453C.1 DEFINITIONS.
1. "Adjusted for inflation" means increased in accordance
with the formula for inflation adjustment set forth in exhibit "C" to
the master settlement agreement.
2. "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.
3. "Allocable share" means allocable share as defined in the
master settlement agreement.
4. "Cigarette" means any product that contains nicotine, is
intended to be burned or heated under ordinary conditions of use, and
consists of or contains any of the following:
a. Any roll of tobacco wrapped in paper or in any substance
not containing tobacco.
b. 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.
c. 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 described in paragraph
"a" of this definition.
The term "cigarette" includes "roll-your-own" tobacco, meaning
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".
5. "Master settlement agreement" means the settlement
agreement and related documents entered into on November 23, 1998, by
the state and leading United States tobacco product manufacturers.
6. "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 one billion dollars 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
section 453C.2, subsection 2, paragraph "b".
7. "Released claims" means released claims as that term is
defined in the master settlement agreement.
8. "Releasing parties" means releasing parties as that term
is defined in the master settlement agreement.
9. "Tobacco product manufacturer" means an entity that on or
after May 20, 1999, directly and not exclusively through any
affiliate does any of the following:
a. 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
subsection 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).
b. 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.
c. Becomes a successor of an entity described in paragraph
"a" or "b".
The term "tobacco product manufacturer" shall not include an
affiliate of a tobacco product manufacturer unless such affiliate
itself falls within any of paragraphs "a" through "c".
10. "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 bearing the
excise stamp of the state or on roll-your-own tobacco containers.
The department of revenue shall adopt rules as are necessary to
ascertain the amount of state excise tax paid on the cigarettes of
such tobacco product manufacturer for each year. Section History: Recent Form
99 Acts, ch 157, §1, 3; 2000 Acts, ch 1058, §42; 2001 Acts, ch 18,
§1, 2, 4; 2003 Acts, ch 145, §286; 2003 Acts, ch 179, §131, 159; 2007
Acts, ch 186, §53
Referred to in § 12E.2, 453D.2
453C.2 REQUIREMENTS.
Any tobacco product manufacturer selling cigarettes to consumers
within the state, whether directly or through a distributor,
retailer, or similar intermediary or intermediaries, on or after May
20, 1999, 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.
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:
(1) For 1999: $.0094241 per unit sold on or after May 20, 1999.
(2) For 2000: $.0104712 per unit sold.
(3) For each of 2001 and 2002: $.0136125 per unit sold.
(4) For each of 2003 through 2006: $.0167539 per unit sold.
(5) For 2007 and each year thereafter: $.0188482 per unit sold.
b. A tobacco product manufacturer that places funds into
escrow pursuant to paragraph "a" shall receive the interest or
other appreciation on such funds as earned. Such funds themselves
shall be released from escrow only under any of the following
circumstances:
(1) 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 subparagraph (1), (a) in the order
in which they were placed into escrow and (b) only to the extent and
at the time necessary to make payments required under such judgment
or settlement.
(2) To the extent that a tobacco product manufacturer establishes
that the amount the manufacturer 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 had such
manufacturer been a participating manufacturer, the excess shall be
released from escrow and revert back to such tobacco product
manufacturer.
(3) To the extent not released from escrow under subparagraph (1)
or (2), funds shall be released from escrow and revert back to such
tobacco product manufacturer twenty-five 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 subsection shall annually certify
to the attorney general that the manufacturer 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 is
not a participating manufacturer under the master settlement
agreement and 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 subsection
shall be subject to all of the following:
(1) Be required within fifteen days to place such funds into
escrow as shall bring the manufacturer into compliance with this
subsection. 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.
(2) In the case of a knowing violation, be required within
fifteen days to place such funds into escrow as shall bring the
manufacturer into compliance with this subsection. 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.
(3) 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.
d. Each failure to make an annual deposit required under this
subsection shall constitute a separate violation. Section History: Recent Form
99 Acts, ch 157, §2, 3; 2001 Acts, ch 18, §3, 4; 2003 Acts, ch
179, §132, 159
Referred to in §453C.1