EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. Green numbers along left margin indicate location on the printed bill (e.g., 5-15 indicates page 5, line 15).

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

1-2 the provisions set forth as sections 2 to 17, inclusive, of this act.

1-3 Sec. 2. As used in sections 2 to 17, inclusive, of this act, unless the

1-4 context otherwise requires, the words and terms defined in sections 3 to

1-5 13, inclusive, of this act have the meanings ascribed to them in those

1-6 sections.

1-7 Sec. 3. "Adjusted for inflation" means increased in accordance with

1-8 the formula for adjustment for inflation set forth in Exhibit C to the

1-9 master settlement agreement.

1-10 Sec. 4. "Affiliate" means a person who directly or indirectly owns or

1-11 controls, is owned or controlled by, or is under common ownership or

1-12 control with, another person. For the purposes of this section, "own"

1-13 means to have an equity interest, or the equivalent thereof, of 10 percent

1-14 or more.

1-15 Sec. 5. "Allocable share" has the meaning ascribed to it in section

1-16 II(f) of the master settlement agreement.

2-1 Sec. 6. "Cigarette" means any product that contains nicotine, is

2-2 intended to be burned or heated under ordinary conditions of use, and

2-3 consists of or contains:

2-4 1. Any roll of tobacco wrapped in paper or in any other substance

2-5 not containing tobacco;

2-6 2. Tobacco, in any form, that is functional in the product, which

2-7 because of its appearance, the type of tobacco used in the filler or its

2-8 packaging and labeling is likely to be offered to or purchased by

2-9 consumers as a cigarette described in subsection 1; or

2-10 3. Any roll of tobacco wrapped in any substance containing tobacco

2-11 which because of its appearance, the type of tobacco used in the filler or

2-12 its packaging and labeling is likely to be offered to or purchased by

2-13 consumers as a cigarette described in subsection 1.

2-14 The term includes "roll-your-own" tobacco, that is, any tobacco which

2-15 because of its appearance, type, packaging or labeling is suitable for use

2-16 and likely to be offered to or purchased by consumers as tobacco for

2-17 making cigarettes. For the purposes of this section, 0.09 ounces of "roll-

2-18 your-own" tobacco constitutes one individual cigarette.

2-19 Sec. 7. "Manufacturer of tobacco products" means a person that,

2-20 after the effective date of this act, directly, and not exclusively through an

2-21 affiliate:

2-22 1. Manufactures cigarettes anywhere that the manufacturer intends

2-23 to be sold in the United States, including cigarettes intended to be sold in

2-24 the United States through an importer:

2-25 (a) Unless the importer is an original participating manufacturer that:

2-26 (1) Will be responsible for the payments under the master

2-27 settlement agreement with respect to the cigarettes as a result of the

2-28 provisions of section II(mm) of the master settlement agreement; and

2-29 (2) Pays the taxes specified in section II(z) of the master settlement

2-30 agreement; and

2-31 (b) If the manufacturer of the cigarettes does not market or advertise

2-32 the cigarettes in the United States;

2-33 2. Is the first purchaser anywhere for resale in the United States of

2-34 cigarettes manufactured anywhere which the manufacturer does not

2-35 intend to be sold in the United States; or

2-36 3. Becomes a successor of a person described in subsection 1
2-37 or 2.

2-38 The term does not include an affiliate of a manufacturer of tobacco

2-39 products unless the affiliate itself is a person described in subsection 1, 2

2-40 or 3.

3-1 Sec. 8. "Master settlement agreement" means the settlement

3-2 agreement, and related documents, entered into on November 23, 1998,

3-3 by this state and leading United States manufacturers of tobacco

3-4 products.

3-5 Sec. 9. "Participating manufacturer" has the meaning ascribed to it

3-6 in section II(jj) of the master settlement agreement.

3-7 Sec. 10. "Qualified escrow" means an agreement with a financial

3-8 institution, chartered by this state or the United States, that has no

3-9 affiliation with any manufacturer of tobacco products and has assets of

3-10 at least $1 billion if the agreement requires the financial institution to

3-11 hold the principal of the amount deposited in escrow for the benefit of

3-12 releasing parties and prohibits the manufacturer of tobacco products

3-13 which deposits the money from using, having access to or directing the

3-14 use of the principal of the amount deposited except as permitted under

3-15 subsections 2 and 3 of section 16 of this act.

3-16 Sec. 11. "Released claims" has the meaning ascribed to it in section

3-17 II(nn) of the master settlement agreement.

3-18 Sec. 12. "Releasing parties" has the meaning ascribed to it in

3-19 section II(pp) of the master settlement agreement.

3-20 Sec. 13. "Units sold" means, with respect to a particular

3-21 manufacturer of tobacco products for a particular year, the number of

3-22 individual cigarettes sold in this state by the manufacturer directly or

3-23 through a distributor, retailer or similar intermediary during that year, as

3-24 measured by excise taxes collected by the state on packs, or containers of

3-25 "roll-your-own" tobacco, bearing the excise stamp of this state.

3-26 Sec. 14. The department of taxation shall adopt such regulations as

3-27 are necessary to ascertain the amount of excise tax collected by the state

3-28 on the cigarettes of each manufacturer of tobacco products in each year.

3-29 Sec. 15. A manufacturer of tobacco products that sells cigarettes to

3-30 consumers in this state, directly or through a distributor, retailer or

3-31 similar intermediary, after the effective date of this act shall:

3-32 1. Become a participating manufacturer and perform its financial

3-33 obligations as such under the master settlement agreement; or

3-34 2. Deposit into a qualified escrow, on or before April 15 of the year

3-35 following the year in which the cigarettes were sold, the following

3-36 amounts adjusted for inflation:

3-37 (a) For the year 1999, $0.0094241 for each unit sold after the effective

3-38 date of this act;

3-39 (b) For the year 2000, $0.0104712 for each unit sold;

3-40 (c) For the years 2001 and 2002, $0.0136125 for each unit sold;

3-41 (d) For the years 2003 to 2006, inclusive, $0.0167539 for each unit

3-42 sold; and

4-1 (e) For the year 2007 and each year thereafter, $0.0188482 for each

4-2 unit sold.

4-3 Sec. 16. A manufacturer of tobacco products that deposits money

4-4 into escrow pursuant to section 15 of this act is entitled to receive the

4-5 interest or other appreciation on the deposit as earned. The principal of

4-6 the deposit may be released from escrow only in one of the following

4-7 circumstances:

4-8 1. To pay a judgment or settlement on a released claim brought

4-9 against the manufacturer by this state or by a releasing party located or

4-10 residing in this state. Money must be released from escrow under this

4-11 subsection in the order in which it was deposited into escrow only to the

4-12 extent and at the time necessary to make payments required under the

4-13 judgment or settlement.

4-14 2. To the extent that the manufacturer establishes that the amount it

4-15 was required to deposit into escrow in a particular year was greater than

4-16 this state’s allocable share of the total payments that the manufacturer

4-17 would have been required to make in that year under the master

4-18 settlement agreement, determined pursuant to section IX(i)(2) of that

4-19 agreement and before any of the adjustments or offsets described in

4-20 section IX(i)(3) of that agreement other than the adjustment for inflation

4-21 if the manufacturer had been a participating manufacturer, the excess

4-22 must be released from escrow and reverts to the manufacturer.

4-23 3. To the extent not released from escrow under subsection 1 or 2,

4-24 deposits must be released from escrow and revert to the manufacturer 25

4-25 years after the date on which they were deposited.

4-26 Sec. 17. 1. A manufacturer of tobacco products which elects to

4-27 deposit money into escrow pursuant to section 15 of this act shall

4-28 annually certify to the attorney general that it is in compliance with that

4-29 section. If the attorney general does not receive the annual certification,

4-30 he shall mail a notice to the manufacturer. The attorney general may

4-31 maintain a civil action of behalf of this state against any manufacturer of

4-32 tobacco products which fails to deposit into escrow the amount required

4-33 by that section.

4-34 2. A manufacturer of tobacco products that so fails in any year:

4-35 (a) Shall deposit into escrow within 15 days after the date on which

4-36 the notice required by subsection 1 was mailed the amount required to

4-37 bring the manufacturer into compliance with section 15 of this act. The

4-38 court, upon finding a violation of this subsection, may impose a civil

4-39 penalty of not more than 5 percent of the amount improperly withheld

4-40 from escrow for each day of the violation, but not more in total amount

4-41 than three times the original amount improperly withheld from escrow.

5-1 (b) In the case of a knowing violation, shall deposit into escrow within

5-2 15 days after the date on which the notice required by subsection 1 was

5-3 mailed the amount required to bring the manufacturer into compliance

5-4 with section 15 of this act. The court, upon finding a knowing violation

5-5 of this subsection, may impose a civil penalty of not more than 15 percent

5-6 of the amount improperly withheld from escrow for each day of the

5-7 violation, but not more in total amount than three times the original

5-8 amount improperly withheld from escrow.

5-9 (c) In the case of a second knowing violation, shall not sell cigarettes

5-10 to consumers in this state, directly or through a distributor, retailer or

5-11 similar intermediary, for a period to be fixed by the court not to exceed 2

5-12 years.

5-13 3. Each failure to make an annual deposit required by section 15 of

5-14 this act constitutes a separate violation of this section.

5-15 Sec. 18. This act becomes effective upon passage and approval.