(b) Cigarette smoking also presents serious financial concerns for the state. Under certain health-care programs, the state may have a legal obligation to provide medical assistance to eligible persons for health conditions associated with cigarette smoking, and those persons may have a legal entitlement to receive such medical assistance.
(c) Under these programs, the state pays millions of dollars each year to provide medical assistance for these persons for health conditions associated with cigarette smoking.
(d) It is the policy of the state that financial burdens imposed on the state by cigarette smoking be borne by tobacco product manufacturers rather than by the state to the extent that such manufacturers either determine to enter into a settlement with the state or are found culpable by the courts.
(e) On the twenty-third day of November, one thousand nine hundred ninety-eight, leading United States tobacco product manufacturers entered into a settlement agreement, entitled the "master settlement agreement", with the state. The master settlement agreement obligates these manufacturers, in return for a release of past, present and certain future claims against them as described therein, to pay substantial sums to the state (tied in part to their volume of sales); to fund a national foundation devoted to the interests of public health; and to make substantial changes in their advertising and marketing practices and corporate culture, with the intention of reducing underage smoking.
(f) It would be contrary to the policy of the state if tobacco product manufacturers who determine not to enter into such a settlement could use a resulting cost advantage to derive large, short-term profits in the years before liability may arise without ensuring that the state will have an eventual source of recovery from them if they are proven to have acted culpably. It is thus in the interest of the state to require that such manufacturers establish a reserve fund to guarantee a source of compensation and to prevent such manufacturers from deriving large, short-term profits and then becoming judgment-proof before liability may arise.
(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 ten 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; or (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 as that term is described in this subsection. The term "cigarette" includes "roll-your-own", which means 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 the twenty-third day of November, one thousand nine hundred ninety-eight, 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 $1,000,000,000 where such arrangement requires that such 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 (2), subsection (b), section three of this article.
(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 such manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer (except where such 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 subsections 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);
(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 subdivision (1) or (2) of this subsection.
The term "tobacco product manufacturer" shall not include an affiliate of a tobacco product manufacturer unless such affiliate itself falls within subdivision (1), (2) or (3).
(j) "Units sold" means the number of individual cigarettes sold 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, as measured by excise taxes collected by the state on packs or "roll-your-own" tobacco containers bearing the excise tax stamp of the state. The tax commissioner shall propose legislative rules for promulgation, in accordance with article three, chapter twenty-nine of this code, as are necessary to ascertain the amount of state excise tax paid on the cigarettes of such tobacco product manufacturer for each year.
(a) 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
(b) (1) Place into a qualified escrow fund by the fifteenth day of April of the year following the year in question the following amounts, adjusted for inflation:
(A) For the year one thousand nine hundred ninety-nine: $.0094241 per unit sold after the date of enactment of this article;
(B) For the year two thousand: $.0104712 per unit sold;
(C) For each of the years two thousand one and two thousand two: $.0136125 per unit sold;
(D) For each of the years two thousand three through two thousand six: $.0167539 per unit sold; and
(E) For the year two thousand seven or each year thereafter: $.0188482 per unit sold.
(2) A tobacco product manufacturer that places funds into escrow pursuant to this subsection shall receive the interest or other appreciation on such funds as earned. Such funds themselves shall be released from escrow only under the following circumstances:
(A) To pay a judgment or settlement on any released claim brought against such tobacco product manufacturer by the state or any releasing party located or residing in the state. Funds shall be released from escrow under this paragraph: (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;
(B) 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 tobacco 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
(C) To the extent not released from escrow under paragraph (A) or (B) of this subdivision, funds shall be released from escrow and revert back to the tobacco product manufacturer twenty-five years after the date on which they were placed into escrow.
(3) Each tobacco product manufacturer that elects to place funds into escrow pursuant to this subsection shall annually certify to the attorney general that it is in compliance with this subsection. The attorney general may bring a civil action on behalf of the state against any tobacco product manufacturer that fails to place into escrow the funds required under this section. Any tobacco product manufacturer that fails in any year to place into escrow the funds required under this section shall:
(A) Be required within fifteen 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 subsection, may impose a civil penalty, to be paid to the general fund of the state, in an amount not to exceed five percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed one hundred percent of the original amount improperly withheld from escrow;
(B) In the case of a knowing violation, be required within fifteen 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 subsection, may impose a civil penalty, to be paid to the general fund of the state, in an amount not to exceed fifteen percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed three hundred percent of the original amount improperly withheld from escrow; and
(C) In the case of a second knowing violation, be prohibited from selling cigarettes to consumers within the state (whether directly or through a distributor, retailer or similar intermediary) for a period not to exceed two years.
Each failure to make an annual deposit required under this section shall constitute a separate violation.
(1) If the act amending section three of this article in the year two thousand three, or any portion of the amendment to paragraph (B), subdivision (2), subsection (b), section three of this article, made by that act, is held by a court of competent jurisdiction to be unconstitutional, then such paragraph (B) shall be deemed to be repealed in its entirety.
(2) If after application of subsection (a) of this section, a court of competent jurisdiction thereafter holds subdivision (2), subsection (b) of said section three to be unconstitutional, then section three as amended in the year two thousand three shall be deleted in its entirety and section three as enacted in the year one thousand nine hundred ninety-nine, shall be restored as if no amendments had been made to section three in the year two thousand three. Neither any holding of unconstitutionality nor the repeal of paragraph (B), subdivision (2), subsection (b), section three of this article shall affect, impair or invalidate any other portion of section three, or the application of section three to any other person or circumstance, and such remaining portions of section three shall at all times continue in full force and effect.
(b) Implementation date. -- The amendments to section three of this article in the year two thousand three shall not take effect until thirty days after the earlier of:
(1) All states that share a common border with this state enacting similar amendments to their laws implementing the master tobacco settlement agreement; or
(2) Thirty-three states, including this state, enacting similar amendments to their laws implementing the master tobacco settlement agreement.