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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.
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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.
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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
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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 soldthe
22 State's allocable share of the total payments
23 that such manufacturer would have been required
24 to make in that year under the Master
25 Settlement Agreement (as determined pursuant to
26 Section IX(i)(2) of the Master Settlement
27 Agreement, and before any of the adjustments or
28 offsets described in Section IX(i)(3) of that
29 Agreement 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
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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
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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,
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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.
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