Amended in Senate May 14, 2013

Amended in Senate April 1, 2013

Senate Bill No. 680

Introduced by Senator Wolk

February 22, 2013

An act to amend Section 104556 of the Health and Safety Code, relating to tobacco settlement moneys.

LEGISLATIVE COUNSEL’S DIGEST

SB 680, as amended, Wolk. Tobacco begin insert Master end insert Settlement begin delete Fund. end delete begin insert Agreement: qualified escrow funds. end insert

Under existing law, states’ attorneys general and various tobacco product manufacturers have entered into a Master Settlement Agreement (MSA), in settlement of various lawsuits, that provides for the allocation of money to the states and certain territories.

Existing law requires a tobacco product manufacturer selling cigarettes to consumers within the state to either become a participating manufacturer, as defined, and generally perform its financial obligations under the MSA, or to place specified amounts into a qualified escrow fund, which are calculated on a per unit sold basis, as specified. For each tobacco product manufacturer that places amounts into a qualified escrow fund, existing law requires that manufacturer to certify to the Attorney General that the manufacturer has complied with begin delete exiting end delete begin insert existing end insert law, and the failure to place all required funds into escrow subjects the manufacturer to civil penalties, as specified.

This bill would, for the purposes of begin delete the end delete calculating the amount a tobacco product manufacturer is required to place in the qualified escrow begin delete account end delete begin insert fund end insert , revise the definition of “units sold” to specify that it begin delete is end delete begin insert means end insert the number of cigarettes sold to a consumer, regardless of whether the state excise tax was begin insert due or end insert collected, but would exclude, among other things, cigarettes sold at federal military installations.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 104556 of the Health and Safety Code
is amended to read:

104556.  

The definitions contained in this section shall govern
the construction of this article.

(a)  “Adjusted for inflation” means increased in accordance with
the formula for inflation adjustment set forth in Exhibit C to the
Master Settlement Agreement.

(b)  “Affiliate” means a person who directly or indirectly owns
or controls, 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 interest, or the equivalent thereof,
of 10 percent 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; (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 this section. “Cigarette” also includes “roll-your-own”
tobacco, meaning 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 definition of “cigarette,” 0.09
ounces of “roll-your-own” tobacco shall constitute 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 one billion dollars ($1,000,000,000) where the
arrangement requires that the financial institution hold the escrowed
funds’ principal for the benefit of releasing 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 subdivision (b) of Section 104557.

(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 article directly, and not exclusively
through any affiliate:

(1)  Manufactures cigarettes anywhere that the manufacturer
intends to be sold in the United States, including cigarettes intended
to be sold in the United States through an importer (except where
the importer is an original participating manufacturer as that term
is defined in the Master Settlement Agreement, that will be
responsible for the payments under the Master Settlement
Agreement with respect to such cigarettes as a result of the
provisions of subsection 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); or

(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
affiliate of a tobacco product manufacturer unless the affiliate itself
falls within any of paragraphs (1) to (3) of this subdivision.

(j)  “Units sold” means the number of individual cigarettes sold
to a consumer in the state by the applicable tobacco product
manufacturer, whether directly or through a distributor, retailer,
or similar intermediary or intermediaries, during the year in
question, regardless of whether the state excise tax was begin insert due or end insert
collected. “Units sold” shall not include cigarettes sold on federal
military installations, sold by a Native American tribe to a member
of that tribe on that tribe’s land, or that are otherwise exempt from
state excise tax pursuant to federal law. The State Board of
Equalization shall adopt any regulations as are necessary to
ascertain the amount of state excise tax paid on the cigarettes of
the tobacco product manufacturer for each year.