Session Law

Identifying Information:L. 2001 ch. 020
Other Identifying Information:2001 Senate Bill 242
Tax Type:Cigarette and Tobacco Products
Brief Description:An Act concerning tobacco; relating to requirements for sale of cigarettes; amendingK.S.A. 2000 Supp. 50-6a02 and 50-6a03 and repealing the existing sections.
Keywords:


Body:

CHAPTER 20

SENATE BILL No. 242


An Act concerning tobacco; relating to requirements for sale of cigarettes; amending

K.S.A. 2000 Supp. 50-6a02 and 50-6a03 and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 2000 Supp. 50-6a02 is hereby amended to read as

follows: 50-6a02. As used in this act:

(a) ``Adjusted for inflation'' means increased in accordance with the

formula for inflation adjustment set forth in exhibit C to the master set-

tlement agreement.

(b) ``Affiliate'' means a person who directly or indirectly owns or con-

trols, is owned or controlled by, or is under common ownership or control

with, another person. Solely for purposes of this definition, the terms

``owns,'' ``is owned'' and ``ownership'' mean ownership of an equity inter-

est, or the equivalent thereof, of 10% or more, and the term ``person''

means an individual, partnership, committee, association, corporation or

any other organization or group of persons.

(c) ``Allocable share'' means allocable share as that term is defined in

the master settlement agreement.

(d) ``Cigarette'' means any product that contains nicotine, is intended

to be burned or heated under ordinary conditions of use and consists of

or contains (1) any roll of tobacco wrapped in paper or in any substance

not containing tobacco; or (2) tobacco, in any form, that is functional in

the product, which, because of its appearance, the type of tobacco used

in the filler, or its packaging and labeling, is likely to be offered to, or

purchased by, consumers as a cigarette; or (3) any roll of tobacco wrapped

in any substance containing tobacco which, because of its appearance, the

type of tobacco used in the filler, or its packaging and labeling, is likely

to be offered to, or purchased by, consumers as a cigarette described in

clause (1) of this subsection (d). The term ``cigarette'' includes ``roll-your-

own'' (i.e., any tobacco which, because of its appearance, type, packaging

or labeling is suitable for use and likely to be offered to, or purchased by,

consumers as tobacco for making cigarettes). For purposes of this defi-

nition of ``cigarette,'' 0.09 ounces of ``roll-your-own'' tobacco shall con-

stitute one individual ``cigarette.''

(e) ``Master settlement agreement'' means the settlement agreement

(and related documents) entered into on November 23, 1998, by the state

and leading United States tobacco product manufacturers.

(f) ``Qualified escrow fund'' means an escrow arrangement with a

federally or state chartered financial institution having no affiliation

with any tobacco product manufacturer and having assets of at least

$1,000,000,000 where such arrangement requires that such financial

institution hold the escrowed funds' principal for the benefit of releas-

ing parties and prohibits the tobacco product manufacturer placing the

funds into escrow from using, accessing or directing the use of the

funds' principal except as consistent with subsection (b)(2) of K.S.A.

2000 Supp. 50-6a03 and amendments thereto.

(g) ``Released claims'' means released claims as that term is defined

in the master settlement agreement.

(h) ``Releasing parties'' means releasing parties as that term is defined

in the master settlement agreement.

(i) ``Tobacco product manufacturer'' means an entity that after the

date of enactment of this act directly (and not exclusively through any

affiliate):

(1) Manufactures cigarettes anywhere that such manufacturer in-

tends to be sold in the United States, including cigarettes intended to be

sold in the United States through an importer (except where such im-

porter is an original participating manufacturer, as that term is defined

in the master settlement agreement, that will be responsible for the pay-

ments under the master settlement agreement with respect to such cig-

arettes as a result of the provisions of subsections II(mm) of the master

settlement agreement and that pays the taxes specified in subsection II(z)

of the master settlement agreement, and provided that the manufacturer

of such cigarettes does not market or advertise such cigarettes in the

United States);

(2) is the first purchaser anywhere for resale in the United States of

cigarettes manufactured anywhere that the manufacturer does not intend

to be sold in the United States; or

(3) becomes a successor of an entity described in paragraph (1) or

(2). The term ``tobacco product manufacturer'' shall not include an affil-

iate of a tobacco product manufacturer unless such affiliate itself falls

within any of parts (1)-(3) of subsection (i) above.

(j) ``Units sold'' means the number of individual cigarettes sold in the

state by the applicable tobacco product manufacturer (whether directly

or through a distributor, retailer or similar intermediary or intermediar-

ies) during the year in question, 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. The department of revenue shall promulgate

such rules and regulations as are necessary to ascertain the amount of

state excise tax paid on the cigarettes of such tobacco product manufac-

turer for each year.

Sec. 2. K.S.A. 2000 Supp. 50-6a03 is hereby amended to read as

follows: 50-6a03. Any tobacco product manufacturer selling cigarettes to

consumers within the state (whether directly or through a distributor,

retailer or similar intermediary or intermediaries) after the effective date

of this act shall do one of the following:

(a) Become a participating manufacturer (as that term is defined in

section II(jj) of the master settlement agreement) and generally perform

its financial obligations under the master settlement agreement; or

(b) (1) place into a qualified escrow fund by April 15 of the year

following the year in question the following amounts (as such amounts

are adjusted for inflation):

(A) 1999: $.0094241 per unit sold after the effective date of this act;

(B) 2000: $.0104712 per unit sold;

(C) for each of 2001 and 2002: $.0136125 per unit sold;

(D) for each of 2003 through 2006: $.0167539 per unit sold;

(E) for each of 2007 and each year thereafter: $0188482 $.0188482

per unit sold.

(2) A tobacco product manufacturer that places funds into escrow

pursuant to paragraph (1) of subsection (b) shall receive the interest or

other appreciation on such funds as earned. Such funds themselves shall

be released from escrow only under the following circumstances:

(A) To pay a judgment or settlement on any released claim brought

against such tobacco product manufacturer by the state or any releasing

party located or residing in the state. Funds shall be released from escrow

under this subparagraph (i) in the order in which they were placed into

escrow and (ii) only to the extent and at the time necessary to make

payments required under such judgment or settlement;

(B) to the extent that a tobacco product manufacturer establishes that

the amount it was required to place into escrow in a particular year was

greater than the state's allocable share of the total payments that such

manufacturer would have been required to make in that year under the

master settlement agreement (as determined pursuant to section IX(i)(2)

of the master settlement agreement, and before any of the adjustments

or offsets described in section IX(i)(3) of that agreement other than the

inflation adjustment) had it been a participating manufacturer, the excess

shall be released from escrow and revert back to such tobacco product

manufacturer; or

(C) to the extent not released from escrow under subparagraphs (A)

or (B) of paragraph (2) of subsection (b), funds shall be released from

escrow and revert back to such tobacco product manufacturer 25 years

after the date on which they were placed into escrow.

(3) Each tobacco product manufacturer that elects to place funds into

escrow pursuant to this subsection shall annually certify to the attorney

general that it is in compliance with this subsection. The attorney general

may bring a civil action on behalf of the state against any tobacco product

manufacturer that fails to place into escrow the funds required under this

section. Any tobacco product manufacturer that fails in any year to place

into escrow the funds required under this section shall:

(A) Be required within 15 days to place such funds into escrow as

shall bring it into compliance with this section. The court, upon a finding

of a violation of this subsection, may impose a civil penalty to be credited

to the state general fund in an amount not to exceed 5% of the amount

improperly withheld from escrow per day of the violation and in a total

amount not to exceed 100% of the original amount improperly withheld

from escrow;

(B) in the case of a knowing violation, be required within 15 days to

place such funds into escrow as shall bring it into compliance with this

section. The court, upon a finding of a knowing violation of this subsec-

tion, may impose a civil penalty to be paid to the state general fund in an

amount not to exceed 15% of the amount improperly withheld from es-

crow per day of the violation and in a total amount not to exceed 300%

of the original amount improperly withheld from escrow; and

(C) in the case of a second knowing violation, be prohibited from

selling cigarettes to consumers within the state (whether directly or

through a distributor, retailer or similar intermediary) for a period not to

exceed two years.

Each failure to make an annual deposit required under this section

shall constitute a separate violation. A tobacco product manufacturer who

is found in violation of this section shall pay, in addition to other amounts

assessed under this section and pursuant to law, the costs and attorney's

fees incurred by the state during a successful presentation under this

paragraph (3).

Sec. 3. K.S.A. 2000 Supp. 50-6a02 and 50-6a03 are hereby repealed.

Sec. 4. This act shall take effect and be in force from and after its

publication in the Kansas register.

Approved March 15, 2000.

Published in the Kansas Register March 22, 2000.


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Date Composed: 09/25/2001 Date Modified: 09/25/2001