Public Act 093-0446
Public Act 93-0446 of the 93rd General Assembly
Public Act 93-0446
HB0276 Enrolled LRB093 04546 SJM 04599 b
AN ACT in relation to tobacco product manufacturers.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Tobacco Products Manufacturers' Escrow Enforcement Act of
2003.
Section 5. Findings; purpose. The General Assembly finds
that violations of the Tobacco Product Manufacturers' Escrow
Act threaten the integrity of the tobacco Master Settlement
Agreement, the fiscal soundness of the State, and the public
health. The General Assembly finds that enacting procedural
enhancements will help prevent violations and aid the
enforcement of the Tobacco Product Manufacturers' Escrow Act
and thereby safeguard the Master Settlement Agreement, the
fiscal soundness of the State, and the public health. The
provisions of this Act are not intended to and shall not be
interpreted to amend the Tobacco Product Manufacturers'
Escrow Act.
Section 10. Definitions. As used in this Act:
"Brand family" means all styles of cigarettes sold under
the same trade mark and differentiated from one another by
means of additional modifiers or descriptors, including, but
not limited to, menthol, lights, kings, and 100s and includes
any brand name (alone or in conjunction with any other word)
trademark, logo, symbol, motto, selling message, recognizable
pattern of colors, or any other indicia of product
identification identical or similar to, or identifiable with,
a previously known brand of cigarettes.
"Cigarette" has the same meaning in Section 10 of the
Escrow Act.
"Director" means the Director of Revenue.
"Distributor" has the same meaning prescribed in Section
1 of the Cigarette Tax Act, Section 1 of the Cigarette Use
Tax Act, and, in addition, means a distributor of
roll-your-own tobacco in accordance with Section 10-5 of the
Tobacco Products Tax Act of 1995, as appropriate.
"Escrow Act" means the Tobacco Product Manufacturers'
Escrow Act.
"Non-participating manufacturer" means any Tobacco
Product Manufacturer that is not a participating
manufacturer.
"Participating manufacturer" has the meaning given that
term in Section II(jj) of the Master Settlement Agreement and
all amendments thereto.
"Qualified escrow fund" has the same meaning as that term
is defined in Section 10 of the Escrow Act.
"Tobacco product manufacturer" has the same meaning as
that term is defined in Section 10 of the Escrow Act.
"Units sold" has the same meaning as that term is defined
in Section 10 of the Escrow Act.
Section 15. Certifications; directory; tax stamps.
(a) Every tobacco product manufacturer whose cigarettes
are sold in this State whether directly or through a
distributor, retailer, or similar intermediary or
intermediaries shall execute and deliver on a form prescribed
by the Attorney General a certification to the Attorney
General, no later than the thirtieth day of April each year,
certifying under penalty of perjury that, as of the date of
the certification, the tobacco product manufacturer either:
(i) is a participating manufacturer and has generally
performed its financial obligations under the Master
Settlement Agreement; or (ii) is in full compliance with the
Escrow Act, including all quarterly installment payments.
(1) A participating manufacturer shall include in
its certification a list of its brand families. The
participating manufacturer shall update the list 30 days
prior to any addition to or modification of its brand
families by executing and delivering a supplemental
certification to the Attorney General.
(2) A non-participating manufacturer shall include
in its certification a complete list of all of its brand
families: (i) separately listing brand families of
cigarettes and the number of units sold for each brand
family that were sold in the State during the preceding
calendar year; (ii) listing all of its brand families
that have been sold in the State at any time during the
current calendar year; (iii) indicating by an asterisk,
any brand family sold in the State during the preceding
calendar year that is no longer being sold in the State
as of the date of the certification; and (iv) identifying
by name and address any other manufacturer of the brand
families in the preceding calendar year. The
non-participating manufacturer shall update the list 30
days prior to any addition to or modification of its
brand families by executing and delivering a supplemental
certification to the Attorney General.
(3) In the case of a non-participating
manufacturer, the certification shall further certify:
(A) that the non-participating manufacturer is
registered to do business in this State or has
appointed a resident agent for service of process
and provided notice thereof as required by item 4 of
subsection (a) of this Section;
(B) that the non-participating manufacturer
has (i) established and continues to maintain a
qualified escrow fund as that term is defined in
Section 10 of the Escrow Act, and (ii) executed a
qualified escrow agreement that has been reviewed
and approved by the Attorney General and that
governs the qualified escrow fund;
(C) that the non-participating manufacturer is
in full compliance with the Escrow Act and this Act,
and any regulations promulgated pursuant thereto;
(D) the name, address and telephone number of
the financial institution where the
non-participating manufacturer has established the
qualified escrow fund required pursuant to Section
15 of the Escrow Act and all regulations promulgated
thereto;
(E) the account number of the qualified escrow
fund and sub-account number for this State;
(F) the amount the non-participating
manufacturer placed in the fund for cigarettes sold
in the State during the preceding calendar year,
including the dates and amount of each deposit, and
such evidence or verification as may be deemed
necessary by the Attorney General to confirm the
foregoing; and
(G) the amounts of and dates of any withdrawal
or transfer of funds the non-participating
manufacturer made at any time from the fund or from
any other qualified escrow fund into which it ever
made escrow payments pursuant to Section 15 of the
Escrow Act and all regulations promulgated thereto.
(4) A tobacco product manufacturer may not include
a brand family in its certification unless: (i) in the
case of a participating manufacturer, the participating
manufacturer affirms that the brand family is to be
deemed to be its cigarettes for purposes of calculating
its payments under the master settlement agreement for
the relevant year, in the volume and shares determined
pursuant to the master settlement agreement; and (ii) in
the case of a non-participating manufacturer, the
non-participating manufacturer affirms that the brand
family is to be deemed to be its cigarettes for purposes
of Section 15 of the Escrow Act.
Nothing in this Section shall be construed as
limiting or otherwise affecting the State's right to
maintain that a brand family constitutes cigarettes of a
different tobacco product manufacturer for purposes of
calculating payments under the master settlement
agreement or for purposes of Section 15 of the Escrow
Act.
(5) The tobacco product manufacturers shall
maintain all invoices and documentation of sales and
other information relied upon for certification for a
period of 5 years, unless otherwise required by law to
maintain them for a greater period of time.
(b) Not later than 6 months after the effective date of
this Act, the Attorney General shall develop and make
available for public inspection, through publishing on its
website, a directory listing all tobacco product
manufacturers that have provided current and accurate
certifications conforming to the requirements of subsection
(a) of Section 15 and all brand families that are listed in
the certifications, except for the following:
(1) The Attorney General shall not include or
retain in the directory the name or brand families of any
non-participating manufacturer that fails to provide the
required certification or whose certification the
Attorney General determines is not in compliance with
subsections (a)(2) or (a)(3) of Section 15, unless the
Attorney General has determined that the violation has
been cured to the satisfaction of the Attorney General.
(2) Neither a tobacco product manufacturer nor
brand family shall be included or retained in the
directory if the Attorney General concludes that: (i) in
the case of a non-participating manufacturer all escrow
payments required pursuant to Section 15 of the Escrow
Act for any period for any brand family, whether or not
listed by the non-participating manufacturer, have not
been fully paid into a qualified escrow fund governed by
a qualified escrow agreement that has been approved by
the Attorney General; or (ii) all outstanding final
judgments, including interest thereon, for violations of
Section 15 of the Escrow Act have not been fully
satisfied for that brand family and manufacturer.
(c) The Attorney General shall update the directory as
necessary in order to correct mistakes and to add or remove a
tobacco product manufacturer or brand families to keep the
directory in conformity with the requirements of this Act.
(d) Every distributor shall provide and update as
necessary an electronic mail address to the Attorney General
for the purpose of receiving any notifications as may be
required by this Act.
(e) It shall be unlawful for any person: (i) to affix a
stamp to a package or other container of cigarettes of a
tobacco product manufacturer or brand family not included in
the directory or to sell, offer, or possess for sale in this
State; or (ii) import for personal consumption in this State,
cigarettes of a tobacco product manufacturer or brand family
not included in the directory.
Section 20. Agent for service of process.
(a) Any non-resident or foreign non-participating
manufacturer that has not registered to do business in this
State as a foreign corporation or business entity shall, as a
condition precedent to having its brand families listed or
retained in the directory, appoint and continually engage
without interruption the services of an agent in this State
to act as agent for the service of process on whom all
process, and any action or proceeding against it concerning
or arising out of the enforcement of this Act and the Escrow
Act, may be served in any manner authorized by law. The
service shall constitute legal and valid service of process
on the non-participating manufacturer. The non-participating
manufacturer shall provide the name, address, phone number,
and proof of the appointment and availability of the agent to
and to the satisfaction of the Director and Attorney General.
(b) The non-participating manufacturer shall provide
notice to the Director and Attorney General 30 calendar days
prior to termination of the authority of an agent and shall
further provide proof to the satisfaction of the Attorney
General of the appointment of a new agent no less than 5
calendar days prior to the termination of an existing agent
appointment. In the event an agent terminates an agency
appointment, the non-participating manufacturer shall notify
the Director and Attorney General of the termination within 5
calendar days and shall include proof to the satisfaction of
the Attorney General of the appointment of a new agent.
(c) Any non-participating manufacturer whose products
are sold in this State, without appointing or designating an
agent as herein required shall be deemed to have appointed
the Secretary of State as the agent and may be proceeded
against in courts of this State by service of process upon
the Secretary of State; however, the appointment of the
Secretary of State as an agent shall not satisfy the
condition precedent to having its brand families listed or
retained in the directory.
Section 25. Reporting of information; escrow
installments.
(a) Not later than 20 days after the end of each
calendar quarter, and more frequently if so directed by the
Attorney General, each distributor shall submit the
information as the Attorney General requires to facilitate
compliance with this Act, including, but not limited to, a
list by brand family of the total number of cigarettes or in
the case of roll-your-own, the equivalent stick count for
which the distributor affixed stamps during the previous
calendar quarter or otherwise paid the tax due for these
cigarettes. The distributor shall maintain, and make
available to the Attorney General, all invoices and
documentation of sales of all non-participating manufacturer
cigarettes and any other information relied upon in reporting
to the Attorney General for a period of 5 years.
(b) The Director is authorized to disclose to the
Attorney General any information received under this Act and
requested by the Attorney General for purposes of determining
compliance with and enforcing the provisions of this Act. The
Director and Attorney General shall share with each other the
information received under this Act, and may share the
information with other federal, State, or local agencies only
for purposes of enforcement of this Act, the Escrow Act, or
corresponding laws of other states.
(c) The Attorney General may require at any time, from
the non-participating manufacturer, proof from the financial
institution in which the manufacturer has established a
qualified escrow fund for the purpose of compliance with the
Escrow Act of the amount of money in the fund being held on
behalf of the State and the dates of deposits, and listing
the amounts of all withdrawals from the fund and the dates
thereof.
(d) In addition to the information required to be
submitted pursuant to this Act, the Attorney General may
require a distributor or tobacco product manufacturer to
submit any additional information including, but not limited
to, samples of the packaging or labeling of each brand
family, as is necessary to enable the Attorney General to
determine whether a tobacco product manufacturer is in
compliance with this Act.
(e) To promote compliance with the provisions of this
Act, the Attorney General may promulgate regulations
requiring a tobacco product manufacturer subject to the
requirements of subsection (a)(2) of Section 15 to make the
escrow deposits required in quarterly installments during the
year in which the sales covered by the deposits are made. The
Attorney General may require production of information
sufficient to enable the Attorney General to determine the
adequacy of the amount of the installment deposit.
Section 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 (c) of Section 15 or any
regulation adopted pursuant thereto, the Director may revoke
or suspend the license of any stamping agent 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
(c) 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 (c) 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
(c) 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 (c)
of Section 15, subsection (a) of Section 25, or subsection
(d) of Section 25 by a stamping agent and to compel the
stamping agent 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.
(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 (c) of
Section 15. A violation of this Section shall be a Class 2
felony.
(e) A person who violates subsection (c) of Section 15
engages in an unfair and deceptive trade practice in
violation of the Uniform Deceptive Trade Practices Act.
Section 35. Miscellaneous provisions.
(a) A determination of the Attorney General to not list
or to remove from the directory a brand family or tobacco
product manufacturer shall be subject to review in the manner
prescribed by rule.
(b) No person shall be issued a license or granted a
renewal of a license to act as a distributor unless the
person has certified in writing, under penalty of perjury,
that the person will comply fully with this Act.
(c) The Attorney General may promulgate rules necessary
to effect the purposes of this Act.
(d) In any action brought by the State to enforce this
Act, the State shall be entitled to recover the costs of
investigation, expert witness fees, costs of the action, and
reasonable attorney fees.
(e) If a court determines that a person has violated
this Act, the court shall order any profits, gain, gross
receipts, or other benefit from the violation to be disgorged
and paid to the General Revenue Fund.
(f) Unless otherwise expressly provided the remedies or
penalties provided by this Act are cumulative to each other
and to the remedies or penalties available under all other
laws of this State.
Section 40. Severability.
(a) If any provision of this Act or its application to
any person or circumstance is held invalid, the invalidity
does not affect other provisions or applications of this Act
that can be given effect without the invalid provision or
application.
(b) If a court of competent jurisdiction finds that the
provisions of this Act and of the Escrow Act conflict and
cannot be harmonized, then the provisions of the Escrow Act
shall control.
(c) If any Section, subsection, subdivision, paragraph,
sentence, clause, or phrase of this Act (excluding the
amendatory provisions of Section 300) causes the Escrow Act
to no longer constitute a qualifying or model statute, as
those terms are defined in the Master Settlement Agreement,
then that portion of this Act shall not be valid.
(30 ILCS 169/Act rep.)
Section 200. The Tobacco Products Manufacturers' Escrow
Enforcement Act is repealed.
Section 300. The Tobacco Product Manufacturers' Escrow
Act is amended by changing Section 15 and by adding Section
20 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 the
State's allocable share of the total payments
that such manufacturer would have been required
to make in that year under the Master
Settlement Agreement (as determined pursuant to
Section IX(i)(2) of the Master Settlement
Agreement, and before any of the adjustments or
offsets described in Section IX(i)(3) of that
Agreement other than the Inflation Adjustment)
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.
(Source: P.A. 91-41, eff. 6-30-99.)
(30 ILCS 168/20 new)
Sec. 20. If this amendatory Act of the 93rd General
Assembly or any portion of the amendment to subdivision
(2)(B)(ii) of subsection (a) of Section 15 made by this
amendatory Act of the 93rd General Assembly is held by a
court of competent jurisdiction to be unconstitutional, then
such subdivision (2)(B)(ii) of subsection (a) of Section 15
shall be deemed to be repealed in its entirety. If
subdivision (2)(B)(ii) of subsection (a) of Section 15 shall
thereafter be held by a court of competent jurisdiction to be
unconstitutional, then this amendatory Act of the 93rd
General Assembly shall be deemed repealed and subdivision
(2)(B)(ii) of subsection (a) of Section 15 shall be restored
as if no such amendments had been made. Neither any holding
of unconstitutionality nor the repeal of subdivision
(2)(B)(ii) of subsection (a) of Section 15 shall affect,
impair, or invalidate any other portion of Section 15 or the
application of such Section to any other person or
circumstance, and such remaining portions of Section 15 shall
at all times continue in full force and effect.
Effective Date: 01/01/04
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