HB-5222, As Passed House, November 12, 2003
November 4, 2003, Introduced by Reps. O'Neil, Farrah, Minore, Zelenko, Nofs and Meyer and referred to the Committee on Tax Policy.
A bill to amend 1999 PA 244, entitled
"An act to require tobacco product manufacturers to place funds
in escrow for medical expenses incurred by the state due to
tobacco related illnesses; to establish a formula for determining
the amount of the escrow; to establish the conditions for release
of funds from escrow; to prescribe powers and duties of the
attorney general; and to provide for civil penalties for
violation of this act,"
by amending section 2 (MCL 445.2052).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 2. (1) Any tobacco product manufacturer selling
2 cigarettes to consumers within the state (whether directly or
3 through a distributor, retailer, or similar intermediary or
4 intermediaries) after the date of enactment of this act shall do
5 1 of the following:
6 (a) Become a participating manufacturer and generally perform
7 its financial obligations under the master settlement agreement.
8 (b) Place into a qualified escrow fund by April 15 of the
1 year following the year in question the following amounts (as
2 such amounts are adjusted for inflation):
3 (i) 1999: $.0094241 per unit sold after the date of
4 enactment of this act.
5 (ii) 2000: $.0104712 per unit sold.
6 (iii) For each of 2001 and 2002: $.0136125 per unit sold.
7 (iv) For each of 2003 through 2006: $.0167539 per unit
8 sold.
9 (v) For each of 2007 and each year thereafter: $.0188482 per
10 unit sold.
11 (2) A tobacco product manufacturer that places funds into
12 escrow pursuant to subsection (1)(b) shall receive the interest
13 or other appreciation on the funds as earned. The funds
14 themselves shall be released from escrow only under 1 or more of
15 the following circumstances:
16 (a) To pay a judgment or settlement on any released claim
17 brought against the tobacco product manufacturer by the state or
18 any releasing party located or residing in the state. Funds
19 shall be released from escrow under this subdivision in the order
20 in which they were placed into escrow and only to the extent and
21 at the time necessary to make payments required under such
22 judgment or settlement.
23 (b) To the extent that a tobacco product manufacturer
24 establishes that the amount it was required to place into escrow
25 on account of units sold in the state in a particular year was
26 greater than the state's
allocable share of the total payments
27 that such manufacturer
would have been required to make in that
1 year under the master
settlement agreement (as determined
2 pursuant to section
IX(i)(2) of the master settlement agreement,
3 and before any of the
adjustments or offsets described in section
4 IX(i)(3) of the master settlement agreement other than the
5 inflation adjustment) master settlement agreement payments, as
6 determined pursuant to section IX(i) of that agreement including
7 after final determination of all adjustments, that such
8 manufacturer would have been required to make on account of such
9 units sold had it been a participating manufacturer, the excess
10 shall be released from escrow and revert back to such tobacco
11 product manufacturer.
12 (c) To the extent not released from escrow under subdivision
13 (a) or (b), funds shall be released from escrow and revert back
14 to such tobacco product manufacturer 25 years after the date on
15 which they were placed into escrow.
16 (d) If a court of competent jurisdiction determines that
17 subdivision (b) as amended by the amendatory act that added this
18 subdivision is unconstitutional, subdivision (b) does not apply.
19 (3) Each tobacco product manufacturer that elects to place
20 funds into escrow pursuant to subsection (1)(b) shall annually
21 certify to the department of treasury that it is in compliance
22 with this section. The attorney general may bring a civil action
23 on behalf of the state against any tobacco product manufacturer
24 that fails to place into escrow the funds required under this
25 section. Any tobacco product manufacturer that fails in any year
26 to place into escrow the funds required under this section shall
27 be subject to all of the following that are applicable:
1 (a) Shall be required within 15 days to place sufficient
2 funds into escrow to bring it into compliance with this section.
3 The court, upon a finding of a violation of this subsection, may
4 impose a civil penalty to be paid to the general fund of the
5 state in an amount not to exceed 5% of the amount improperly
6 withheld from escrow per day of the violation and in a total
7 amount not to exceed 100% of the original amount improperly
8 withheld from escrow.
9 (b) In the case of a knowing violation, shall be required
10 within 15 days to place sufficient funds into escrow to bring it
11 into compliance with this section. The court, upon a finding of
12 a knowing violation of this subsection, may impose a civil
13 penalty to be paid to the general fund of this state in an amount
14 not to exceed 15% of the amount improperly withheld from escrow
15 per day of the violation and in a total amount not to exceed 300%
16 of the original amount improperly withheld from escrow.
17 (c) In the case of a second knowing violation, shall be
18 prohibited from selling cigarettes to consumers within the state
19 (whether directly or through a distributor, retailer, or similar
20 intermediary) for a period not to exceed 2 years.
21 (4) For purposes of subsection (3), each failure to make an
22 annual deposit required under subsection (1)(b) shall constitute
23 a separate violation.
24 (5) If, following a court determination described in
25 subsection(2)(d), a court of competent jurisdiction determines
26 that subsection (2) without subsection (2)(b) is
27 unconstitutional, then this subsection applies. A tobacco
1 product manufacturer that places funds into escrow pursuant to
2 subsection (1)(b) shall receive the interest or other
3 appreciation on the funds as earned. The funds themselves shall
4 be released from escrow only under 1 or more of the following
5 circumstances:
6 (a) To pay a judgment or settlement on any released claim
7 brought against the tobacco product manufacturer by the state or
8 any releasing party located or residing in the state. Funds
9 shall be released from escrow under this subdivision in the order
10 in which they were placed into escrow and only to the extent and
11 at the time necessary to make payments required under such
12 judgment or settlement.
13 (b) To the extent that a tobacco product manufacturer
14 establishes that the amount it was required to place into escrow
15 in a particular year was greater than the state's allocable share
16 of the total payments that such manufacturer would have been
17 required to make in that year under the master settlement
18 agreement (as determined pursuant to section IX(i)(2) of the
19 master settlement agreement, and before any of the adjustments or
20 offsets described in section IX(i)(3) of the master settlement
21 agreement other than the inflation adjustment) had it been a
22 participating manufacturer, the excess shall be released from
23 escrow and revert back to such tobacco product manufacturer.
24 (c) To the extent not released from escrow under subdivision
25 (a) or (b), funds shall be released from escrow and revert back
26 to such tobacco product manufacturer 25 years after the date on
27 which they were placed into escrow.
1 (6) If this act or any portion of the amendatory act that
2 added this subsection is held by a court of competent
3 jurisdiction to be unconstitutional, the remaining portions of
4 this act shall continue in full force and effect.