093_HB0276enr HB0276 Enrolled LRB093 04546 SJM 04599 b 1 AN ACT in relation to tobacco product manufacturers. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 1. Short title. This Act may be cited as the 5 Tobacco Products Manufacturers' Escrow Enforcement Act of 6 2003. 7 Section 5. Findings; purpose. The General Assembly finds 8 that violations of the Tobacco Product Manufacturers' Escrow 9 Act threaten the integrity of the tobacco Master Settlement 10 Agreement, the fiscal soundness of the State, and the public 11 health. The General Assembly finds that enacting procedural 12 enhancements will help prevent violations and aid the 13 enforcement of the Tobacco Product Manufacturers' Escrow Act 14 and thereby safeguard the Master Settlement Agreement, the 15 fiscal soundness of the State, and the public health. The 16 provisions of this Act are not intended to and shall not be 17 interpreted to amend the Tobacco Product Manufacturers' 18 Escrow Act. 19 Section 10. Definitions. As used in this Act: 20 "Brand family" means all styles of cigarettes sold under 21 the same trade mark and differentiated from one another by 22 means of additional modifiers or descriptors, including, but 23 not limited to, menthol, lights, kings, and 100s and includes 24 any brand name (alone or in conjunction with any other word) 25 trademark, logo, symbol, motto, selling message, recognizable 26 pattern of colors, or any other indicia of product 27 identification identical or similar to, or identifiable with, 28 a previously known brand of cigarettes. 29 "Cigarette" has the same meaning in Section 10 of the 30 Escrow Act. HB0276 Enrolled -2- LRB093 04546 SJM 04599 b 1 "Director" means the Director of Revenue. 2 "Distributor" has the same meaning prescribed in Section 3 1 of the Cigarette Tax Act, Section 1 of the Cigarette Use 4 Tax Act, and, in addition, means a distributor of 5 roll-your-own tobacco in accordance with Section 10-5 of the 6 Tobacco Products Tax Act of 1995, as appropriate. 7 "Escrow Act" means the Tobacco Product Manufacturers' 8 Escrow Act. 9 "Non-participating manufacturer" means any Tobacco 10 Product Manufacturer that is not a participating 11 manufacturer. 12 "Participating manufacturer" has the meaning given that 13 term in Section II(jj) of the Master Settlement Agreement and 14 all amendments thereto. 15 "Qualified escrow fund" has the same meaning as that term 16 is defined in Section 10 of the Escrow Act. 17 "Tobacco product manufacturer" has the same meaning as 18 that term is defined in Section 10 of the Escrow Act. 19 "Units sold" has the same meaning as that term is defined 20 in Section 10 of the Escrow Act. 21 Section 15. Certifications; directory; tax stamps. 22 (a) Every tobacco product manufacturer whose cigarettes 23 are sold in this State whether directly or through a 24 distributor, retailer, or similar intermediary or 25 intermediaries shall execute and deliver on a form prescribed 26 by the Attorney General a certification to the Attorney 27 General, no later than the thirtieth day of April each year, 28 certifying under penalty of perjury that, as of the date of 29 the certification, the tobacco product manufacturer either: 30 (i) is a participating manufacturer and has generally 31 performed its financial obligations under the Master 32 Settlement Agreement; or (ii) is in full compliance with the 33 Escrow Act, including all quarterly installment payments. HB0276 Enrolled -3- LRB093 04546 SJM 04599 b 1 (1) A participating manufacturer shall include in 2 its certification a list of its brand families. The 3 participating manufacturer shall update the list 30 days 4 prior to any addition to or modification of its brand 5 families by executing and delivering a supplemental 6 certification to the Attorney General. 7 (2) A non-participating manufacturer shall include 8 in its certification a complete list of all of its brand 9 families: (i) separately listing brand families of 10 cigarettes and the number of units sold for each brand 11 family that were sold in the State during the preceding 12 calendar year; (ii) listing all of its brand families 13 that have been sold in the State at any time during the 14 current calendar year; (iii) indicating by an asterisk, 15 any brand family sold in the State during the preceding 16 calendar year that is no longer being sold in the State 17 as of the date of the certification; and (iv) identifying 18 by name and address any other manufacturer of the brand 19 families in the preceding calendar year. The 20 non-participating manufacturer shall update the list 30 21 days prior to any addition to or modification of its 22 brand families by executing and delivering a supplemental 23 certification to the Attorney General. 24 (3) In the case of a non-participating 25 manufacturer, the certification shall further certify: 26 (A) that the non-participating manufacturer is 27 registered to do business in this State or has 28 appointed a resident agent for service of process 29 and provided notice thereof as required by item 4 of 30 subsection (a) of this Section; 31 (B) that the non-participating manufacturer 32 has (i) established and continues to maintain a 33 qualified escrow fund as that term is defined in 34 Section 10 of the Escrow Act, and (ii) executed a HB0276 Enrolled -4- LRB093 04546 SJM 04599 b 1 qualified escrow agreement that has been reviewed 2 and approved by the Attorney General and that 3 governs the qualified escrow fund; 4 (C) that the non-participating manufacturer is 5 in full compliance with the Escrow Act and this Act, 6 and any regulations promulgated pursuant thereto; 7 (D) the name, address and telephone number of 8 the financial institution where the 9 non-participating manufacturer has established the 10 qualified escrow fund required pursuant to Section 11 15 of the Escrow Act and all regulations promulgated 12 thereto; 13 (E) the account number of the qualified escrow 14 fund and sub-account number for this State; 15 (F) the amount the non-participating 16 manufacturer placed in the fund for cigarettes sold 17 in the State during the preceding calendar year, 18 including the dates and amount of each deposit, and 19 such evidence or verification as may be deemed 20 necessary by the Attorney General to confirm the 21 foregoing; and 22 (G) the amounts of and dates of any withdrawal 23 or transfer of funds the non-participating 24 manufacturer made at any time from the fund or from 25 any other qualified escrow fund into which it ever 26 made escrow payments pursuant to Section 15 of the 27 Escrow Act and all regulations promulgated thereto. 28 (4) A tobacco product manufacturer may not include 29 a brand family in its certification unless: (i) in the 30 case of a participating manufacturer, the participating 31 manufacturer affirms that the brand family is to be 32 deemed to be its cigarettes for purposes of calculating 33 its payments under the master settlement agreement for 34 the relevant year, in the volume and shares determined HB0276 Enrolled -5- LRB093 04546 SJM 04599 b 1 pursuant to the master settlement agreement; and (ii) in 2 the case of a non-participating manufacturer, the 3 non-participating manufacturer affirms that the brand 4 family is to be deemed to be its cigarettes for purposes 5 of Section 15 of the Escrow Act. 6 Nothing in this Section shall be construed as 7 limiting or otherwise affecting the State's right to 8 maintain that a brand family constitutes cigarettes of a 9 different tobacco product manufacturer for purposes of 10 calculating payments under the master settlement 11 agreement or for purposes of Section 15 of the Escrow 12 Act. 13 (5) The tobacco product manufacturers shall 14 maintain all invoices and documentation of sales and 15 other information relied upon for certification for a 16 period of 5 years, unless otherwise required by law to 17 maintain them for a greater period of time. 18 (b) Not later than 6 months after the effective date of 19 this Act, the Attorney General shall develop and make 20 available for public inspection, through publishing on its 21 website, a directory listing all tobacco product 22 manufacturers that have provided current and accurate 23 certifications conforming to the requirements of subsection 24 (a) of Section 15 and all brand families that are listed in 25 the certifications, except for the following: 26 (1) The Attorney General shall not include or 27 retain in the directory the name or brand families of any 28 non-participating manufacturer that fails to provide the 29 required certification or whose certification the 30 Attorney General determines is not in compliance with 31 subsections (a)(2) or (a)(3) of Section 15, unless the 32 Attorney General has determined that the violation has 33 been cured to the satisfaction of the Attorney General. 34 (2) Neither a tobacco product manufacturer nor HB0276 Enrolled -6- LRB093 04546 SJM 04599 b 1 brand family shall be included or retained in the 2 directory if the Attorney General concludes that: (i) in 3 the case of a non-participating manufacturer all escrow 4 payments required pursuant to Section 15 of the Escrow 5 Act for any period for any brand family, whether or not 6 listed by the non-participating manufacturer, have not 7 been fully paid into a qualified escrow fund governed by 8 a qualified escrow agreement that has been approved by 9 the Attorney General; or (ii) all outstanding final 10 judgments, including interest thereon, for violations of 11 Section 15 of the Escrow Act have not been fully 12 satisfied for that brand family and manufacturer. 13 (c) The Attorney General shall update the directory as 14 necessary in order to correct mistakes and to add or remove a 15 tobacco product manufacturer or brand families to keep the 16 directory in conformity with the requirements of this Act. 17 (d) Every distributor shall provide and update as 18 necessary an electronic mail address to the Attorney General 19 for the purpose of receiving any notifications as may be 20 required by this Act. 21 (e) It shall be unlawful for any person: (i) to affix a 22 stamp to a package or other container of cigarettes of a 23 tobacco product manufacturer or brand family not included in 24 the directory or to sell, offer, or possess for sale in this 25 State; or (ii) import for personal consumption in this State, 26 cigarettes of a tobacco product manufacturer or brand family 27 not included in the directory. 28 Section 20. Agent for service of process. 29 (a) Any non-resident or foreign non-participating 30 manufacturer that has not registered to do business in this 31 State as a foreign corporation or business entity shall, as a 32 condition precedent to having its brand families listed or 33 retained in the directory, appoint and continually engage HB0276 Enrolled -7- LRB093 04546 SJM 04599 b 1 without interruption the services of an agent in this State 2 to act as agent for the service of process on whom all 3 process, and any action or proceeding against it concerning 4 or arising out of the enforcement of this Act and the Escrow 5 Act, may be served in any manner authorized by law. The 6 service shall constitute legal and valid service of process 7 on the non-participating manufacturer. The non-participating 8 manufacturer shall provide the name, address, phone number, 9 and proof of the appointment and availability of the agent to 10 and to the satisfaction of the Director and Attorney General. 11 (b) The non-participating manufacturer shall provide 12 notice to the Director and Attorney General 30 calendar days 13 prior to termination of the authority of an agent and shall 14 further provide proof to the satisfaction of the Attorney 15 General of the appointment of a new agent no less than 5 16 calendar days prior to the termination of an existing agent 17 appointment. In the event an agent terminates an agency 18 appointment, the non-participating manufacturer shall notify 19 the Director and Attorney General of the termination within 5 20 calendar days and shall include proof to the satisfaction of 21 the Attorney General of the appointment of a new agent. 22 (c) Any non-participating manufacturer whose products 23 are sold in this State, without appointing or designating an 24 agent as herein required shall be deemed to have appointed 25 the Secretary of State as the agent and may be proceeded 26 against in courts of this State by service of process upon 27 the Secretary of State; however, the appointment of the 28 Secretary of State as an agent shall not satisfy the 29 condition precedent to having its brand families listed or 30 retained in the directory. 31 Section 25. Reporting of information; escrow 32 installments. 33 (a) Not later than 20 days after the end of each HB0276 Enrolled -8- LRB093 04546 SJM 04599 b 1 calendar quarter, and more frequently if so directed by the 2 Attorney General, each distributor shall submit the 3 information as the Attorney General requires to facilitate 4 compliance with this Act, including, but not limited to, a 5 list by brand family of the total number of cigarettes or in 6 the case of roll-your-own, the equivalent stick count for 7 which the distributor affixed stamps during the previous 8 calendar quarter or otherwise paid the tax due for these 9 cigarettes. The distributor shall maintain, and make 10 available to the Attorney General, all invoices and 11 documentation of sales of all non-participating manufacturer 12 cigarettes and any other information relied upon in reporting 13 to the Attorney General for a period of 5 years. 14 (b) The Director is authorized to disclose to the 15 Attorney General any information received under this Act and 16 requested by the Attorney General for purposes of determining 17 compliance with and enforcing the provisions of this Act. The 18 Director and Attorney General shall share with each other the 19 information received under this Act, and may share the 20 information with other federal, State, or local agencies only 21 for purposes of enforcement of this Act, the Escrow Act, or 22 corresponding laws of other states. 23 (c) The Attorney General may require at any time, from 24 the non-participating manufacturer, proof from the financial 25 institution in which the manufacturer has established a 26 qualified escrow fund for the purpose of compliance with the 27 Escrow Act of the amount of money in the fund being held on 28 behalf of the State and the dates of deposits, and listing 29 the amounts of all withdrawals from the fund and the dates 30 thereof. 31 (d) In addition to the information required to be 32 submitted pursuant to this Act, the Attorney General may 33 require a distributor or tobacco product manufacturer to 34 submit any additional information including, but not limited HB0276 Enrolled -9- LRB093 04546 SJM 04599 b 1 to, samples of the packaging or labeling of each brand 2 family, as is necessary to enable the Attorney General to 3 determine whether a tobacco product manufacturer is in 4 compliance with this Act. 5 (e) To promote compliance with the provisions of this 6 Act, the Attorney General may promulgate regulations 7 requiring a tobacco product manufacturer subject to the 8 requirements of subsection (a)(2) of Section 15 to make the 9 escrow deposits required in quarterly installments during the 10 year in which the sales covered by the deposits are made. The 11 Attorney General may require production of information 12 sufficient to enable the Attorney General to determine the 13 adequacy of the amount of the installment deposit. 14 Section 30. Penalties and other remedies. 15 (a) In addition to or in lieu of any other civil or 16 criminal remedy provided by law, upon a determination that a 17 distributor has violated subsection (c) of Section 15 or any 18 regulation adopted pursuant thereto, the Director may revoke 19 or suspend the license of any stamping agent in the manner 20 provided by Section 6 of the Cigarette Tax Act, Section 6 of 21 the Cigarette Use Tax Act, or Section 10-25 of the Tobacco 22 Products Tax Act of 1995, as appropriate. Each stamp affixed 23 and each offer to sell cigarettes in violation of subsection 24 (c) of Section 15 shall constitute a separate violation. For 25 each violation, the Director may also impose a civil penalty 26 in an amount not to exceed the greater of 500% of the retail 27 value of the cigarettes sold or $5,000 upon a determination 28 of violation of subsection (c) of Section 15 or any 29 regulations adopted pursuant thereto. 30 (b) Any cigarettes that have been sold, offered for 31 sale, or possessed for sale in this State, or imported for 32 personal consumption in this State in violation of subsection 33 (c) of Section 15 shall be subject to seizure and forfeiture HB0276 Enrolled -10- LRB093 04546 SJM 04599 b 1 as provided in Sections 18, 18a, and 20 of the Cigarette Tax 2 Act and Sections 24, 25, 25a and 26 of the Cigarette Use Tax 3 Act, and all cigarettes so seized and forfeited shall be 4 destroyed and not resold. 5 (c) The Attorney General may seek an injunction to 6 restrain a threatened or actual violation of subsection (c) 7 of Section 15, subsection (a) of Section 25, or subsection 8 (d) of Section 25 by a stamping agent and to compel the 9 stamping agent to comply with such subsections. In any action 10 brought pursuant to this Section, the State shall be entitled 11 to recover the costs of investigation, costs of the action, 12 and reasonable attorney fees. 13 (d) It shall be unlawful for a person to: (i) sell or 14 distribute cigarettes; or (ii) acquire, hold, own, possess, 15 transport, import, or cause to be imported cigarettes that 16 the person knows or should know are intended for distribution 17 or sale in the State in violation of subsection (c) of 18 Section 15. A violation of this Section shall be a Class 2 19 felony. 20 (e) A person who violates subsection (c) of Section 15 21 engages in an unfair and deceptive trade practice in 22 violation of the Uniform Deceptive Trade Practices Act. 23 Section 35. Miscellaneous provisions. 24 (a) A determination of the Attorney General to not list 25 or to remove from the directory a brand family or tobacco 26 product manufacturer shall be subject to review in the manner 27 prescribed by rule. 28 (b) No person shall be issued a license or granted a 29 renewal of a license to act as a distributor unless the 30 person has certified in writing, under penalty of perjury, 31 that the person will comply fully with this Act. 32 (c) The Attorney General may promulgate rules necessary 33 to effect the purposes of this Act. HB0276 Enrolled -11- LRB093 04546 SJM 04599 b 1 (d) In any action brought by the State to enforce this 2 Act, the State shall be entitled to recover the costs of 3 investigation, expert witness fees, costs of the action, and 4 reasonable attorney fees. 5 (e) If a court determines that a person has violated 6 this Act, the court shall order any profits, gain, gross 7 receipts, or other benefit from the violation to be disgorged 8 and paid to the General Revenue Fund. 9 (f) Unless otherwise expressly provided the remedies or 10 penalties provided by this Act are cumulative to each other 11 and to the remedies or penalties available under all other 12 laws of this State. 13 Section 40. Severability. 14 (a) If any provision of this Act or its application to 15 any person or circumstance is held invalid, the invalidity 16 does not affect other provisions or applications of this Act 17 that can be given effect without the invalid provision or 18 application. 19 (b) If a court of competent jurisdiction finds that the 20 provisions of this Act and of the Escrow Act conflict and 21 cannot be harmonized, then the provisions of the Escrow Act 22 shall control. 23 (c) If any Section, subsection, subdivision, paragraph, 24 sentence, clause, or phrase of this Act (excluding the 25 amendatory provisions of Section 300) causes the Escrow Act 26 to no longer constitute a qualifying or model statute, as 27 those terms are defined in the Master Settlement Agreement, 28 then that portion of this Act shall not be valid. 29 (30 ILCS 169/Act rep.) 30 Section 200. The Tobacco Products Manufacturers' Escrow 31 Enforcement Act is repealed. HB0276 Enrolled -12- LRB093 04546 SJM 04599 b 1 Section 300. The Tobacco Product Manufacturers' Escrow 2 Act is amended by changing Section 15 and by adding Section 3 20 as follows: 4 (30 ILCS 168/15) 5 Sec. 15. Requirements. 6 (a) Any tobacco product manufacturer selling cigarettes 7 to consumers within the State of Illinois (whether directly 8 or through a distributor, retailer, or similar intermediary 9 or intermediaries) after the effective date of this Act shall 10 do one of the following: 11 (1) become a participating manufacturer (as that 12 term is defined in Section II(jj) of the Master 13 Settlement Agreement) and generally perform its 14 financial obligations under the Master Settlement 15 Agreement; or 16 (2) (A) place into a qualified escrow fund by April 17 15 of the year following the year in question the 18 following amounts (as such amounts are adjusted for 19 inflation): 20 (i) For 1999: $0.0094241 per unit sold 21 after the effective date of this Act; 22 (ii) For 2000: $0.0104712 per unit sold; 23 (iii) For each of 2001 and 2002: 24 $0.0136125 per unit sold; 25 (iv) For each of 2003 through 2006: 26 $0.0167539 per unit sold; 27 (v) For each of 2007 and each year 28 thereafter: $0.0188482 per unit sold. 29 (B) A tobacco product manufacturer that places 30 funds into escrow pursuant to subdivision (a)(2)(A) 31 shall receive the interest or other appreciation on 32 the funds as earned. The funds themselves shall be 33 released from escrow only under the following HB0276 Enrolled -13- LRB093 04546 SJM 04599 b 1 circumstances: 2 (i) to pay a judgment or settlement on 3 any released claim brought against the tobacco 4 product manufacturer by the State or any 5 releasing party located or residing in the 6 State. Funds shall be released from escrow 7 under this subdivision (a)(2)(B)(i): (I) in 8 the order in which they were placed into 9 escrow; and (II) only to the extent and at the 10 time necessary to make payments required under 11 such judgment or settlement; 12 (ii) to the extent that a tobacco product 13 manufacturer establishes that the amount it was 14 required to place into escrow on account of 15 units sold in the State in a particular year 16 was greater than the Master Settlement 17 Agreement payments, as determined pursuant to 18 Section IX(i) of that Agreement, including 19 after final determination of all adjustments, 20 that such manufacturer would have been required 21 to make on account of such units soldthe22State's allocable share of the total payments23that such manufacturer would have been required24to make in that year under the Master25Settlement Agreement (as determined pursuant to26Section IX(i)(2) of the Master Settlement27Agreement, and before any of the adjustments or28offsets described in Section IX(i)(3) of that29Agreement other than the Inflation Adjustment)30 had it been a Participating Manufacturer, the 31 excess shall be released from escrow and revert 32 back to such tobacco product manufacturer; or 33 (iii) to the extent not released from 34 escrow under subdivisions (a)(2)(B)(i) or HB0276 Enrolled -14- LRB093 04546 SJM 04599 b 1 (a)(2)(B)(ii), funds shall be released from 2 escrow and revert back to such tobacco product 3 manufacturer 25 years after the date on which 4 they were placed into escrow. 5 (C) Each tobacco product manufacturer that 6 elects to place funds into escrow pursuant to this 7 subdivision (a)(2) shall annually certify to the 8 Attorney General that it is in compliance with this 9 subdivision (a)(2). The Attorney General may bring 10 a civil action on behalf of the State of Illinois 11 against any tobacco product manufacturer that fails 12 to place into escrow the funds required under this 13 subdivision (a)(2). Any tobacco product 14 manufacturer that fails in any year to place into 15 escrow the funds required under this subdivision 16 (a)(2) shall: 17 (i) be required within 15 days to place 18 such funds into escrow as shall bring it into 19 compliance with this Section. The court, upon 20 a finding of a violation of this subdivision 21 (a)(2), may impose a civil penalty to be paid 22 into the General Revenue Fund in an amount not 23 to exceed 5% of the amount improperly withheld 24 from escrow per day of the violation and in a 25 total amount not to exceed 100% of the original 26 amount improperly withheld from escrow; 27 (ii) in the case of a knowing violation, 28 be required within 15 days to place such funds 29 into escrow as shall bring it into compliance 30 with this Section. The court, upon a finding 31 of a knowing violation of this subdivision 32 (a)(2), may impose a civil penalty to be paid 33 into the General Revenue Fund in an amount not 34 to exceed 15% of the amount improperly withheld HB0276 Enrolled -15- LRB093 04546 SJM 04599 b 1 from escrow per day of the violation and in a 2 total amount not to exceed 300% of the original 3 amount improperly withheld from escrow; and 4 (iii) in the case of a second knowing 5 violation, be prohibited from selling 6 cigarettes to consumers within the State of 7 Illinois (whether directly or through a 8 distributor, retailer, or similar intermediary) 9 for a period not to exceed 2 years. 10 (b) Each failure to make an annual deposit required 11 under this Section shall constitute a separate violation. If 12 a tobacco product manufacturer is successfully prosecuted by 13 the Attorney General for a violation of subdivision (a)(2), 14 the tobacco product manufacturer must pay, in addition to any 15 fine imposed by a court, the State's costs and attorney's 16 fees incurred in the prosecution. 17 (Source: P.A. 91-41, eff. 6-30-99.) 18 (30 ILCS 168/20 new) 19 Sec. 20. If this amendatory Act of the 93rd General 20 Assembly or any portion of the amendment to subdivision 21 (2)(B)(ii) of subsection (a) of Section 15 made by this 22 amendatory Act of the 93rd General Assembly is held by a 23 court of competent jurisdiction to be unconstitutional, then 24 such subdivision (2)(B)(ii) of subsection (a) of Section 15 25 shall be deemed to be repealed in its entirety. If 26 subdivision (2)(B)(ii) of subsection (a) of Section 15 shall 27 thereafter be held by a court of competent jurisdiction to be 28 unconstitutional, then this amendatory Act of the 93rd 29 General Assembly shall be deemed repealed and subdivision 30 (2)(B)(ii) of subsection (a) of Section 15 shall be restored 31 as if no such amendments had been made. Neither any holding 32 of unconstitutionality nor the repeal of subdivision 33 (2)(B)(ii) of subsection (a) of Section 15 shall affect, HB0276 Enrolled -16- LRB093 04546 SJM 04599 b 1 impair, or invalidate any other portion of Section 15 or the 2 application of such Section to any other person or 3 circumstance, and such remaining portions of Section 15 shall 4 at all times continue in full force and effect.