BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2496| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 2496 Author: Nava (D) Amended: 8/18/10 in Senate Vote: 21 SENATE HEALTH COMMITTEE : 6-2, 6/16/10 AYES: Alquist, Cedillo, Leno, Negrete McLeod, Pavley, Romero 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. Senate Floor Amendments of 8/18/10 revise certain sections of the bill to make clear the division of administrative CONTINUED AB 2496 Page 2 duties between the Board of Equalization (BOE) and the Department of Justice (DOJ) in administering the Cigarette and Tobacco Products Tax Law and the Cigarette and Tobacco Products Licensing Act and make certain provisions of the bill more workable to tobacco distributors and retailers, and double-joints the bill to AB 2733 (Ruskin). The amendments specifically: (1) clarify certain sections of the bill to make clear the division of administrative duties between the BOE and the DOJ in administering the Cigarette and Tobacco Products Tax Law and the Cigarette and Tobacco Products Licensing Act of 2003, (2) revise the proposed Tobacco Directory Law that requires notice to, and sell-off period for, a distributor's customer so that they are workable for distributors and retailers, (3) clarify that the sell-off period deadlines don't apply for the distributors if the DOJ decides not to take administrative action against a manufacturer that has been notified of potential administrative action, and (4) add findings language regarding the public health hazards posed by cheap cigarettes and tobacco products. ANALYSIS : Existing federal law: 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 year. 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 AB 2496 Page 3 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, 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 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 AB 2496 Page 4 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 bond in a from and manner directed by the AG. 2. Requires the manufacturer or importer to additionally identify the registered agent to 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. AB 2496 Page 5 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 specified. 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 has provided an electronic mail address for this purpose. 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. AB 2496 Page 6 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, upon the request of the AG. 18.Eliminates the reference to the track and trace provisions under state law that is applicable to delivery sales. 19.Defines "Delivery Sales Laws" as any state or federal laws applicable to delivery sale under to existing state law. 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 8/18/10) Department of Justice (source) American Lung Association Breathe California AB 2496 Page 7 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. 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 8/19/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE AB 2496 Page 8 **** END ****