement Agreement; or
 13        (b)  (1) Place into a qualified escrow fund by April 15 of the  year  fol-
 14        lowing  the  year  in  question the following amounts (as such amounts are
 15        adjusted for inflation):
 16             1999:  $.0094241 per unit sold after the date of  enactment  of  this
 17             act;
 18             2000:  $.0104712 per unit sold;
 19             For each of 2001 and 2002:  $.0136125 per unit sold;
 20             For each of 2003 through 2006:  $.0167539 per unit sold;
 21             For each of 2007 and each year thereafter:  $.0188482 per unit sold.
 22        (2)  A tobacco product manufacturer that places funds into escrow pursuant
 23        to  paragraph  (1)  of this subsection shall receive the interest or other
 24        appreciation on such funds as  earned.  Such  funds  themselves  shall  be
 25        released from escrow only under the following circumstances:
 26             (A)  To  pay  a  judgment or settlement on any released claim brought
 27             against such tobacco product manufacturer by the state or any releas-
 28             ing party located or residing in the state. Funds shall  be  released
 29             from  escrow  under this subparagraph: (i) in the order in which they
 30             were placed into escrow; and (ii) only to the extent and at the  time
 31             necessary  to  make  payments required under such judgment or settle-
 32             ment;
 33             (B)  To the extent that a tobacco  product  manufacturer  establishes
 34             that  the amount it was required to place into escrow in a particular
 35             year was greater than the state's allocable share of the  total  pay-
 36             ments that such manufacturer would have been required to make in that
 37             year under the Master Settlement Agreement (as determined pursuant to
 38             section  IX(i)(2)  of the Master Settlement Agreement, and before any
 39             of the adjustments or offsets described in section IX(i)(3)  of  that
 40             Agreement other than the inflation adjustment) had it been a partici-
 41             pating  manufacturer,  the  excess  shall be released from escrow and
 42             revert back to such tobacco product manufacturer; or
 43             (C)  To the extent not released from escrow under  subparagraphs  (A)
 44             or  (B)  of  this  paragraph, funds shall be released from escrow and
 45             revert back to such tobacco  product  manufacturer  twenty-five  (25)
 46             years after the date on which they were placed into escrow.
 47        (3)  Each  tobacco  product  manufacturer  that elects to place funds into
 48        escrow pursuant to this section shall annually  certify  to  the  attorney
 49        general  that  it is in compliance with this section. The attorney general
 50        may bring a civil action on behalf of the state against any tobacco  prod-
 51        uct  manufacturer that fails to place into escrow the funds required under
 52        this section. Any tobacco product manufacturer that fails in any  year  to
 53        place into escrow the funds required under this section shall:
                                                                        
                                           4
                                                                        
  1             (A)  Be  required  within  fifteen (15) days to place such funds into
  2             escrow as shall bring it  into  compliance  with  this  section.  The
  3             court,  upon  a finding of a violation  of this section, may impose a
  4             civil penalty to be paid to the general  fund  of  the  state  in  an
  5             amount not to exceed five percent (5%) of the amount improperly with-
  6             held  from  escrow per day of the violation and in a total amount not
  7             to exceed one hundred percent (100%) of the original  amount  improp-
  8             erly withheld from escrow;
  9             (B)  In  the  case of a knowing violation, be required within fifteen
 10             (15) days to place such funds into escrow as shall bring it into com-
 11             pliance with this section. The court, upon a  finding  of  a  knowing
 12             violation  of  this subsection, may impose a civil penalty to be paid
 13             to the general fund of the state in an amount not to  exceed  fifteen
 14             percent  (15%)  of the amount improperly withheld from escrow per day
 15             of the violation and in a total amount not to  exceed  three  hundred
 16             percent  (300%)  of  the  original  amount  improperly  withheld from
 17             escrow; and
 18             (C)  In the case of a second knowing violation,  be  prohibited  from
 19             selling cigarettes to consumers within the state (whether directly or
 20             through a distributor, retailer or similar intermediary) for a period
 21             not to exceed two (2) years.
 22        Each  failure  to make an annual deposit required under this section shall
 23        constitute a separate violation.
 24        (4)  In any action brought under this section, the court shall  award  the
 25        attorney  general,  if  he  is  the  prevailing  party,  reasonable costs,
 26        expenses and attorney's fees in bringing his action.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE
                             RS 13109
This proposed legislation is designed to eliminate an unintended
consequence of language found in Idaho's Tobacco Master
Settlement Agreement Act (the Act).  Some tobacco product
manufacturers, not parties to the Master Settlement Agreement
(MSA), have begun utilizing present language in Idaho Code 39-
7803(b)(2)(B) of the Act, to obtain an early release of the great
majority of their escrow deposits.  This frustrates the purposes
for which the Act was passed, as stated in Idaho Code 39-7801. 
The proposed amendment would cure this unintended consequence by
limiting releases from escrow accounts under Idaho Code 39-7803
to any amounts paid into escrow in excess of the MSA payments
that the manufacturer would have been required to make on account
of cigarettes sold in Idaho for a particular year had it
participated in the MSA in that year.
                          FISCAL IMPACT
There is no fiscal impact to the general fund.

         
Contact
Name: Brett DeLange, Office of The Attorney General 
Phone: 208/334-4114
Contact: William von Tagen
Phone:   208/334-4140


STATEMENT OF PURPOSE/FISCAL NOTE                H 358