BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                  AB 2496|
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                                 THIRD READING

          Bill No:  AB 2496
          Author:   Nava (D)
          Amended:  7/15/10 in Assembly
          Vote:     21

           SENATE HEALTH COMMITTEE  :  6-2, 6/16/10
          AYES:  Alquist, Cedillo, Leno, Negrete McLeod, Pavley,  
          NOES:  Strickland, Aanestad
          NO VOTE RECORDED:  Cox

           SENATE REVENUE & TAXATION COMMITTEE  :  3-0, 6/23/10
          AYES:  Wolk, Alquist, Padilla
          NO VOTE RECORDED:  Walters, Ashburn

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8 

           ASSEMBLY FLOOR  :  58-16, 6/1/10 - See last page for vote

           SUBJECT  :    Cigarette and tobacco products

           SOURCE  :     Department of Justice

           DIGEST  :    This bill amends the California Cigarette and  
          Tobacco Products Licensing Act of 2003 in governing the  
          financial and other obligations of non-participating  
          tobacco manufacturers as part of its diligence obligation.

           ANALYSIS  :    Existing federal law: 



                                                               AB 2496

          1.Requires, state Attorneys General (AG) and various  
            tobacco product manufacturers to enter into a Master  
            Settlement Agreement (MSA) as a settlement of various  
            lawsuits, that provides for the allocation of money to  
            the states and certain territories. 

          2.Enters California into a memorandum of understanding  
            providing for the allocation of the state's share of  
            funds to be received under the MSA between the state and  
            counties and certain cities within the state. 

          3.Requires any tobacco product manufacturer selling  
            cigarettes to consumers in this state to place specified  
            amounts into a qualified escrow fund by April 15 of each  

          Existing state law: 

          1.Prohibits the sale, offer for sale, distribution, or  
            import of "bidis" or "beedies," defined as a product  
            containing tobacco that is wrapped in temburni leaf or  
            tendu leaf, unless it is sold or intended for sale in  
            business establishments that exclude minors . 

          2.Requires, under the Cigarette and Tobacco Products Tax  
            Law (Tax Law), a tax with respect to distributions of  
            cigarettes paid by distributors through the use of stamps  
            or meter impressions: 

             A.   Requires that these stamps or impressions be  
               affixed to each package of cigarettes sold; 

             B.   Requires certification of additional information,  
               as specified; and, 

             C.   Requires the AG to post on the AG's Internet Web  
               site a directory of tobacco product manufacturers that  
               are participating manufacturers that are participating  
               manufacturers under the MSA, and that have made the  
               required escrow payments and provided certification of  
               related information to the AG: 

                  i.        Requires the AG's Internet Web site to  
                    include specified brand families, as defined,  


                                                               AB 2496

                    that have been identified by the by the tobacco  
                    product manufacturers; 

                  ii.             Requires that a manufacturer and  
                    brand families be excluded from the directory,  
                    under certain circumstances; and, 

                  iii.            Requires certain cigarette and  
                    tobacco products be forfeited to the state, under  
                    certain circumstances, upon seizure by the Board  
                    of Equalization (BOE). 

          3.Enacts the Cigarette and Tobacco Products Licensing Act,  
            which imposes licensing requirements on tobacco  
            manufacturers, wholesalers, retailers and importers;  
            requires manufacturers to pay a one-time fee; and,  
            imposes additional civil and criminal penalties on  
            individuals and businesses that violate tobacco-related,  
            anti-contraband laws and laws prohibiting tobacco-related  
            sales to minors. 

          4.Establishes the Stop Tobacco Access to Kids Enforcement  
            Act (STAKE Act) to reduce or eliminate the illegal  
            purchase and consumption of tobacco products by minors: 

             A.   Requires retailers from selling cigarettes and  
               tobacco products to minors under the age of 18 and  
               requires that retailers check identification of  
               individuals trying to buy cigarettes and tobacco  
               products who appear under the age of 18; and, 

             B.   Increases civil penalties and expands the number of  
               agencies that are permitted to carry out  
               investigations of illegal tobacco sales to minors from  
               the Department of Public Health to include the AG and  
               other state and local agencies. 

          This bill: 

          1. Requires a manufacturer or importer to consent to  
             jurisdiction of the California courts for the purpose of  
             enforcement of the MSA and the Cigarette and Tobacco  
             Products Tax Law, or, in lieu of consent, post a surety  


                                                               AB 2496

          2. Requires the manufacturer or importer to additionally  
             identify the registered agent to the Department of  
             Justice (DOJ). 

          3. Authorizes a peace officer or board employee granted  
             limited peace officer status to inspect any site with  
             respect to violations of a specified provision of the  
             Tax Law.

          4. Prohibits those persons from acquiring a package of  
             cigarettes unless the brand family or product  
             manufacturer of the cigarettes is included on a  
             directory posted by the DOJ, as specified. 

          5. Deletes the DOJ's fee on manufacturers for implementing  
             and maintaining the directory. 

          6. Authorizes a tobacco product manufacturer that elects to  
             place funds into a qualified escrow fund to make an  
             irrevocable assignment of its interest in the funds to  
             the benefit of the State of California. 

          7. Requires any funds assigned to the state that are  
             withdrawn to be deposited into the General Fund as a  
             credit against any judgment or settlement which may be  
             obtained against the tobacco product manufacturer who  
             has assigned the funds. 

          8. Requires a stamp or meter impression to be made on rolls  
             of tobacco, as specified, and makes conforming changes  
             to related provisions.

          9. Requires certification of additional information, as  

          10.Establishes circumstances under which a manufacturer and  
             brand families are to be excluded from the directory of  
             tobacco product manufacturers that are participating  
             manufacturers and brand families under the MSA, and  
             require DOJ to provide distributors and wholesalers with  
             written notice of each tobacco product that is added to  
             or removed from the directory and to provide notice to  
             each licensed distributor, wholesaler, other person who  


                                                               AB 2496

             has provided an electronic mail address for this  

          11.Requires a newly qualified NPM or a NPM that poses an  
             elevated risk of noncompliance with the Tax Law or the  
             MSA, to post a surety bond, as specified before  
             inclusion onto the DOJ's directory of tobacco product  
             manufacturers that are participating manufacturers under  
             the MSA. 

          12.Specifies that a person is prohibited from shipping or  
             distributing into or within this state for personal  
             consumption in California cigarettes of a tobacco  
             manufacturer or brand family not included in the  
             directory, and would provide that this specification is  
             declaratory of existing law. 

          13.Requires any NPM not located in the United States, as an  
             additional condition precedent to having its brand  
             families listed or retained in the directory, to cause  
             its importers to appoint an agent, as specified, and  
             would impose additional specified responsibilities upon  
             such manufacturer. 

          14.Requires, as a condition of selling cigarettes in  
             California, a tobacco product manufacturer, as  
             specified, to submit, or authorize to disclose, a copy  
             of its applicable return.

          15.Provides that a failure to comply with that provision  
             would subject the manufacturer and its brand companies  
             to removal from the directory.

          16.Imposes a civil penalty on any manufacturer that  
             intentionally provides an applicable return with  
             materially false information. 

          17.Requires the BOE and the DOJ to share the data,  
             including e-mail addresses, for distributors, importers,  
             manufacturers, and wholesalers. 

          18.Eliminates the reference to the track and trace  
             provisions under state law that is applicable to  
             delivery sales. 


                                                               AB 2496

          19.Defines "Delivery Sales Laws" as any state or federal  
             laws applicable to delivery sale under to existing state  

          20.Amends the definition of "bidis" or "beedies," as  
             defined, to include any product that is marked as sold  
             as "bidis" or "beedies", and clarifies that persons who  
             violate the prohibition prescribed under existing law  
             are subject to both criminal and civil liability. 

          21.Provides that the provisions of this bill are severable.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

           SUPPORT  :   (Verified  8/9/10)

          Department of Justice (source) 
          American Lung Association
          Breathe California 

           ARGUMENTS IN SUPPORT  :    DOJ states that this bill will  
          "enhance the department's efforts to enforce existing  
          provisions of state law related to the Master Settlement  
          Agreement between California and the major tobacco  
          manufacturers.  The measure would protect against the sale  
          of cigarettes below market prices, and would help protect  
          the State's share of tobacco settlement payments [due] to  
          it under the Master Settlement Agreement." 

          The American Lung Association supports this bill because it  
          will "strengthen existing law regarding payments from  
          'non-participating manufacturers' under the Master Tobacco  
          Settlement Agreement."  The American Lung Association  
          believes that this bill will "provide the state with  
          additional tools to ensure payment of NPMs, especially for  
          new, foreign, and elevated risk NPMs." The American Lung  
          Association also supports the provision in this bill that  
          allows NPMs to assign their interest in the funds to the  
          State, so that such funds may ultimately be directed toward  
          tobacco prevention efforts.


                                                               AB 2496

           ASSEMBLY FLOOR :  
          AYES:  Adams, Ammiano, Arambula, Bass, Beall, Blakeslee,  
            Block, Blumenfield, Bradford, Brownley, Buchanan,  
            Caballero, Charles Calderon, Carter, Chesbro, Coto,  
            Davis, De La Torre, De Leon, Emmerson, Eng, Evans, Feuer,  
            Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,  
            Hernandez, Hill, Huber, Huffman, Jones, Lieu, Bonnie  
            Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,  
            Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,  
            Saldana, Skinner, Solorio, Swanson, Torlakson, Torres,  
            Torrico, Tran, Villines, Yamada, John A. Perez
          NOES:  Anderson, Bill Berryhill, Conway, DeVore, Fletcher,  
            Gaines, Garrick, Gilmore, Hagman, Harkey, Jeffries,  
            Knight, Logue, Niello, Norby, Smyth
          NO VOTE RECORDED:  Tom Berryhill, Cook, Fuller, Silva,  
            Audra Strickland

          CTW:nl  8/9/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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