LRB-1840/3
RPN&JK:wlj:rs
2003 - 2004 LEGISLATURE
September 8, 2003 - Introduced by Representatives Vrakas, Nischke, Jeskewitz,
Rhoades, Miller, M. Lehman, Van Roy, Ladwig, Nass, Taylor, Bies
and
McCormick, cosponsored by Senators S. Fitzgerald, Kedzie, Lassa, Breske
and Welch. Referred to Committee on Judiciary.
AB494,1,3 1An Act to amend 895.10 (2) (b) 2. b.; and to create 895.12 of the statutes;
2relating to: tobacco settlement agreement enforcement and providing
3penalties.
Analysis by the Legislative Reference Bureau
Under current law, every tobacco product manufacturer selling cigarettes to
consumers is required either to make payments to the state based on the number of
cigarettes sold in the state under the master tobacco settlement agreement or to
place a certain amount of money into an escrow account based on the number of
cigarettes that are sold. Tobacco product manufacturers that place money into an
escrow account are entitled to receive interest on the money. That money may be
released from escrow to pay a judgment on any claim brought against the tobacco
product manufacturer by the state or certain other parties. The money may also be
released to the tobacco product manufacturer if the amount that was placed in
escrow in a particular year was greater than the manufacturer would have had to
pay under the master settlement agreement in that year.
Current law requires tobacco product manufacturers who place money in
escrow to certify annually to the attorney general that the manufacturer has placed
the required amount into an escrow account and has removed money from that
account only as allowed under current law.
This bill requires every tobacco product manufacturer who places money in
escrow to execute a detailed certification showing that the manufacturer is in full
compliance with the requirement to place moneys in escrow based on the number of

cigarettes that are sold. The bill requires the detailed certification to include a list
of the manufacturer's cigarette brand names, updated at least 30 days before any
change in the brand names, the number of cigarettes of each brand sold annually, a
list of any brands of cigarettes that are no longer being sold in the state, and the name
and address of any other manufacturer of the same brand of cigarettes. The
certification must also include a statement that the manufacturer is registered to do
business in this state or has appointed an agent for service of process, the name and
address of the financial institution where the escrow account is located, and the
amount and date of any deposit, withdrawal, or transfer from the escrow account.
The bill further requires the attorney general to make available for public
inspection a directory of all tobacco product manufacturers that have provided
current and accurate certifications. The bill prohibits the inclusion in the directory
of any manufacturer that is not in compliance with the certification requirements
and any manufacturer that has not registered to do business in this state or that has
not provided an agent for the service of process. The bill also prohibits the affixing
of a tax stamp on any cigarettes or the sale of any cigarettes of a tobacco product
manufacturer that is not included in the directory.
The bill requires distributors of cigarettes to report quarterly to the
Department of Revenue (department) the information that the department needs to
determine compliance with the provisions of this bill. The distributors must
maintain and make available to the department invoices and documentation of sales
of all cigarettes produced by tobacco product manufacturers that are required to
establish an escrow account. The department is required to provide this information
to the attorney general. The bill authorizes the attorney general to request
information from the manufacturers to verify their compliance.
The bill authorizes the department to take various punitive actions against any
person that fails to comply with the bill's requirements, including revocation of the
license of a cigarette distributor, seizure of cigarettes, and imposition of forfeitures.
The attorney general is authorized by the bill to seek an injunction to restrain a
violation of the bill's requirements. Under the bill, if a court determines that a person
has violated the provisions of this bill, the court is required to order that any profits,
gains, gross receipts, or other benefits resulting from the violation be paid to the
state. In addition the bill provides that the costs of investigation, witness fees, court
costs, and attorney fees may be recovered in any action brought by the state to
enforce the provisions of this bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB494, s. 1 1Section 1. 895.10 (2) (b) 2. b. of the statutes is amended to read:
AB494,3,13
1895.10 (2) (b) 2. b. To the extent that a tobacco product manufacturer
2establishes that the amount it was required to place into escrow on account of the
3units sold
in a particular year was greater than the state's allocable share of the total
4payments that the manufacturer would have been required to make in that year
5under the master settlement agreement had it been a participating manufacturer,
6as those payments are determined under section IX (i) (2) of the master settlement
7agreement and before any of the adjustments or offsets described in section IX (i) (3)
8of that agreement other than the inflation adjustment
master settlement agreement
9payments, as determined under section IX (i) of that agreement including after the
10final determination of all adjustments, that the manufacturer would have been
11required to make on account of such units sold had it been a participating
12manufacturer
, the excess shall be released from escrow and revert to that tobacco
13product manufacturer.
AB494, s. 2 14Section 2. 895.12 of the statutes is created to read:
AB494,3,15 15895.12 Certification under the tobacco settlement agreement.
AB494,3,16 16(1) Definitions. In this section:
AB494,3,2217 (a) "Brand family" means all styles of cigarettes sold under the same trademark
18and differentiated from one another by means of additional modifiers or descriptors,
19including "menthol," "lights," "kings," and "100s," and includes any brand name,
20alone or in conjunction with any other word; trademark; logo; symbol; motto; selling
21message; recognizable pattern of colors; or other indicia of product identification
22identical or similar to, or identifiable with, a previously known brand of cigarettes.
AB494,3,2323 (b) "Cigarette" has the meaning given in s. 895.10 (1) (d).
AB494,3,2424 (c) "Department" means the department of revenue.
AB494,4,4
1(d) "Distributor" means a person that is authorized to affix tax stamps to
2packages or other containers of cigarettes under subch. II of ch. 139 or any person
3that is required to pay the tax imposed on tobacco products under subch. III of ch.
4139.
AB494,4,55 (e) "Master settlement agreement" has the meaning given in s. 895.10 (1) (e).
AB494,4,76 (f) "Nonparticipating manufacturer" means any tobacco product manufacturer
7that is not a participating manufacturer.
AB494,4,98 (g) "Participating manufacturer" has the meaning given in section II (jj) of the
9master settlement agreement.
AB494,4,1010 (h) "Qualified escrow fund" has the meaning given in s. 895.10 (1) (f).
AB494,4,1111 (j) "Tobacco product manufacturer" has the meaning given in s. 895.10 (1) (i).
AB494,4,1212 (k) "Units sold" has the meaning given in s. 895.10 (1) (j).
AB494,4,13 13(2) Certifications; directory; tax stamps.
AB494,4,2014 (a) Certification. 1. Every tobacco product manufacturer whose cigarettes are
15sold in this state, whether directly or through a distributor, retailer, or similar
16intermediary or intermediaries, shall execute and deliver in the manner prescribed
17by the attorney general a certification to the department and attorney general, no
18later than the 30th day of April each year, certifying that as of that date the tobacco
19product manufacturer is either a participating manufacturer or is in full compliance
20with s. 895.10 (2) (b).
AB494,4,2521 2. A participating manufacturer shall include in its certification a list of its
22brand families. The participating manufacturer shall update that list at least 30
23calendar days prior to any addition to or modification of its brand families by
24executing and delivering a supplemental certification to the department and
25attorney general.
AB494,5,2
13. A nonparticipating manufacturer shall include all of the following in its
2certification:
AB494,5,43 a. A list of all of its brand families and the number of units sold for each brand
4family that were sold in the state during the preceding calendar year.
AB494,5,65 b. A list of all of its brand families that have been sold in the state at any time
6during the current calendar year.
AB494,5,87 c. A list of any brand families sold in the state during the preceding calendar
8year that are no longer being sold in the state as of the date of such certification.
AB494,5,109 d. The name and address of any other manufacturer of the brand families in
10the preceding or current calendar year.
AB494,5,1411 4. The nonparticipating manufacturer shall update the list under subd. 3. at
12least 30 calendar days before any addition to or modification of its brand families by
13executing and delivering a supplemental certification to the department and
14attorney general.
AB494,5,1515 5. The nonparticipating manufacturer shall further certify all of the following:
AB494,5,1816 a. That the nonparticipating manufacturer is registered to do business in the
17state or has appointed an agent for service of process and provided notice of that
18appointment as required by sub. (3).
AB494,5,2219 b. That the nonparticipating manufacturer has established and continues to
20maintain a qualified escrow fund and has executed a qualified escrow agreement
21that has been reviewed and approved by the attorney general and that governs the
22qualified escrow fund.
AB494,5,2423 c. That the nonparticipating manufacturer is in full compliance with this
24section and s. 895.10.
AB494,6,3
1d. The name, address, and telephone number of the financial institution where
2the nonparticipating manufacturer has established the qualified escrow fund
3required under s. 895.10 (2) (b).
AB494,6,54 e. The account number of the qualified escrow fund and any subaccount
5number for the state.
AB494,6,86 f. The amount the nonparticipating manufacturer placed into the fund for
7cigarettes sold in the state during the preceding calendar year, the date and amount
8of each deposit, and any evidence or verification as required by the attorney general.
AB494,6,129 g. The amount and date of any withdrawal or transfer of funds the
10nonparticipating manufacturer made at any time from the fund or from any other
11qualified escrow fund into which it ever made escrow payments under s. 895.10 (2)
12(b).
AB494,6,1713 6. A participating manufacturer may not include a brand family in its
14certification unless the participating manufacturer affirms that the brand family
15constitutes its cigarettes for purposes of calculating its payments under the master
16settlement agreement for the relevant year, in the volume and shares determined
17under the master settlement agreement.
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