Assembly Bill No. 14–Committee of the Whole

 

July 21, 2003

____________

 

Declared an Emergency Measure

 

SUMMARY—Revising provisions regarding manufacture, sale and use of tobacco products. (BDR 15‑25)

 

FISCAL NOTE:  Effect on Local Government: Yes.

                           Effect on the State: Yes.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to tobacco; revising the duties and rights of manufacturers and distributors of cigarettes; revising the duties of the Department of Taxation; providing civil and criminal penalties; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1  Section 1. Chapter 370 of NRS is hereby amended by adding

1-2  thereto the provisions set forth as sections 2 to 20, inclusive, of this

1-3  act.

1-4  Sec. 2.  The Legislature finds that:

1-5  1.  Violations of the provisions of chapter 370A of NRS

1-6  threaten the integrity of the Master Settlement Agreement, the

1-7  fiscal soundness of the State and the public health.

1-8  2.  The enactment of the procedural enhancements set forth in

1-9  sections 2 to 20, inclusive, of this act will aid in the enforcement of

1-10  the provisions of chapter 370A of NRS and thereby safeguard the

1-11  Master Settlement Agreement, the fiscal soundness of the State

1-12  and the public health.

1-13      Sec. 3.  As used in sections 2 to 20, inclusive, of this act,

1-14  unless the context otherwise requires, the words and terms defined

1-15  in sections 4 to 14, inclusive, of this act have the meanings

1-16  ascribed to them in those sections.

2-1  Sec. 4.  “Brand family” means all styles of cigarettes sold

2-2  under the same trademark and differentiated from one another by

2-3  means of additional modifiers or descriptors, including, but not

2-4  limited to, “menthol,” “lights,” “kings” and “100s,” and includes

2-5  any brand name, whether occurring alone or in conjunction with

2-6  any other word, any trademark, logo, symbol, motto, selling

2-7  message or recognizable pattern of colors, or any other indicia of

2-8  product identification identical or similar to, or identifiable with, a

2-9  previously known brand of cigarettes.

2-10      Sec. 5.  “Cigarette” has the meaning ascribed to it in

2-11  NRS 370A.050.

2-12      Sec. 6.  “Directory” means the directory created pursuant to

2-13  section 17 of this act.

2-14      Sec. 7.  “Distributor” means a person that is authorized to

2-15  affix stamps to cigarette packages pursuant to this chapter or any

2-16  person that is required to pay the taxes on cigarettes imposed

2-17  pursuant to this chapter.

2-18      Sec. 8.  “Manufacturer of tobacco products” has the meaning

2-19  ascribed to it in NRS 370A.060.

2-20      Sec. 9.  “Master Settlement Agreement” has the meaning

2-21  ascribed to it in NRS 370A.070.

2-22      Sec. 10.  “Nonparticipating manufacturer” means any

2-23  manufacturer of tobacco products that is not a participating

2-24  manufacturer.

2-25      Sec. 11.  “Participating manufacturer” has the meaning

2-26  ascribed to it in NRS 370A.080.

2-27      Sec. 12.  “Qualified escrow fund” has the meaning ascribed

2-28  to it in NRS 370A.090.

2-29      Sec. 13.  “Stamp” means the indicia required to be placed on

2-30  a cigarette package that evidences payment of the taxes on

2-31  cigarettes imposed pursuant to this chapter.

2-32      Sec. 14.  “Units sold” has the meaning ascribed to it in

2-33  NRS 370A.120.

2-34      Sec. 15.  1.  A manufacturer of tobacco products whose

2-35  cigarettes are sold in this state, whether directly or through a

2-36  distributor, retailer or similar intermediary or intermediaries,

2-37  shall, not later than April 30 of each year, execute and deliver to

2-38  the Attorney General and the Department, on a form provided by

2-39  the Department, a certification which certifies under penalty of

2-40  perjury that, as of the date of that certification, the manufacturer

2-41  of tobacco products is either:

2-42      (a) A participating manufacturer; or

2-43      (b) In full compliance with subsection 2 of NRS 370A.140,

2-44  including any quarterly installment payments required pursuant to

2-45  section 20 of this act.

3-1  2.  Except as otherwise provided in section 16 of this act:

3-2  (a) A participating manufacturer shall include in its

3-3  certification pursuant to this section a list of its brand families.

3-4  The participating manufacturer shall update that list at least 30

3-5  calendar days before it adds to or modifies its brand families by

3-6  executing and delivering a supplemental certification to the

3-7  Attorney General and the Department.

3-8  (b) A nonparticipating manufacturer shall, in its certification

3-9  pursuant to this section:

3-10          (1) Include:

3-11              (I) A list of all of its brand families and the number of

3-12  units sold for each brand family that were sold in the State during

3-13  the preceding calendar year; and

3-14              (II) A list of all of its brand families that have been sold

3-15  in the State at any time during the current calendar year;

3-16          (2) Indicate, by an asterisk, any brand family sold in the

3-17  State during the preceding calendar year that is no longer being

3-18  sold in the State as of the date of the certification; and

3-19          (3) Identify, by name and address, any other manufacturer

3-20  of those brand families in the preceding or current calendar

3-21  year.

3-22  A nonparticipating manufacturer shall update the information

3-23  required by this paragraph at least 30 calendar days before it adds

3-24  to or modifies its brand families by executing and delivering a

3-25  supplemental certification to the Attorney General and the

3-26  Department.

3-27      3.  In addition to the requirements of subsection 2, the

3-28  certification of a nonparticipating manufacturer pursuant to this

3-29  section must certify:

3-30      (a) That the nonparticipating manufacturer is registered to do

3-31  business in the State or has appointed a resident agent for service

3-32  of process and provided notice thereof as required by section 18 of

3-33  this act;

3-34      (b) That the nonparticipating manufacturer has:

3-35          (1) Established and continues to maintain a qualified

3-36  escrow fund; and

3-37          (2) Executed a qualified escrow agreement governing the

3-38  qualified escrow fund that has been reviewed and approved by the

3-39  Attorney General;

3-40      (c) That the nonparticipating manufacturer is in full

3-41  compliance with chapter 370A of NRS and any regulations

3-42  adopted pursuant thereto;

3-43      (d) The name, address and telephone number of the financial

3-44  institution where the nonparticipating manufacturer has

4-1  established the qualified escrow fund required pursuant to chapter

4-2  370A of NRS and any regulations adopted pursuant thereto;

4-3  (e) The account number of that qualified escrow fund and any

4-4  subaccount number for this state;

4-5  (f) The amount the nonparticipating manufacturer placed in

4-6  that qualified escrow fund for cigarettes sold in the State during

4-7  the preceding calendar year, the date and amount of each such

4-8  deposit, and such evidence or verification as may be deemed

4-9  necessary by the Department to confirm the information required

4-10  by this paragraph; and

4-11      (g) The amount and date of any withdrawal or transfer of

4-12  money the nonparticipating manufacturer made at any time from

4-13  that qualified escrow fund or from any other qualified escrow

4-14  fund into which it ever made escrow payments pursuant to chapter

4-15  370A of NRS and any regulations adopted pursuant thereto.

4-16      Sec. 16.  A manufacturer of tobacco products:

4-17      1.  Shall not include a brand family in its certification

4-18  pursuant to section 15 of this act unless, if the manufacturer is:

4-19      (a) A participating manufacturer, the manufacturer affirms

4-20  that the brand family is to be deemed to be its cigarettes for

4-21  purposes of calculating its payments under the Master Settlement

4-22  Agreement for the relevant year, in the volume and shares

4-23  determined pursuant to the Master Settlement Agreement; or

4-24      (b) A nonparticipating manufacturer, the manufacturer

4-25  affirms that the brand family is to be deemed to be its cigarettes

4-26  for purposes of chapter 370A of NRS.

4-27  This subsection must not be construed as limiting or otherwise

4-28  affecting the right of the State to maintain that a brand family

4-29  constitutes cigarettes of a different manufacturer of tobacco

4-30  products for purposes of calculating payments under the Master

4-31  Settlement Agreement or for purposes of chapter 370A of NRS.

4-32      2.  Shall maintain all invoices and documentation of sales,

4-33  and any other information relied upon by the manufacturer for its

4-34  certification pursuant to section 15 of this act, for at least 5 years,

4-35  unless the manufacturer is otherwise required by law to maintain

4-36  them for a greater period.

4-37      Sec. 17.  1.  The Department shall create and maintain on

4-38  its Internet website and otherwise make available for public

4-39  inspection a directory that lists, except as otherwise provided in

4-40  sections 2 to 20, inclusive, of this act, all manufacturers of tobacco

4-41  products that have provided current and accurate certifications

4-42  conforming to the requirements of sections 2 to 20, inclusive, of

4-43  this act and all brand families that are listed in those

4-44  certifications. The Department:

5-1  (a) Shall not include or retain in the directory the name or

5-2  brand families of any nonparticipating manufacturer that has

5-3  failed to provide the required certification or whose certification

5-4  the Department determines is not in compliance with sections 2 to

5-5  20, inclusive, of this act, unless the Department has determined

5-6  that such violation has been cured to its satisfaction.

5-7  (b) Shall not include or retain in the directory a manufacturer

5-8  of tobacco products or brand family if the Department concludes,

5-9  for a nonparticipating manufacturer, that:

5-10          (1) Any escrow payment required pursuant to chapter 370A

5-11  of NRS for any period for any brand family, whether or not listed

5-12  by the nonparticipating manufacturer, has not been fully paid into

5-13  a qualified escrow fund governed by a qualified escrow agreement

5-14  which has been approved by the Attorney General; or

5-15          (2) Any outstanding final judgment, including any interest

5-16  thereon, for a violation of chapter 370A of NRS has not been fully

5-17  satisfied for that manufacturer or brand family.

5-18      2.  The Department shall update the directory as necessary to

5-19  correct mistakes and to add or remove a manufacturer of tobacco

5-20  products or brand family to keep the directory in conformity with

5-21  the requirements of sections 2 to 20, inclusive, of this act.

5-22      3.  Any determination of the Department not to include in or

5-23  to remove from the directory a manufacturer of tobacco products

5-24  or brand family is a final decision for the purposes of judicial

5-25  review.

5-26      Sec. 18.  1.  Any nonresident or foreign nonparticipating

5-27  manufacturer that has not registered to do business in the State as

5-28  a foreign corporation or other business entity must, as a condition

5-29  precedent to having its brand families included or retained in the

5-30  directory, appoint and continually engage without interruption the

5-31  services of an agent in this state to act as its agent for the service

5-32  of process on whom all process, in any action or proceeding

5-33  against it concerning or arising out of the enforcement of this

5-34  chapter, may be served in any manner authorized by law. Such

5-35  service constitutes legal and valid service of process on the

5-36  nonparticipating manufacturer. The nonparticipating

5-37  manufacturer shall provide the name, address, phone number and

5-38  proof of the appointment and availability of such agent to, and to

5-39  the satisfaction of, the Attorney General and the Department.

5-40      2.  A nonparticipating manufacturer shall provide notice to

5-41  the Attorney General and the Department at least 30 calendar days

5-42  before the termination of the authority of an agent appointed

5-43  pursuant to this section and shall provide proof to the satisfaction

5-44  of the Attorney General and the Department of the appointment of

5-45  a new agent not less than 5 calendar days before the termination

6-1  of appointment of an existing agent. If an agent terminates his

6-2  appointment as an agent, the nonparticipating manufacturer shall

6-3  notify the Attorney General and the Department of that

6-4  termination within 5 calendar days and include with that

6-5  notification proof to the satisfaction of the Attorney General and

6-6  the Department of the appointment of a new agent.

6-7  3.  Any nonparticipating manufacturer whose cigarettes are

6-8  sold in this state and who has not appointed and engaged an agent

6-9  as required by this section shall be deemed to have appointed the

6-10  Secretary of State as such agent and may be proceeded against in

6-11  courts of this state by service of process upon the Secretary of

6-12  State, except that the appointment of the Secretary of State as such

6-13  agent does not satisfy the condition precedent for having the brand

6-14  families of the nonparticipating manufacturer included or

6-15  retained in the directory.

6-16      Sec. 19.  1.  Not later than 20 calendar days after the end of

6-17  each calendar quarter, and more frequently if so directed by the

6-18  Department, each distributor shall submit such information as the

6-19  Department requires to facilitate compliance with the provisions of

6-20  sections 2 to 20, inclusive, of this act, including, without

6-21  limitation, a list by brand family of the total number of cigarettes

6-22  or, in the case of “roll-your-own” tobacco, the equivalent unit

6-23  count, for which the distributor affixed stamps during the previous

6-24  calendar quarter or otherwise paid the tax due for those cigarettes.

6-25  The distributor shall maintain for at least 5 years, and make

6-26  available to the Department, all invoices and documentation of

6-27  sales of all cigarettes of nonparticipating manufacturers and any

6-28  other information relied upon in reporting to the Department.

6-29      2.  The Department may disclose to the Attorney General any

6-30  information received pursuant to sections 2 to 20, inclusive, of this

6-31  act and requested by the Attorney General for purposes of

6-32  determining compliance with and enforcing the provisions of

6-33  sections 2 to 20, inclusive, of this act. The Department and

6-34  Attorney General shall share with each other the information

6-35  received pursuant to the provisions of sections 2 to 20, inclusive,

6-36  of this act, and may share such information with other federal,

6-37  state or local agencies only for purposes of enforcement of those

6-38  provisions, the provisions of chapter 370A of NRS or the

6-39  corresponding laws of other states.

6-40      3.  The Department may require at any time from a

6-41  nonparticipating manufacturer proof, from the financial

6-42  institution in which that manufacturer has established a qualified

6-43  escrow fund for the purpose of compliance with chapter 370A of

6-44  NRS, of the amount of money in that fund, exclusive of interest,

7-1  the amount and date of each deposit to that fund, and the amount

7-2  and date of each withdrawal from that fund.

7-3  4.  In addition to the information otherwise required to be

7-4  submitted pursuant to sections 2 to 20, inclusive, of this act, the

7-5  Department may require a distributor or manufacturer of tobacco

7-6  products to submit any additional information, including, without

7-7  limitation, samples of the packaging or labeling of each brand

7-8  family, as is necessary to enable the Department to determine

7-9  whether a manufacturer of tobacco products is in compliance with

7-10  the provisions of sections 2 to 20, inclusive, of this act.

7-11      5.  Every distributor shall provide to the Department and

7-12  update as necessary an electronic mail address for receiving any

7-13  notifications as may be required to carry out sections 2 to 20,

7-14  inclusive, of this act.

7-15      Sec. 20.  1.  To promote compliance with the provisions of

7-16  NRS 370A.140, the Department may adopt regulations requiring a

7-17  manufacturer of tobacco products to make the escrow deposits

7-18  required by NRS 370A.140 in quarterly installments during the

7-19  year in which the sales covered by those deposits are made. The

7-20  Department may require the production of information sufficient

7-21  to enable the Department to determine the adequacy of the amount

7-22  of each quarterly installment.

7-23      2.  The Department may adopt such regulations as it deems

7-24  necessary to carry out the provisions of sections 2 to 20, inclusive,

7-25  of this act.

7-26      Sec. 21.  (Deleted.)

7-27      Sec. 22.  NRS 370A.150 is hereby amended to read as follows:

7-28      370A.150  A manufacturer of tobacco products that deposits

7-29  money into escrow pursuant to subsection 2 of NRS 370A.140 shall

7-30  receive the interest or other appreciation on the deposit as earned.

7-31  The principal of the deposit may be released from escrow only

7-32  under the following circumstances:

7-33      1.  To pay a judgment or settlement on a released claim brought

7-34  against that manufacturer by this state or by a releasing party located

7-35  or residing in this state. Money may be released from escrow under

7-36  this subsection only in the order in which it was deposited into

7-37  escrow and only to the extent and at the time necessary to make

7-38  payments required under the judgment or settlement.

7-39      2.  To the extent that the manufacturer establishes that the

7-40  amount it was required to deposit into escrow on account of units

7-41  sold in the State in a particular year was greater than [this state’s

7-42  allocable share of the total payments that the manufacturer would

7-43  have been required to make in that year under] the Master

7-44  Settlement Agreement payments, as determined pursuant to section

7-45  IX(i) of that Agreement including after final determination of all

8-1  adjustments, that such manufacturer would have been required to

8-2  make on account of such units sold if the manufacturer had been a

8-3  participating manufacturer, [as such payments are determined

8-4  pursuant to section IX(i)(2) of that Agreement and before any of the

8-5  adjustments or offsets described in section IX(i)(3) of that

8-6  Agreement other than the inflation adjustment,] the excess must be

8-7  released from escrow and revert to the manufacturer.

8-8  3.  To the extent not released from escrow under subsection 1 or

8-9  2, deposits must be released from escrow and revert to the

8-10  manufacturer 25 years after the date on which they were deposited.

8-11      Sec. 23.  NRS 370A.150 is hereby amended to read as follows:

8-12      370A.150  A manufacturer of tobacco products that deposits

8-13  money into escrow pursuant to subsection 2 of NRS 370A.140 shall

8-14  receive the interest or other appreciation on the deposit as earned.

8-15  The principal of the deposit may be released from escrow only

8-16  under the following circumstances:

8-17      1.  To pay a judgment or settlement on a released claim brought

8-18  against that manufacturer by this state or by a releasing party located

8-19  or residing in this state. Money may be released from escrow under

8-20  this subsection only in the order in which it was deposited into

8-21  escrow and only to the extent and at the time necessary to make

8-22  payments required under the judgment or settlement.

8-23      2.  [To the extent that the manufacturer establishes that the

8-24  amount it was required to deposit into escrow on account of units

8-25  sold in the State in a particular year was greater than the Master

8-26  Settlement Agreement payments, as determined pursuant to section

8-27  IX(i) of that Agreement including after final determination of all

8-28  adjustments, that such manufacturer would have been required to

8-29  make on account of such units sold if the manufacturer had been a

8-30  participating manufacturer, the excess must be released from escrow

8-31  and revert to the manufacturer.

8-32      3.] To the extent not released from escrow under subsection 1 ,

8-33  [or 2,] deposits must be released from escrow and revert to the

8-34  manufacturer 25 years after the date on which they were deposited.

8-35      Sec. 24.  NRS 370A.150 is hereby amended to read as follows:

8-36      370A.150  A manufacturer of tobacco products that deposits

8-37  money into escrow pursuant to subsection 2 of NRS 370A.140 shall

8-38  receive the interest or other appreciation on the deposit as earned.

8-39  The principal of the deposit may be released from escrow only

8-40  under the following circumstances:

8-41      1.  To pay a judgment or settlement on a released claim brought

8-42  against that manufacturer by this state or by a releasing party located

8-43  or residing in this state. Money may be released from escrow under

8-44  this subsection only in the order in which it was deposited into

9-1  escrow and only to the extent and at the time necessary to make

9-2  payments required under the judgment or settlement.

9-3  2.  To the extent that the manufacturer establishes that the

9-4  amount it was required to deposit into escrow in a particular year

9-5  was greater than this state’s allocable share of the total payments

9-6  that the manufacturer would have been required to make in that

9-7  year under the Master Settlement Agreement if the manufacturer

9-8  had been a participating manufacturer, as such payments are

9-9  determined pursuant to section IX(i)(2) of that Agreement and

9-10  before any of the adjustments or offsets described in section

9-11  IX(i)(3) of that Agreement other than the inflation adjustment, the

9-12  excess must be released from escrow and revert to the

9-13  manufacturer.

9-14      3.  To the extent not released from escrow under subsection 1

9-15  [,] or 2, deposits must be released from escrow and revert to the

9-16  manufacturer 25 years after the date on which they were deposited.

9-17      Sec. 25.  1.  The first report required by section 19 of this act

9-18  is due on or before October 20, 2003.

9-19      2.  Notwithstanding the provisions of section 15 of this act, the

9-20  initial certifications required by that section are due on or before

9-21  November 15, 2003.

9-22      3.  The Department of Taxation shall create and make available

9-23  for public inspection the directory required pursuant to section 17 of

9-24  this act on or before December 31, 2003.

9-25      Sec. 26.  1.  This section and sections 1 to 22, inclusive, and

9-26  25 of this act become effective:

9-27      (a) Upon passage and approval for the purposes of adopting

9-28  regulations and taking such other actions as are necessary to carry

9-29  out the provisions of this act; and

9-30      (b) On October 1, 2003, for all other purposes.

9-31      2.  Section 23 of this act becomes effective on the date a court

9-32  of competent jurisdiction enters a judgment determining that the

9-33  amendatory provisions of section 22 of this act are unconstitutional.

9-34      3.  Section 24 of this act becomes effective on the date a court

9-35  of competent jurisdiction enters a judgment determining that the

9-36  amendatory provisions of section 23 of this act are unconstitutional.

 

9-37  H