HB1582eng 104TH GENERAL ASSEMBLY

HB1582 Engrossed LRB104 06249 HLH 16284 b

AN ACT concerning finance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Tobacco Products Manufacturers' Escrow Enforcement Act of 2003 is amended by changing Section 30 as follows:

(30 ILCS 167/30)

Sec. 30. Penalties and other remedies.

(a) In addition to or in lieu of any other civil or criminal remedy provided by law, upon a determination that a distributor has violated subsection (e) of Section 15 or any regulation adopted pursuant thereto, the Director may revoke or suspend the license of any distributor in the manner provided by Section 6 of the Cigarette Tax Act, Section 6 of the Cigarette Use Tax Act, or Section 10-25 of the Tobacco Products Tax Act of 1995, as appropriate. Each stamp affixed and each offer to sell cigarettes in violation of subsection (e) of Section 15 shall constitute a separate violation. For each violation, the Director may also impose a civil penalty in an amount not to exceed the greater of 500% of the retail value of the cigarettes sold or $5,000 upon a determination of violation of subsection (e) of Section 15 or any regulations adopted pursuant thereto.

(b) Any cigarettes that have been sold, offered for sale, or possessed for sale in this State, or imported for personal consumption in this State in violation of subsection (e) of Section 15 shall be subject to seizure and forfeiture as provided in Sections 18, 18a, and 20 of the Cigarette Tax Act and Sections 24, 25, 25a and 26 of the Cigarette Use Tax Act, and all cigarettes so seized and forfeited shall be destroyed and not resold.

(c) The Attorney General may seek an injunction to restrain a threatened or actual violation of subsection (e) of Section 15, subsection (a) of Section 25, or subsection (d) of Section 25 by a distributor and to compel the distributor to comply with such subsections. In any action brought pursuant to this Section, the State shall be entitled to recover the costs of investigation, costs of the action, and reasonable attorney fees.

(c-5) Upon a distributor's failure to submit information as required by subsection (a) of Section 25 or subsection (d) of Section 25, the Attorney General may send a notice of violation to the distributor and provide the distributor with 10 days to cure the violation. If the distributor does not cure the violation, the Attorney General may notify the Director of the violation, and, upon receiving the Attorney General's notice, the Director shall revoke the distributor's license.

(d) It shall be unlawful for a person to: (i) sell or distribute cigarettes; or (ii) acquire, hold, own, possess, transport, import, or cause to be imported cigarettes that the person knows or should know are intended for distribution or sale in the State in violation of subsection (e) of Section 15. A violation of this Section shall be a Class 2 felony.

(e) A person who violates subsection (e) of Section 15 engages in an unfair and deceptive trade practice in violation of the Uniform Deceptive Trade Practices Act.

(Source: P.A. 93-446, eff. 1-1-04; 93-930, eff. 1-1-05; 94-575, eff. 8-12-05.)

Section 10. The Tobacco Product Manufacturers' Escrow Act is amended by changing Section 15 as follows:

(30 ILCS 168/15)

Sec. 15. Requirements.

(a) Any tobacco product manufacturer selling cigarettes to consumers within the State of Illinois (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:

(1) 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

(2) (A) 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):

(i) For 1999: $0.0094241 per unit sold after the effective date of this Act;

(ii) For 2000: $0.0104712 per unit sold;

(iii) For each of 2001 and 2002: $0.0136125 per unit sold;

(iv) For each of 2003 through 2006: $0.0167539 per unit sold;

(v) For each of 2007 and each year thereafter: $0.0188482 per unit sold.

(B) A tobacco product manufacturer that places funds into escrow pursuant to subdivision (a)(2)(A) shall receive the interest or other appreciation on the funds as earned. The funds themselves shall be released from escrow only under the following circumstances:

(i) to pay a judgment or settlement on any released claim brought against the tobacco product manufacturer by the State or any releasing party located or residing in the State. Funds shall be released from escrow under this subdivision (a)(2)(B)(i): (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;

(ii) to the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the State in a particular year was greater than the Master Settlement Agreement payments, as determined pursuant to Section IX(i) of that Agreement, including after final determination of all adjustments, that such manufacturer would have been required to make on account of such units sold had it been a Participating Manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or

(iii) to the extent not released from escrow under subdivisions (a)(2)(B)(i) or (a)(2)(B)(ii), 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.

(C) Each tobacco product manufacturer that elects to place funds into escrow pursuant to this subdivision (a)(2) shall annually certify to the Attorney General that it is in compliance with this subdivision (a)(2). The Attorney General may bring a civil action on behalf of the State of Illinois against any tobacco product manufacturer that fails to place into escrow the funds required under this subdivision (a)(2). Any tobacco product manufacturer that fails in any year to place into escrow the funds required under this subdivision (a)(2) shall:

(i) 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 subdivision (a)(2), may impose a civil penalty to be paid into the General Revenue 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;

(ii) 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 subdivision (a)(2), may impose a civil penalty to be paid into the General Revenue Fund in an amount not to exceed 15% of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 300% of the original amount improperly withheld from escrow; and

(iii) in the case of a second knowing violation, be prohibited from selling cigarettes to consumers within the State of Illinois (whether directly or through a distributor, retailer, or similar intermediary) for a period not to exceed 2 years.

(b) Each failure to make an annual deposit required under this Section shall constitute a separate violation. If a tobacco product manufacturer is successfully prosecuted by the Attorney General for a violation of subdivision (a)(2), the tobacco product manufacturer must pay, in addition to any fine imposed by a court, the State's costs and attorney's fees incurred in the prosecution.

(c) Notwithstanding subparagraph (B) of item (2) of subsection (a) of this Section, a tobacco product manufacturer that elects to place funds into escrow pursuant to subparagraph (A) of item (2) of subsection (a) of this Section may make an irrevocable assignment of its interest in the funds to the benefit of the State. The assignment shall be permanent and shall apply to all funds that are in the escrow account or that may subsequently come into the account, including (i) those funds deposited into the escrow account before the assignment is executed, (ii) those funds deposited into the escrow account on or after the date the assignment is executed, and (iii) interest or other appreciation on the funds. The tobacco product manufacturer, the Attorney General, and the financial institution where the escrow account is maintained may make amendments to the qualified escrow account agreement as necessary to effectuate an assignment of rights executed pursuant to this subsection or a withdrawal of moneys from the escrow account pursuant to subparagraph (B) of item (2) of subsection (a) of this Section. An assignment of rights executed pursuant to this subsection shall be in writing, shall be signed by a duly authorized representative of the tobacco product manufacturer making the assignment, and shall become effective on delivery of the assignment to the Attorney General and the financial institution where the escrow account is maintained. An assignment of escrow funds shall not be made by a tobacco product manufacturer unless and until the Attorney General provides written approval to the tobacco product manufacturer.

(d) Notwithstanding subparagraph (B) of item (2) of subsection (a) of this Section, any escrow funds assigned to the State pursuant to subsection (c) shall be withdrawn by the State on the approval of the Attorney General. Any funds withdrawn pursuant to this subsection shall be used to reimburse the State for Medicaid costs and shall be calculated on a dollar-for-dollar basis as a credit against any judgment or settlement described in subparagraph (B) of item (2) of subsection (a) of this Section that may be obtained against the tobacco product manufacturer that has assigned the funds in the escrow account. This Section does not relieve a tobacco product manufacturer from any past, current, or future obligations that the manufacturer may have pursuant to this Section.

(e) Notwithstanding subparagraph (B) of item (2) of subsection (a) of this Section, if, after more than one year from the date of release, the escrow amount has not been subject to a request by the tobacco product manufacturer who made the deposit or currently owns the rights to the account, the Attorney General may send a notice of intent to assign giving the entity 10 days to make an application for release in the manner established by the Attorney General. If, after the expiration of that 10-day period, no application has been received, the Attorney General may send a notice of assignment to the last known contact, and if no application is received after the expiration of that 10-day period, the Attorney General may provide notice to the escrow bank that the funds shall be transferred to the State.

(Source: P.A. 93-446, eff. 1-1-04.)