As Passed by the Senate 1
123rd General Assembly 4
Regular Session Am. Sub. H. B. No. 362 5
1999-2000 6
REPRESENTATIVES COUGHLIN-THOMAS-VAN VYVEN-VESPER-MOTTLEY-JONES- 8
CAREY-WILSON-O'BRIEN-METZGER-WOMER BENJAMIN-BOYD-PERRY-BARRETT- 9
D. MILLER-ROBERTS-DAMSCHRODER-GOODMAN-HOOPS-MEAD-OPFER-TIBERI- 10
JOLIVETTE-MYERS-CALVERT-BUEHRER-ALLEN-GARDNER-HARRIS-OLMAN- 11
WINKLER-BRITTON-DePIERO-SENATORS BLESSING-DRAKE-WATTS- 12
SCHAFRATH-LATTA-OELSLAGER 13
_________________________________________________________________ 15
A B I L L
To amend section 5703.21 and to enact sections 17
1346.01, 1346.02, and 1346.03 of the Revised Code 18
to require a tobacco product manufacturer who 19
sells cigarettes in this state but is not part of 20
a settlement agreement with the Attorney General
to place specified amounts of money into a 21
qualified escrow fund each year to be used to pay
any future judgment or settlement on a claim 22
brought against the manufacturer regarding 23
tobacco products, and to declare an emergency.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 25
Section 1. That section 5703.21 be amended and sections 27
1346.01, 1346.02, and 1346.03 of the Revised Code be enacted to 29
read as follows:
Sec. 1346.01. (A) "ADJUSTED FOR INFLATION" MEANS 31
INCREASED IN ACCORDANCE WITH THE FORMULA FOR INFLATION ADJUSTMENT 32
SET FORTH IN EXHIBIT C TO THE MASTER SETTLEMENT AGREEMENT. 33
(B) "AFFILIATE" MEANS A PERSON WHO DIRECTLY OR INDIRECTLY 35
OWNS OR CONTROLS, IS OWNED OR CONTROLLED BY, OR IS UNDER COMMON 36
OWNERSHIP OR CONTROL WITH, ANOTHER PERSON. SOLELY FOR PURPOSES 37
OF THIS DEFINITION, THE TERMS "OWNS," "IS OWNED" AND "OWNERSHIP" 38
2
MEAN OWNERSHIP OF AN EQUITY INTEREST, OR THE EQUIVALENT THEREOF, 39
OF TEN PER CENT OR MORE, AND THE TERM "PERSON" MEANS AN 40
INDIVIDUAL, PARTNERSHIP, COMMITTEE, ASSOCIATION, CORPORATION OR
ANY OTHER ORGANIZATION OR GROUP OF PERSONS. 41
(C) "ALLOCABLE SHARE" MEANS ALLOCABLE SHARE AS THAT TERM 43
IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 44
(D)(1) "CIGARETTE" MEANS ANY PRODUCT THAT CONTAINS 46
NICOTINE, IS INTENDED TO BE BURNED OR HEATED UNDER ORDINARY 47
CONDITIONS OF USE, AND CONSISTS OF OR CONTAINS ANY OF THE 48
FOLLOWING:
(a) ANY ROLL OF TOBACCO WRAPPED IN PAPER OR IN ANY 50
SUBSTANCE NOT CONTAINING TOBACCO; 51
(b) TOBACCO, IN ANY FORM, THAT IS FUNCTIONAL IN THE 53
PRODUCT, WHICH, BECAUSE OF ITS APPEARANCE, THE TYPE OF TOBACCO 54
USED IN THE FILLER, OR ITS PACKAGING AND LABELING, IS LIKELY TO 55
BE OFFERED TO, OR PURCHASED BY, CONSUMERS AS A CIGARETTE; OR 56
(c) ANY ROLL OF TOBACCO WRAPPED IN ANY SUBSTANCE 58
CONTAINING TOBACCO WHICH, BECAUSE OF ITS APPEARANCE, THE TYPE OF 59
TOBACCO USED IN THE FILLER, OR ITS PACKAGING AND LABELING, IS 60
LIKELY TO BE OFFERED TO, OR PURCHASED BY, CONSUMERS AS A 61
CIGARETTE DESCRIBED IN DIVISION (D)(1)(a) OF THIS SECTION. 62
(2) THE TERM "CIGARETTE" INCLUDES "ROLL-YOUR-OWN" (I.E., 64
ANY TOBACCO WHICH, BECAUSE OF ITS APPEARANCE, TYPE, PACKAGING, OR 65
LABELING IS SUITABLE FOR USE AND LIKELY TO BE OFFERED TO, OR 66
PURCHASED BY, CONSUMERS AS TOBACCO FOR MAKING CIGARETTES). FOR 67
PURPOSES OF THIS DEFINITION OF "CIGARETTE," 0.09 OUNCES OF 68
"ROLL-YOUR-OWN" TOBACCO SHALL CONSTITUTE ONE INDIVIDUAL
"CIGARETTE."
(E) "MASTER SETTLEMENT AGREEMENT" MEANS THE SETTLEMENT 71
AGREEMENT (AND RELATED DOCUMENTS) ENTERED INTO ON NOVEMBER 23, 72
1998 BY THE STATE AND LEADING UNITED STATES TOBACCO PRODUCT 73
MANUFACTURERS.
(F) "QUALIFIED ESCROW FUND" MEANS AN ESCROW ARRANGEMENT 75
WITH A FEDERALLY OR STATE CHARTERED FINANCIAL INSTITUTION HAVING 76
3
NO AFFILIATION WITH ANY TOBACCO PRODUCT MANUFACTURER AND HAVING 77
ASSETS OF AT LEAST ONE BILLION DOLLARS WHERE SUCH ARRANGEMENT 78
REQUIRES THAT SUCH FINANCIAL INSTITUTION HOLD THE ESCROWED FUNDS' 79
PRINCIPAL FOR THE BENEFIT OF RELEASING PARTIES AND PROHIBITS THE 80
TOBACCO PRODUCT MANUFACTURER PLACING THE FUNDS INTO ESCROW FROM 81
USING, ACCESSING OR DIRECTING THE USE OF THE FUNDS' PRINCIPAL
EXCEPT AS CONSISTENT WITH SECTION 1346.02 OF THE REVISED CODE. 82
(G) "RELEASED CLAIMS" MEANS RELEASED CLAIMS AS THAT TERM 84
IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 85
(H) "RELEASING PARTIES" MEANS RELEASING PARTIES AS THAT 87
TERM IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 88
(I)(1) "TOBACCO PRODUCT MANUFACTURER" MEANS AN ENTITY THAT 90
AFTER THE EFFECTIVE DATE OF THIS SECTION DIRECTLY (AND NOT 91
EXCLUSIVELY THROUGH ANY AFFILIATE): 92
(a) MANUFACTURES CIGARETTES ANYWHERE THAT SUCH 94
MANUFACTURER INTENDS TO BE SOLD IN THE UNITED STATES, INCLUDING 95
CIGARETTES INTENDED TO BE SOLD IN THE UNITED STATES THROUGH AN 97
IMPORTER (EXCEPT WHERE SUCH IMPORTER IS AN ORIGINAL PARTICIPATING
MANUFACTURER (AS THAT TERM IS DEFINED IN THE MASTER SETTLEMENT 99
AGREEMENT) THAT WILL BE RESPONSIBLE FOR THE PAYMENTS UNDER THE 100
MASTER SETTLEMENT AGREEMENT WITH RESPECT TO SUCH CIGARETTES AS A 101
RESULT OF THE PROVISIONS OF SUBSECTIONS II(mm) OF THE MASTER 103
SETTLEMENT AGREEMENT AND THAT PAYS THE TAXES SPECIFIED IN 104
SUBSECTION II(z) OF THE MASTER SETTLEMENT AGREEMENT, AND PROVIDED 105
THAT THE MANUFACTURER OF SUCH CIGARETTES DOES NOT MARKET OR 106
ADVERTISE SUCH CIGARETTES IN THE UNITED STATES); 107
(b) IS THE FIRST PURCHASER ANYWHERE FOR RESALE IN THE 110
UNITED STATES OF CIGARETTES MANUFACTURED ANYWHERE THAT THE
MANUFACTURER DOES NOT INTEND TO BE SOLD IN THE UNITED STATES; OR 112
(c) BECOMES A SUCCESSOR OF AN ENTITY DESCRIBED IN DIVISION 114
(I)(1)(a) OR (b) OF THIS SECTION. 115
(2) THE TERM "TOBACCO PRODUCT MANUFACTURER" SHALL NOT 117
INCLUDE AN AFFILIATE OF A TOBACCO PRODUCT MANUFACTURER UNLESS 118
SUCH AFFILIATE ITSELF FALLS WITHIN ANY OF DIVISION (I)(1)(a), 119
4
(b), OR (c) OF THIS SECTION. 120
(J) "UNITS SOLD" MEANS THE NUMBER OF INDIVIDUAL CIGARETTES 122
SOLD IN THE STATE BY THE APPLICABLE TOBACCO PRODUCT MANUFACTURER 123
(WHETHER DIRECTLY OR THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR 124
INTERMEDIARY OR INTERMEDIARIES) DURING THE YEAR IN QUESTION, AS 125
MEASURED BY EXCISE TAXES COLLECTED BY THE STATE ON PACKS (OR 126
"ROLL-YOUR-OWN" TOBACCO CONTAINERS) BEARING THE EXCISE TAX STAMP 127
OF THE STATE. THE DEPARTMENT OF TAXATION SHALL PROMULGATE SUCH
REGULATIONS AS ARE NECESSARY TO ASCERTAIN THE AMOUNT OF STATE 128
EXCISE TAX PAID ON THE CIGARETTES OF SUCH TOBACCO PRODUCT 129
MANUFACTURER FOR EACH YEAR.
Sec. 1346.02. ANY TOBACCO PRODUCT MANUFACTURER SELLING 131
CIGARETTES TO CONSUMERS WITHIN THE STATE (WHETHER DIRECTLY OR 132
THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR INTERMEDIARY OR 134
INTERMEDIARIES) AFTER THE EFFECTIVE DATE OF THIS SECTION SHALL DO 135
ONE OF THE FOLLOWING:
(A) BECOME A PARTICIPATING MANUFACTURER (AS THAT TERM IS 137
DEFINED IN SECTION II(jj) OF THE MASTER SETTLEMENT AGREEMENT) AND 140
GENERALLY PERFORM ITS FINANCIAL OBLIGATIONS UNDER THE MASTER 141
SETTLEMENT AGREEMENT; OR
(B)(1) PLACE INTO A QUALIFIED ESCROW FUND BY APRIL 15 OF 143
THE YEAR FOLLOWING THE YEAR IN QUESTION THE FOLLOWING AMOUNTS (AS 144
SUCH AMOUNTS ARE ADJUSTED FOR INFLATION): 145
1999: $.0094241 PER UNIT SOLD AFTER THE EFFECTIVE DATE OF 147
THIS SECTION;
2000: $.0104712 PER UNIT SOLD; 149
FOR EACH OF 2001 AND 2002: $.0136125 PER UNIT SOLD; 151
FOR EACH OF 2003 THROUGH 2006: $.0167539 PER UNIT SOLD; 153
FOR EACH OF 2007 AND EACH YEAR THEREAFTER: $.0188482 PER 155
UNIT SOLD.
(2) A TOBACCO PRODUCT MANUFACTURER THAT PLACES FUNDS INTO 157
ESCROW PURSUANT TO DIVISION (B)(1) OF THIS SECTION SHALL RECEIVE 158
THE INTEREST OR OTHER APPRECIATION ON SUCH FUNDS AS EARNED. SUCH 159
FUNDS THEMSELVES SHALL BE RELEASED FROM ESCROW ONLY UNDER THE 160
5
FOLLOWING CIRCUMSTANCES:
(a) TO PAY A JUDGMENT OR SETTLEMENT ON ANY RELEASED CLAIM 162
BROUGHT AGAINST SUCH TOBACCO PRODUCT MANUFACTURER BY THE STATE OR 163
ANY RELEASING PARTY LOCATED OR RESIDING IN THE STATE. FUNDS 164
SHALL BE RELEASED FROM ESCROW UNDER DIVISION (B)(2)(a) OF THIS 165
SECTION:
(i) IN THE ORDER IN WHICH THEY WERE PLACED INTO ESCROW; 167
AND
(ii) ONLY TO THE EXTENT AND AT THE TIME NECESSARY TO MAKE 169
PAYMENTS REQUIRED UNDER SUCH JUDGMENT OR SETTLEMENT. 170
(b) TO THE EXTENT THAT A TOBACCO PRODUCT MANUFACTURER 172
ESTABLISHES THAT THE AMOUNT IT WAS REQUIRED TO PLACE INTO ESCROW 173
IN A PARTICULAR YEAR WAS GREATER THAN THE STATE'S ALLOCABLE SHARE 174
OF THE TOTAL PAYMENTS THAT SUCH MANUFACTURER WOULD HAVE BEEN 175
REQUIRED TO MAKE IN THAT YEAR UNDER THE MASTER SETTLEMENT 176
AGREEMENT (AS DETERMINED PURSUANT TO SECTION IX(i)(2) OF THE 177
MASTER SETTLEMENT AGREEMENT, AND BEFORE ANY OF THE ADJUSTMENTS OR 178
OFFSETS DESCRIBED IN SECTION IX(i)(3) OF THAT AGREEMENT OTHER THE 180
THE INFLATION ADJUSTMENT) HAD IT BEEN A PARTICIPATING 181
MANUFACTURER, THE EXCESS SHALL BE RELEASED FROM ESCROW AND REVERT 182
BACK TO SUCH TOBACCO PRODUCT MANUFACTURER; OR
(c) TO THE EXTENT NOT RELEASED FROM ESCROW UNDER DIVISION 184
(B)(2)(a) OR (b) OF THIS SECTION, FUNDS SHALL BE RELEASED FROM 186
ESCROW AND REVERT BACK TO SUCH TOBACCO PRODUCT MANUFACTURER 187
TWENTY-FIVE YEARS AFTER THE DATE ON WHICH THEY WERE PLACED INTO
ESCROW. 188
(3) EACH TOBACCO PRODUCT MANUFACTURER THAT ELECTS TO PLACE 190
FUNDS INTO ESCROW PURSUANT TO DIVISION (B) OF THIS SECTION SHALL 191
ANNUALLY CERTIFY TO THE ATTORNEY GENERAL THAT IT IS IN COMPLIANCE 192
WITH DIVISION (B) OF THIS SECTION. THE ATTORNEY GENERAL MAY 193
BRING A CIVIL ACTION ON BEHALF OF THE STATE AGAINST ANY TOBACCO 194
PRODUCT MANUFACTURER THAT FAILS TO PLACE INTO ESCROW THE FUNDS 195
REQUIRED UNDER THIS SECTION. ANY TOBACCO PRODUCT MANUFACTURER 196
THAT FAILS IN ANY YEAR TO PLACE INTO ESCROW THE FUNDS REQUIRED
6
UNDER THIS SECTION SHALL: 197
(a) BE REQUIRED WITHIN FIFTEEN DAYS TO PLACE SUCH FUNDS 199
INTO ESCROW AS SHALL BRING IT INTO COMPLIANCE WITH THIS SECTION. 200
THE COURT, UPON A FINDING OF A VIOLATION OF DIVISION (B) OF THIS 201
SECTION, MAY IMPOSE A CIVIL PENALTY TO BE PAID TO THE GENERAL 202
REVENUE FUND OF THE STATE IN AN AMOUNT NOT TO EXCEED FIVE PER 203
CENT OF THE AMOUNT IMPROPERLY WITHHELD FROM ESCROW PER DAY OF THE 204
VIOLATION AND IN A TOTAL AMOUNT NOT TO EXCEED ONE HUNDRED PER
CENT OF THE ORIGINAL AMOUNT IMPROPERLY WITHHELD FROM ESCROW; 205
(b) IN THE CASE OF A KNOWING VIOLATION, BE REQUIRED WITHIN 207
FIFTEEN DAYS TO PLACE SUCH FUNDS INTO ESCROW AS SHALL BRING IT 208
INTO COMPLIANCE WITH THIS SECTION. THE COURT, UPON A FINDING OF 209
A KNOWING VIOLATION OF DIVISION (B) OF THIS SECTION, MAY IMPOSE A 210
CIVIL PENALTY TO BE PAID TO THE GENERAL REVENUE FUND OF THE STATE 212
IN AN AMOUNT NOT TO EXCEED FIFTEEN PER CENT OF THE AMOUNT
IMPROPERLY WITHHELD FROM ESCROW PER DAY OF THE VIOLATION AND IN A 213
TOTAL AMOUNT NOT TO EXCEED THREE HUNDRED PER CENT OF THE ORIGINAL 214
AMOUNT IMPROPERLY WITHHELD FROM ESCROW; AND 215
(c) IN THE CASE OF A SECOND KNOWING VIOLATION, BE 217
PROHIBITED FROM SELLING CIGARETTES TO CONSUMERS WITHIN THE STATE 218
(WHETHER DIRECTLY OR THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR 219
INTERMEDIARY) FOR A PERIOD NOT TO EXCEED TWO YEARS. 220
EACH FAILURE TO MAKE AN ANNUAL DEPOSIT REQUIRED UNDER THIS 222
SECTION SHALL CONSTITUTE A SEPARATE VIOLATION. 223
Sec. 1346.03. ANY INFORMATION PROVIDED TO THE ATTORNEY 225
GENERAL BY THE DEPARTMENT OF TAXATION IN ACCORDANCE WITH DIVISION 226
(G) OF SECTION 5703.21 OF THE REVISED CODE SHALL NOT BE DISCLOSED 227
PUBLICLY BY THE ATTORNEY GENERAL EXCEPT WHEN IT IS NECESSARY TO 228
FACILITATE COMPLIANCE WITH AND ENFORCEMENT OF SECTION 1346.01 OR 229
1346.02 OF THE REVISED CODE. 230
Sec. 5703.21. (A) Except as provided in divisions (B), 239
(C), (D), (E), and (F), AND (G) of this section, no agent of the 242
department of taxation, except in the agent's report to the 243
department or when called on to testify in any court or 244
7
proceeding, shall divulge any information acquired by the agent 245
as to the transactions, property, or business of any person while 246
acting or claiming to act under orders of the department. 247
Whoever violates this provision shall thereafter be disqualified 248
from acting as an officer or employee or in any other capacity 249
under appointment or employment of the department.
(B)(1) For purposes of an audit pursuant to section 117.15 251
of the Revised Code, or an audit of the department pursuant to 252
Chapter 117. of the Revised Code, or an audit, pursuant to such 253
chapter, the objective of which is to express an opinion on a 254
financial report or statement prepared or issued pursuant to 255
division (G) or (I) of section 126.21 of the Revised Code, the 256
officers and employees of the auditor of state charged with 257
conducting the audit shall have access to and the right to 258
examine any state tax returns and state tax return information in 259
the possession of the department to the extent that such access 260
and examination are necessary for purposes of the audit. Any 261
information acquired as the result of such access and examination 262
shall not be divulged for any purpose other than as required for 263
such audit or unless the officers and employees are required to 264
testify in a court or proceeding under compulsion of legal 265
process. Whoever violates this provision shall thereafter be 266
disqualified from acting as an officer or employee or in any 267
other capacity under appointment or employment of the auditor of 268
state. 269
(2) As provided by section 6103(d)(2) of the Internal 271
Revenue Code, any federal tax returns or federal tax information 272
which THAT the department has acquired from the internal revenue 273
service, through federal and state statutory authority, may be 274
disclosed to the auditor of state solely for purposes of an audit 275
of the department. 276
(C) Division (A) of this section does not prohibit 278
divulging information contained in applications, complaints, and 279
related documents filed with the department under section 5715.27 280
8
of the Revised Code, or in applications filed with the department 281
under section 5715.39 of the Revised Code. 282
(D) Division (A) of this section does not prohibit the 284
department of taxation providing information to the division of 285
child support within the department of human services, or a child 286
support enforcement agency, pursuant to division (G)(2) of 287
section 5101.31 of the Revised Code.
(E) Division (A) of this section does not prohibit the 290
disclosure to the board of motor vehicle collision repair 291
registration of any information in the possession of the 292
department that is necessary for the board to verify the 294
existence of an applicant's valid vendor's license and current 295
state tax identification number under section 4775.07 of the
Revised Code. 296
(F) Division (A) of this section does not prohibit the 298
department from providing information to the administrator of 299
workers' compensation pursuant to section 4123.591 of the Revised 300
Code.
(G) DIVISION (A) OF THIS SECTION DOES NOT PROHIBIT THE 302
DEPARTMENT OF TAXATION FROM PROVIDING TO THE ATTORNEY GENERAL 304
INFORMATION THE DEPARTMENT OBTAINS UNDER DIVISION (J) OF SECTION 305
1346.01 OF THE REVISED CODE. 306
Section 2. That existing section 5703.21 of the Revised 310
Code is hereby repealed.
Section 3. Section 5703.21 of the Revised Code is amended 312
by this act and also by Sub. H.B. 180 of the 123rd General 313
Assembly (effective August 6, 1999). The amendments of Sub. H.B. 314
180 are included in this act in lower case to confirm the 315
intention to retain them, but are not intended to be effective
until August 6, 1999. 316
Section 4. Section 1 of this act enacts the Model Statute 319
described in Exhibit T to the Master Settlement Agreement entered 320
into between leading tobacco manufacturers and state attorney 321
generals on November 23, 1998.
9
Section 5. This act is hereby declared to be an emergency 323
measure necessary for the immediate preservation of the public 324
peace, health, and safety. The reason for such necessity is to 325
ensure that the state's financial and public health benefits 326
under the Master Tobacco Settlement Agreement of 1998 are not
subject to reduction. Therefore, this act shall go into 327
immediate effect.