2005 Legislation
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HOUSE BILL NO. 46 – Master Settlmnt Agreemnt/units sold


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Bill Status

H0046......................................................by STATE AFFAIRS
MASTER SETTLEMENT AGREEMENT - Amends existing law to provide that for an
unstamped "roll-your-own" tobacco container, each nine one-hundredths ounce
of "roll-your-own" tobacco shall equal one unit sold for purposes of the
Idaho Tobacco Master Settlement Agreement.
01/25    House intro - 1st rdg - to printing
01/26    Rpt prt - to St Aff
02/03    Rpt out - rec d/p - to 2nd rdg
02/04    2nd rdg - to 3rd rdg
02/07    3rd rdg - PASSED - 64-2-4
      AYES -- Anderson, Andrus, Barraclough, Bastian, Bayer, Bell, Bilbao,
      Black, Block, Boe, Cannon, Chadderdon, Clark, Collins, Crow, Deal,
      Denney, Edmunson, Ellsworth, Eskridge, Field(18), Field(23), Garrett,
      Hart, Harwood, Henbest, Henderson, Jaquet, Jones, Kemp, Lake,
      LeFavour, Loertscher, Martinez, Mathews, McGeachin, Miller, Mitchell,
      Nielsen, Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo,
      Roberts, Rusche, Rydalch, Sali, Sayler, Schaefer, Shepherd(2),
      Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie,
      Snodgrass, Stevenson, Trail, Wills, Wood, Mr. Speaker
      NAYS -- Barrett, McKague
      Absent and excused -- Bedke, Bolz, Bradford, Moyle
    Floor Sponsor - Ring
    Title apvd - to Senate
02/08    Senate intro - 1st rdg - to St Aff
02/23    Rpt out - rec d/p - to 2nd rdg
02/24    2nd rdg - to 3rd rdg
03/01    3rd rdg - PASSED - 31-0-4
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst,
      Little, Lodge, Malepeai, Marley, McGee, McKenzie, Noble, Schroeder,
      Stegner, Werk, Williams
      NAYS -- None
      Absent and excused -- Pearce, Richardson, Stennett, Sweet
    Floor Sponsor - Darrington
    Title apvd - to House
03/02    To enrol
03/03    Rpt enrol - Sp signed
03/04    Pres signed
03/07    To Governor
03/11    Governor signed
         Session Law Chapter 39
         Effective: 07/01/05

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                              IN THE HOUSE OF REPRESENTATIVES
                                     HOUSE BILL NO. 46
                                 BY STATE AFFAIRS COMMITTEE
  1                                        AN ACT
  5    Be It Enacted by the Legislature of the State of Idaho:
  6        SECTION 1.  That Section 39-7802, Idaho Code, be, and the same  is  hereby
  7    amended to read as follows:
  8        39-7802.  DEFINITIONS.  (a)  "Adjusted  for  inflation" means increased in
  9    accordance with the formula for inflation adjustment set forth in Exhibit C to
 10    the Master Settlement Agreement.
 11        (b)  "Affiliate" means a person who directly or indirectly  owns  or  con-
 12    trols,  is  owned  or  controlled  by, or is under common ownership or control
 13    with, another person. Solely  for  purposes  of  this  definition,  the  terms
 14    "owns,"  "is  owned"  and "ownership" mean ownership of an equity interest, or
 15    the equivalent thereof, of ten percent (10%) or more, and  the  term  "person"
 16    means  an  individual, partnership, committee, association, corporation or any
 17    other organization or group of persons.
 18        (c)  "Allocable share" means allocable share as that term  is  defined  in
 19    the Master Settlement Agreement.
 20        (d)  "Cigarette"  means any product that contains nicotine, is intended to
 21    be burned or heated under ordinary conditions of use, and consists of or  con-
 22    tains:  (1)  any roll of tobacco wrapped in paper or in any substance not con-
 23    taining tobacco; or (2) tobacco, in any form, that is functional in the  prod-
 24    uct, which, because of its appearance, the type of tobacco used in the filler,
 25    or  its  packaging  and labeling, is likely to be offered to, or purchased by,
 26    consumers as a cigarette; or (3) any roll of tobacco wrapped in any  substance
 27    containing  tobacco which, because of its appearance, the type of tobacco used
 28    in the filler, or its packaging and labeling, is likely to be offered  to,  or
 29    purchased by, consumers as a cigarette described in clause (1) of this defini-
 30    tion.  The term "cigarette" includes "roll-your-own" (i.e., any tobacco which,
 31    because of its appearance, type, packaging, or labeling is  suitable  for  use
 32    and  likely to be offered to, or purchased by, consumers as tobacco for making
 33    cigarettes). For purposes of this definition  of  "cigarette,"  nine  one-hun-
 34    dredths  (0.09)  ounces  of  "roll-your-own"  tobacco shall constitute one (1)
 35    individual "cigarette."
 36        (e)  "Master Settlement Agreement" means  the  settlement  agreement  (and
 37    related documents) entered into on November 23, 1998, by the state and leading
 38    United States tobacco product manufacturers.
 39        (f)  "Qualified  escrow fund" means an escrow arrangement with a federally
 40    or state-chartered  financial  institution  having  no  affiliation  with  any
 41    tobacco product manufacturer and having assets of at least one billion dollars
 42    ($1,000,000,000)  where such arrangement requires that such financial institu-
 43    tion hold the escrowed funds' principal for the benefit of  releasing  parties
  1    and  prohibits  the tobacco product manufacturer placing the funds into escrow
  2    from using, accessing or directing the use of the funds' principal  except  as
  3    consistent with section 39-7803, Idaho Code.
  4        (g)  "Released  claims"  means  released claims as that term is defined in
  5    the Master Settlement Agreement.
  6        (h)  "Releasing parties" means releasing parties as that term  is  defined
  7    in the Master Settlement Agreement.
  8        (i)  "Tobacco product manufacturer" means an entity that after the date of
  9    enactment of this act directly (and not exclusively through any affiliate):
 10        (1)  Manufactures cigarettes anywhere that such manufacturer intends to be
 11        sold in the United States, including cigarettes intended to be sold in the
 12        United States through an importer (except where such importer is an origi-
 13        nal participating manufacturer (as that term is defined in the Master Set-
 14        tlement  Agreement)  that  will  be responsible for the payments under the
 15        Master Settlement Agreement with respect to such cigarettes as a result of
 16        the provisions of subsections II(mm) of the  Master  Settlement  Agreement
 17        and  that  pays the taxes specified in subsection II(z) of the Master Set-
 18        tlement Agreement, and provided that the manufacturer of  such  cigarettes
 19        does not market or advertise such cigarettes in the United States);
 20        (2)  Is  the  first  purchaser anywhere for resale in the United States of
 21        cigarettes manufactured anywhere that the manufacturer does not intend  to
 22        be sold in the United States; or
 23        (3)  Becomes a successor of an entity described in paragraph (1) or (2) of
 24        this subsection.
 25    The  term  "tobacco  product manufacturer" shall not include an affiliate of a
 26    tobacco product manufacturer unless such affiliate itself falls within any  of
 27    paragraphs (1) through (3) of this subsection.
 28        (j)  "Units  sold"  means  the number of individual cigarettes sold in the
 29    state by the applicable tobacco  product  manufacturer  (whether  directly  or
 30    through  a  distributor,  retailer  or similar intermediary or intermediaries)
 31    during the year in question, as measured by  excise  taxes  collected  by  the
 32    state  on packs (or "roll-your-own" tobacco containers) bearing the excise tax
 33    stamp of the state or on unstamped "roll-your-own"  tobacco  containers,  with
 34    each nine one-hundredths (0.09) ounces of "roll-your-own" tobacco equaling one
 35    (1)  unit  sold.  The  state tax commission shall promulgate such rules as are
 36    necessary to ascertain the amount of state excise tax paid on  the  cigarettes
 37    of such tobacco product manufacturer for each year.

Statement of Purpose / Fiscal Impact

                       STATEMENT OF PURPOSE
                             RS 14537

This proposed legislation clarifies that .09 ounces of "roll-your-
own" tobacco ("RYO") is a "unit sold" under Idaho's Tobacco Master
Settlement Agreement Act ("the Act").  The Act requires tobacco
product manufacturers that have not joined what is called the
Master Settlement Agreement ("MSA") to establish an escrow account
and make deposits into escrow based upon their "units sold" in
Idaho.  (The MSA being referred to is the settlement that was
entered into on November 23, 1998 between the State and leading
United States tobacco product manufacturers).  The Act defines
"units sold," in part, as the number of cigarettes sold in Idaho
"as measured by excise taxes collected by the state on packs (or
'roll-your-own' tobacco containers) bearing the excise tax stamp of
the state."  Idaho Code  39-7802(j) (emphasis added).  

A number of tobacco product manufacturers that have not joined the
MSA argue that no escrow needs to be deposited for RYO sold in
Idaho because it is not a "unit sold."  They contend that because
Idaho taxes RYO differently from cigarettes and does not require an
excise tax stamp to be affixed to RYO containers, it is not a "unit
sold."  The result is that some manufacturers that have not joined
the MSA are not depositing into escrow based upon sales of RYO in
Idaho.  This directly undercuts the purposes for which the Act was
passed in 1999 and puts tobacco product manufacturers that have
joined the MSA at an unfair disadvantage, because they are paying
the State based upon sales of RYO sold in Idaho.

                           FISCAL NOTE

There is no fiscal impact to the general fund.

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