BILL ANALYSIS
AB 2496
Page 1
ASSEMBLY THIRD READING
AB 2496 (Nava)
As Amended May 20, 2010
Majority vote
GOVERNMENTAL ORGANIZATION 17-1JUDICIARY 8-1
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|Ayes:|Coto, Blakeslee, Chesbro, |Ayes:|Feuer, Tran, Brownley, |
| |De Leon, Evans, Galgiani, | |Evans, Jones, Swanson, |
| |Hernandez, Hill, Lieu, | |Monning, Nava |
| |Ma, Mendoza, Nestande, | | |
| |V. Manuel Perez, | | |
| |Portantino, Silva, | | |
| |Torres, Torrico | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Cook |Nays:|Knight |
| | | | |
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APPROPRIATIONS 14-2
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|Ayes:|Fuentes, Conway, Hill, | | |
| |Bradford, Charles | | |
| |Calderon, Coto, Davis, | | |
| |Hall, Miller, Nielsen, | | |
| |Skinner, Solorio, | | |
| |Torlakson, Torrico | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Norby | | |
| | | | |
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SUMMARY : Amends the California Cigarette and Tobacco Products
Licensing Act of 2003 (Act) in governing the financial and other
obligations of non-participating tobacco manufacturers (NPMs) as
part of its diligence obligation. Specifically, this bill :
1)Requires a manufacturer or importer to additionally consent to
jurisdiction of the California courts for the purpose of
enforcement of the Master Settlement Agreement (MSA) and a
specified provision of the Cigarette and Tobacco Products Tax
Law (Tax Law):
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a) Requires the manufacturer or importer to additionally
identify the registered agent to the Department of Justice
(DOJ);
b) 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; and,
c) 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.
Deletes the DOJ's fee on manufacturers for implementing and
maintaining the directory.
2)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.
Requires any funds assigned to the state that are withdrawn to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.
3)Requires a stamp or meter impression to be made on rolls of
tobacco, as specified, and makes conforming changes to related
provisions:
a) Requires certification of additional information, as
specified;
b) 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 would
require those distributors, after receiving notice from the
DOJ, to provide notice to each customer that is a licensed
distributor, wholesaler, or retailer who purchased, within
two years before the removal, the cigarettes of the tobacco
product manufacturer or brand family removed or excluded
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from the DOJ's directory of tobacco product manufacturers
that are participating manufacturers (PMs) under the MSA;
Deletes provisions referring to cigarettes or tobacco
products from a NPM located outside the United States that
is removed form the directory;
c) 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 PMs under the MSA;
d) 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;
e) 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;
f) 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:
i) Provides that a failure to comply with that
provision would subject the manufacturer and its brand
companies to removal from the directory; and,
ii) Imposes a civil penalty on any manufacturer that
intentionally provides an applicable return with
materially false information.
4)Adds to the forfeiture list cigarette and tobacco products
that do not meet requirements specified by the Board of
Equalization (BOE) or the Attorney General (AG).
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5)Requires the BOE and the DOJ to share the data, including
e-mail addresses, for distributors, importers, manufacturers,
and wholesalers.
6)Eliminates the reference to the track and trace provisions
under state law that is applicable to delivery sales.
7)Defines "Delivery Sales Laws" as any state or federal laws
applicable to delivery sale under to existing state law.
8)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.
9)Provides that the provisions of this bill are severable.
EXISTING FEDERAL LAW :
1)Requires, state AGs and various tobacco product manufacturers
to enter into a 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 (MOU)
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 tendu leaf, unless it is
sold or intended for sale in business establishments that
exclude minors .
2)Requires, under the Tax Law, a tax with respect to
distributions of cigarettes paid by distributors through the
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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 the 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,
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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 State Department
of Public Health (DPH) to include the AG and other state
and local agencies.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Costs associated with this legislation are minor and
absorbable within existing resources as this bill enhances the
AG's authority to enforce the existing provisions of the MSA.
2)In an earlier version of the bill, the BOE estimated their
administrative costs associated with the legislation would
likely be minor, between $10,000 and $50,000.
3)This bill does not affect the state's tax revenues.
4)Potential minor non-reimbursable local costs for investigation
and prosecution of violations, potentially offset by fine
revenue.
COMMENTS : This bill amends the Tax Act with regard to governing
the financial and other MSA-related obligations of NPMs as part
of its diligence obligation. Author states, "This bill would
bring California law into conformity with Virginia's law and
those of the other states to prevent PMs from arguing in future
litigation that California has failed to "diligently enforce"
against NPMs." This bill modeled on similar NPM escrow statute
enhancements made in the following states: Virginia, Kentucky,
Kansas, and Idaho. The measure would protect against the sale
of cigarettes below market prices, and would help protect the
state's share of tobacco settlement payments under the MSA.
Related legislation : SB 822 (Escutia) Chapter 780, Statutes of
1999, created California's version of the MSA model statute,
requiring tobacco manufacturers selling products within the
state to either become a participating manufacturer under the
terms of the MSA, or, if a non-participating member, to deposit
specified funds in a qualified escrow fund each year.
AB 71 (Horton) Chapter 890, Statutes of 2003, created the
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Cigarette and Tobacco Products Licensing Act of 2003, which
generally provides for the licensing of tobacco manufacturers,
importers, distributors, wholesalers, and retailers, and
prohibits any such entity from operating in California without a
license. Authorizes BOE to suspend or revoke licenses for
violations of the Act and related provisions of law.
Currently, AB 2733 (Ruskin) of 2010, amends the Tobacco
Licensing Act to prohibit displaying or gifting of cigarettes
and tobacco products during any period of license suspension and
revocation. The bill also requires a person that has received a
notice of suspension or revocation to post a copy of the notice
at the primary entrance and near the cash register.
Analysis Prepared by : Rod Brewer / G. O. / (916) 319-2531
FN: 0004447