IC 24-3-3
Chapter 3. Qualified Escrow Fund for Tobacco Product
Manufacturers
IC 24-3-3-1 Findings regarding cigarette smoking
Sec. 1. The General Assembly makes the following findings:
(1) Cigarette smoking presents serious public health concerns
to the state and to the citizens of Indiana. The Surgeon General
has determined that smoking causes lung cancer, heart disease,
and other serious diseases, and that there are hundreds of
thousands of tobacco related deaths in the United States each
year. These diseases most often do not appear until many years
after the person in question begins smoking.
(2) Cigarette smoking also presents serious financial concerns
for the state. Under certain health care programs, the state may
have a legal obligation to provide medical assistance to eligible
persons for health conditions associated with cigarette smoking,
and those persons may have a legal entitlement to receive such
medical assistance.
(3) Under these programs, the state pays millions of dollars
each year to provide medical assistance for these persons for
health conditions associated with cigarette smoking.
(4) It is the policy of the state that financial burdens imposed on
the state by cigarette smoking be borne by tobacco product
manufacturers rather than by the state to the extent that such
manufacturers either determine to enter into a settlement with
the state or are found culpable by the courts.
(5) On November 23, 1998, leading United States tobacco
product manufacturers entered into a settlement agreement,
entitled the "Master Settlement Agreement", with the state. The
Master Settlement Agreement obligates these manufacturers, in
return for a release of past, present, and certain future claims
against them as described in the Master Settlement Agreement,
to:
(A) pay substantial sums to the state (tied in part to their
volume of sales);
(B) fund a national foundation devoted to the interests of
public health; and
(C) make substantial changes in their advertising and
marketing practices and corporate culture, with the intention
of reducing underage smoking.
(6) It would be contrary to the policy of the state if tobacco
product manufacturers who determine not to enter into such a
settlement could use a resulting cost advantage to derive large,
short term profits in the years before liability may arise without
ensuring that the state will have an eventual source of recovery
from them if they are proven to have acted culpably. It is thus
in the interest of the state to require that such manufacturers
establish a reserve fund to guarantee a source of compensation
and to prevent such manufacturers from deriving large, short
term profits and then becoming judgment proof before liability
may arise. As added by P.L.223-1999, SEC.1.
IC 24-3-3-2 "Adjusted for inflation" defined
Sec. 2. As used in this chapter, "adjusted for inflation" means
increased in accordance with the formula for inflation adjustment set
forth in Exhibit C to the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-3 "Affiliate" defined
Sec. 3. As used in this chapter, "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 (10%) or more, and the term "person" means
an individual, partnership, committee, association, corporation, or
any other organization or group of persons. As added by P.L.223-1999, SEC.1.
IC 24-3-3-4 "Allocable share" defined
Sec. 4. As used in this chapter, "allocable share" means Allocable
Share as that term is defined in the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-5 "Cigarette" defined
Sec. 5. As used in this chapter, "cigarette" means any product that
contains nicotine, is intended to be burned or heated under ordinary
conditions of use, and consists of or contains:
(1) any roll of tobacco wrapped in paper or in any substance not
containing tobacco;
(2) 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; or
(3) 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 subdivision (1).
The term "cigarette" includes "roll-your-own" tobacco (i.e., any
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", nine-hundredths (0.09) of an ounce of
"roll-your-own" tobacco constitutes one (1) individual "cigarette". As added by P.L.223-1999, SEC.1.
IC 24-3-3-6 "Master Settlement Agreement" defined
Sec. 6. As used in this chapter, "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. As added by P.L.223-1999, SEC.1.
IC 24-3-3-7 "Qualified escrow fund" defined
Sec. 7. As used in this chapter, "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
($1,000,000,000) where the arrangement requires that the financial
institution hold the escrowed fund's 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 fund's principal except as consistent with this chapter. As added by P.L.223-1999, SEC.1.
IC 24-3-3-8 "Released claims" defined
Sec. 8. As used in this chapter, "released claims" means Released
Claims as that term is defined in the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-9 "Releasing parties" defined
Sec. 9. As used in this chapter, "releasing parties" means
Releasing Parties as that term is defined in the Master Settlement
Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-10 "Tobacco product manufacturer" defined
Sec. 10. As used in this chapter, "tobacco product manufacturer"
means an entity that after June 30, 1999, directly (and not exclusively
through any affiliate):
(1) 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);
(2) 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; or
(3) becomes a successor of an entity described in subdivision
(1) or (2).
The term "tobacco product manufacturer" does not include an
affiliate of a tobacco product manufacturer unless the affiliate itself
falls within subdivision (1), (2), or (3). As added by P.L.223-1999, SEC.1.
IC 24-3-3-11 "Units sold" defined
Sec. 11. As used in this chapter, "units sold" means the number of
individual cigarettes sold in Indiana 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
(or "roll-your-own" tobacco containers) bearing the excise tax stamp
of the state. The department of state revenue shall, in the manner
provided by IC 4-22-2, adopt rules that are necessary to ascertain the
amount of state excise tax paid on the cigarettes of such tobacco
product manufacturer for each year. As added by P.L.223-1999, SEC.1.
IC 24-3-3-12 Tobacco product manufacturers required to become participating
manufacturer or place money in qualified escrow fund
Sec. 12. Any tobacco product manufacturer selling cigarettes to
consumers within Indiana (whether directly or through a distributor,
retailer, or similar intermediary or intermediaries) after June 30,
1999, shall do one (1) 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; or
(2) 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):
(A) 1999, $0.0094241 per unit sold after June 30, 1999.
(B) 2000, $0.0104712 per unit sold.
(C) For each of 2001 and 2002, $0.0136125 per unit sold.
(D) For each of 2003 through 2006, $0.0167539 per unit
sold.
(E) For each of 2007 and each year thereafter, $0.0188482
per unit sold.
As added by P.L.223-1999, SEC.1.
IC 24-3-3-13 Interest paid and release of escrow funds; severability
Sec. 13. (a) Subsection (b) applies unless and until all or any part
of subsection (b) is held to be unconstitutional or otherwise
unenforceable. If all or any part of subsection (b) or the application
of all or any part of subsection (b) to a person, an entity, or a
circumstance is held to be unconstitutional or invalid by a court, the
unconstitutionality or invalidity does not affect other provisions of
this chapter, and subsection (c) controls. Subsection (c) applies
unless and until all or any part of subsection (c) is held to be
unconstitutional or otherwise unenforceable. If all or any part of
subsection (c) or the application of all or any part of subsection (c)
to a person, an entity, or a circumstance is held to be unconstitutional
or invalid by a court, the unconstitutionality or invalidity does not
affect other provisions of this chapter, and subsection (d) controls.
(b) A tobacco product manufacturer that places funds into escrow
under section 12(2) of this chapter shall receive the interest or other
appreciation on such funds as earned. The funds shall be released
from escrow only under the following circumstances:
(1) To pay a judgment or settlement on any released claim
brought against the tobacco product manufacturer by the state
or any releasing party located or residing in Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent that a tobacco product manufacturer
establishes that the amount the tobacco product manufacturer is
required to place in escrow on account of units sold in Indiana
in a particular year exceeds the master settlement agreement
payments the tobacco product manufacturer would have been
required to make on account of units sold in Indiana if the
tobacco product manufacturer were a participating
manufacturer, as determined under section IX(i) of the master
settlement agreement and after final determination of all
adjustments, the excess payments shall be released from escrow
and shall revert to the tobacco product manufacturer.
(3) To the extent not released from escrow under subdivision
(1) or (2), funds shall be released from escrow and revert back
to the tobacco product manufacturer twenty-five (25) years after
the date on which the funds were placed into escrow.
(c) This subsection applies only if subsection (b) is held to be
unconstitutional or otherwise unenforceable. A tobacco product
manufacturer that places funds into escrow under section 12(2) of
this chapter shall receive the interest or other appreciation on the
funds as earned. The funds shall be released from escrow only under
the following circumstances:
(1) To pay a judgment or settlement on any released claim
brought against the tobacco product manufacturer by the state
or any releasing party located or residing in Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent not released from escrow under subdivision
(1), funds shall be released from escrow and revert back to the
tobacco product manufacturer twenty-five (25) years after the
date on which the funds were placed into escrow.
(d) This subsection applies only if subsections (b) and (c) are held
to be unconstitutional or otherwise unenforceable. A tobacco product
manufacturer that places funds into escrow under section 12(2) of
this chapter shall receive the interest or other appreciation on such
funds as earned. Such funds themselves shall be released from
escrow only under 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 Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent that a tobacco product manufacturer
establishes that the amount it was required to place into escrow
in a particular year was greater than the state's allocable share
of the total payments that the manufacturer would have been
required to make in that year under the Master Settlement
Agreement (as determined pursuant to section IX(i)(2) of the
Master Settlement Agreement, and before any of the
adjustments or offsets described in section IX(i)(3) of that
Agreement other than the Inflation Adjustment) had it been a
participating manufacturer, the excess shall be released from
escrow and revert back to the tobacco product manufacturer.
(3) To the extent not released from escrow under subdivision
(1) or (2), funds shall be released from escrow and revert back
to such tobacco product manufacturer twenty-five (25) years
after the date on which the funds were placed into escrow. As added by P.L.223-1999, SEC.1. Amended by P.L.252-2003,
SEC.15.
IC 24-3-3-14 Certification of compliance with chapter; failure to make annual
deposit
Sec. 14. (a) Each tobacco product manufacturer that elects to
place funds into escrow under section 12(2) of this chapter shall
annually certify to the attorney general that it is in compliance with
this chapter. The attorney general may bring a civil action on behalf
of the state against any tobacco product manufacturer that fails to
place into escrow the funds required under section 12 and section 13
of this chapter. Any tobacco product manufacturer that fails in any
year to place into escrow the funds required under section 12(2) of
this chapter shall:
(1) Be required within fifteen (15) days to place sufficient funds
into escrow to bring it into compliance with this chapter. The
court, upon a finding of a violation of section 12(2) of this
chapter, may also impose a civil penalty to be paid to the state
general fund in an amount not to exceed five percent (5%) of
the amount improperly withheld from escrow per day of the
violation and in a total amount not to exceed one hundred
percent (100%) of the original amount improperly withheld
from escrow.
(2) In the case of a knowing violation, be required within fifteen
(15) days to place sufficient funds into escrow to bring it into
compliance with section 12(2) of this chapter. The court, upon
a finding of a knowing violation of section 12(2) of this chapter,
may also impose a civil penalty to be paid to the state general
fund in an amount not to exceed fifteen percent (15%) of the
amount improperly withheld from escrow per day of the
violation and in a total amount not to exceed three hundred
percent (300%) 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 Indiana (whether
directly or through a distributor, retailer or similar
intermediary) for a period not to exceed two (2) years.
(b) Each failure to make an annual deposit required under section
12(2) of this chapter constitutes a separate violation. As added by P.L.223-1999, SEC.1.
IC 24-3-3
Chapter 3. Qualified Escrow Fund for Tobacco Product
Manufacturers
IC 24-3-3-1 Findings regarding cigarette smoking
Sec. 1. The General Assembly makes the following findings:
(1) Cigarette smoking presents serious public health concerns
to the state and to the citizens of Indiana. The Surgeon General
has determined that smoking causes lung cancer, heart disease,
and other serious diseases, and that there are hundreds of
thousands of tobacco related deaths in the United States each
year. These diseases most often do not appear until many years
after the person in question begins smoking.
(2) Cigarette smoking also presents serious financial concerns
for the state. Under certain health care programs, the state may
have a legal obligation to provide medical assistance to eligible
persons for health conditions associated with cigarette smoking,
and those persons may have a legal entitlement to receive such
medical assistance.
(3) Under these programs, the state pays millions of dollars
each year to provide medical assistance for these persons for
health conditions associated with cigarette smoking.
(4) It is the policy of the state that financial burdens imposed on
the state by cigarette smoking be borne by tobacco product
manufacturers rather than by the state to the extent that such
manufacturers either determine to enter into a settlement with
the state or are found culpable by the courts.
(5) On November 23, 1998, leading United States tobacco
product manufacturers entered into a settlement agreement,
entitled the "Master Settlement Agreement", with the state. The
Master Settlement Agreement obligates these manufacturers, in
return for a release of past, present, and certain future claims
against them as described in the Master Settlement Agreement,
to:
(A) pay substantial sums to the state (tied in part to their
volume of sales);
(B) fund a national foundation devoted to the interests of
public health; and
(C) make substantial changes in their advertising and
marketing practices and corporate culture, with the intention
of reducing underage smoking.
(6) It would be contrary to the policy of the state if tobacco
product manufacturers who determine not to enter into such a
settlement could use a resulting cost advantage to derive large,
short term profits in the years before liability may arise without
ensuring that the state will have an eventual source of recovery
from them if they are proven to have acted culpably. It is thus
in the interest of the state to require that such manufacturers
establish a reserve fund to guarantee a source of compensation
and to prevent such manufacturers from deriving large, short
term profits and then becoming judgment proof before liability
may arise. As added by P.L.223-1999, SEC.1.
IC 24-3-3-2 "Adjusted for inflation" defined
Sec. 2. As used in this chapter, "adjusted for inflation" means
increased in accordance with the formula for inflation adjustment set
forth in Exhibit C to the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-3 "Affiliate" defined
Sec. 3. As used in this chapter, "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 (10%) or more, and the term "person" means
an individual, partnership, committee, association, corporation, or
any other organization or group of persons. As added by P.L.223-1999, SEC.1.
IC 24-3-3-4 "Allocable share" defined
Sec. 4. As used in this chapter, "allocable share" means Allocable
Share as that term is defined in the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-5 "Cigarette" defined
Sec. 5. As used in this chapter, "cigarette" means any product that
contains nicotine, is intended to be burned or heated under ordinary
conditions of use, and consists of or contains:
(1) any roll of tobacco wrapped in paper or in any substance not
containing tobacco;
(2) 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; or
(3) 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 subdivision (1).
The term "cigarette" includes "roll-your-own" tobacco (i.e., any
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", nine-hundredths (0.09) of an ounce of
"roll-your-own" tobacco constitutes one (1) individual "cigarette". As added by P.L.223-1999, SEC.1.
IC 24-3-3-6 "Master Settlement Agreement" defined
Sec. 6. As used in this chapter, "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. As added by P.L.223-1999, SEC.1.
IC 24-3-3-7 "Qualified escrow fund" defined
Sec. 7. As used in this chapter, "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
($1,000,000,000) where the arrangement requires that the financial
institution hold the escrowed fund's 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 fund's principal except as consistent with this chapter. As added by P.L.223-1999, SEC.1.
IC 24-3-3-8 "Released claims" defined
Sec. 8. As used in this chapter, "released claims" means Released
Claims as that term is defined in the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-9 "Releasing parties" defined
Sec. 9. As used in this chapter, "releasing parties" means
Releasing Parties as that term is defined in the Master Settlement
Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-10 "Tobacco product manufacturer" defined
Sec. 10. As used in this chapter, "tobacco product manufacturer"
means an entity that after June 30, 1999, directly (and not exclusively
through any affiliate):
(1) 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);
(2) 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; or
(3) becomes a successor of an entity described in subdivision
(1) or (2).
The term "tobacco product manufacturer" does not include an
affiliate of a tobacco product manufacturer unless the affiliate itself
falls within subdivision (1), (2), or (3). As added by P.L.223-1999, SEC.1.
IC 24-3-3-11 "Units sold" defined
Sec. 11. As used in this chapter, "units sold" means the number of
individual cigarettes sold in Indiana 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
(or "roll-your-own" tobacco containers) bearing the excise tax stamp
of the state. The department of state revenue shall, in the manner
provided by IC 4-22-2, adopt rules that are necessary to ascertain the
amount of state excise tax paid on the cigarettes of such tobacco
product manufacturer for each year. As added by P.L.223-1999, SEC.1.
IC 24-3-3-12 Tobacco product manufacturers required to become participating
manufacturer or place money in qualified escrow fund
Sec. 12. Any tobacco product manufacturer selling cigarettes to
consumers within Indiana (whether directly or through a distributor,
retailer, or similar intermediary or intermediaries) after June 30,
1999, shall do one (1) 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; or
(2) 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):
(A) 1999, $0.0094241 per unit sold after June 30, 1999.
(B) 2000, $0.0104712 per unit sold.
(C) For each of 2001 and 2002, $0.0136125 per unit sold.
(D) For each of 2003 through 2006, $0.0167539 per unit
sold.
(E) For each of 2007 and each year thereafter, $0.0188482
per unit sold.
As added by P.L.223-1999, SEC.1.
IC 24-3-3-13 Interest paid and release of escrow funds; severability
Sec. 13. (a) Subsection (b) applies unless and until all or any part
of subsection (b) is held to be unconstitutional or otherwise
unenforceable. If all or any part of subsection (b) or the application
of all or any part of subsection (b) to a person, an entity, or a
circumstance is held to be unconstitutional or invalid by a court, the
unconstitutionality or invalidity does not affect other provisions of
this chapter, and subsection (c) controls. Subsection (c) applies
unless and until all or any part of subsection (c) is held to be
unconstitutional or otherwise unenforceable. If all or any part of
subsection (c) or the application of all or any part of subsection (c)
to a person, an entity, or a circumstance is held to be unconstitutional
or invalid by a court, the unconstitutionality or invalidity does not
affect other provisions of this chapter, and subsection (d) controls.
(b) A tobacco product manufacturer that places funds into escrow
under section 12(2) of this chapter shall receive the interest or other
appreciation on such funds as earned. The funds shall be released
from escrow only under the following circumstances:
(1) To pay a judgment or settlement on any released claim
brought against the tobacco product manufacturer by the state
or any releasing party located or residing in Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent that a tobacco product manufacturer
establishes that the amount the tobacco product manufacturer is
required to place in escrow on account of units sold in Indiana
in a particular year exceeds the master settlement agreement
payments the tobacco product manufacturer would have been
required to make on account of units sold in Indiana if the
tobacco product manufacturer were a participating
manufacturer, as determined under section IX(i) of the master
settlement agreement and after final determination of all
adjustments, the excess payments shall be released from escrow
and shall revert to the tobacco product manufacturer.
(3) To the extent not released from escrow under subdivision
(1) or (2), funds shall be released from escrow and revert back
to the tobacco product manufacturer twenty-five (25) years after
the date on which the funds were placed into escrow.
(c) This subsection applies only if subsection (b) is held to be
unconstitutional or otherwise unenforceable. A tobacco product
manufacturer that places funds into escrow under section 12(2) of
this chapter shall receive the interest or other appreciation on the
funds as earned. The funds shall be released from escrow only under
the following circumstances:
(1) To pay a judgment or settlement on any released claim
brought against the tobacco product manufacturer by the state
or any releasing party located or residing in Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent not released from escrow under subdivision
(1), funds shall be released from escrow and revert back to the
tobacco product manufacturer twenty-five (25) years after the
date on which the funds were placed into escrow.
(d) This subsection applies only if subsections (b) and (c) are held
to be unconstitutional or otherwise unenforceable. A tobacco product
manufacturer that places funds into escrow under section 12(2) of
this chapter shall receive the interest or other appreciation on such
funds as earned. Such funds themselves shall be released from
escrow only under 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 Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent that a tobacco product manufacturer
establishes that the amount it was required to place into escrow
in a particular year was greater than the state's allocable share
of the total payments that the manufacturer would have been
required to make in that year under the Master Settlement
Agreement (as determined pursuant to section IX(i)(2) of the
Master Settlement Agreement, and before any of the
adjustments or offsets described in section IX(i)(3) of that
Agreement other than the Inflation Adjustment) had it been a
participating manufacturer, the excess shall be released from
escrow and revert back to the tobacco product manufacturer.
(3) To the extent not released from escrow under subdivision
(1) or (2), funds shall be released from escrow and revert back
to such tobacco product manufacturer twenty-five (25) years
after the date on which the funds were placed into escrow. As added by P.L.223-1999, SEC.1. Amended by P.L.252-2003,
SEC.15.
IC 24-3-3-14 Certification of compliance with chapter; failure to make annual
deposit
Sec. 14. (a) Each tobacco product manufacturer that elects to
place funds into escrow under section 12(2) of this chapter shall
annually certify to the attorney general that it is in compliance with
this chapter. The attorney general may bring a civil action on behalf
of the state against any tobacco product manufacturer that fails to
place into escrow the funds required under section 12 and section 13
of this chapter. Any tobacco product manufacturer that fails in any
year to place into escrow the funds required under section 12(2) of
this chapter shall:
(1) Be required within fifteen (15) days to place sufficient funds
into escrow to bring it into compliance with this chapter. The
court, upon a finding of a violation of section 12(2) of this
chapter, may also impose a civil penalty to be paid to the state
general fund in an amount not to exceed five percent (5%) of
the amount improperly withheld from escrow per day of the
violation and in a total amount not to exceed one hundred
percent (100%) of the original amount improperly withheld
from escrow.
(2) In the case of a knowing violation, be required within fifteen
(15) days to place sufficient funds into escrow to bring it into
compliance with section 12(2) of this chapter. The court, upon
a finding of a knowing violation of section 12(2) of this chapter,
may also impose a civil penalty to be paid to the state general
fund in an amount not to exceed fifteen percent (15%) of the
amount improperly withheld from escrow per day of the
violation and in a total amount not to exceed three hundred
percent (300%) 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 Indiana (whether
directly or through a distributor, retailer or similar
intermediary) for a period not to exceed two (2) years.
(b) Each failure to make an annual deposit required under section
12(2) of this chapter constitutes a separate violation. As added by P.L.223-1999, SEC.1.
IC 24-3-3
Chapter 3. Qualified Escrow Fund for Tobacco Product
Manufacturers
IC 24-3-3-1 Findings regarding cigarette smoking
Sec. 1. The General Assembly makes the following findings:
(1) Cigarette smoking presents serious public health concerns
to the state and to the citizens of Indiana. The Surgeon General
has determined that smoking causes lung cancer, heart disease,
and other serious diseases, and that there are hundreds of
thousands of tobacco related deaths in the United States each
year. These diseases most often do not appear until many years
after the person in question begins smoking.
(2) Cigarette smoking also presents serious financial concerns
for the state. Under certain health care programs, the state may
have a legal obligation to provide medical assistance to eligible
persons for health conditions associated with cigarette smoking,
and those persons may have a legal entitlement to receive such
medical assistance.
(3) Under these programs, the state pays millions of dollars
each year to provide medical assistance for these persons for
health conditions associated with cigarette smoking.
(4) It is the policy of the state that financial burdens imposed on
the state by cigarette smoking be borne by tobacco product
manufacturers rather than by the state to the extent that such
manufacturers either determine to enter into a settlement with
the state or are found culpable by the courts.
(5) On November 23, 1998, leading United States tobacco
product manufacturers entered into a settlement agreement,
entitled the "Master Settlement Agreement", with the state. The
Master Settlement Agreement obligates these manufacturers, in
return for a release of past, present, and certain future claims
against them as described in the Master Settlement Agreement,
to:
(A) pay substantial sums to the state (tied in part to their
volume of sales);
(B) fund a national foundation devoted to the interests of
public health; and
(C) make substantial changes in their advertising and
marketing practices and corporate culture, with the intention
of reducing underage smoking.
(6) It would be contrary to the policy of the state if tobacco
product manufacturers who determine not to enter into such a
settlement could use a resulting cost advantage to derive large,
short term profits in the years before liability may arise without
ensuring that the state will have an eventual source of recovery
from them if they are proven to have acted culpably. It is thus
in the interest of the state to require that such manufacturers
establish a reserve fund to guarantee a source of compensation
and to prevent such manufacturers from deriving large, short
term profits and then becoming judgment proof before liability
may arise. As added by P.L.223-1999, SEC.1.
IC 24-3-3-2 "Adjusted for inflation" defined
Sec. 2. As used in this chapter, "adjusted for inflation" means
increased in accordance with the formula for inflation adjustment set
forth in Exhibit C to the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-3 "Affiliate" defined
Sec. 3. As used in this chapter, "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 (10%) or more, and the term "person" means
an individual, partnership, committee, association, corporation, or
any other organization or group of persons. As added by P.L.223-1999, SEC.1.
IC 24-3-3-4 "Allocable share" defined
Sec. 4. As used in this chapter, "allocable share" means Allocable
Share as that term is defined in the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-5 "Cigarette" defined
Sec. 5. As used in this chapter, "cigarette" means any product that
contains nicotine, is intended to be burned or heated under ordinary
conditions of use, and consists of or contains:
(1) any roll of tobacco wrapped in paper or in any substance not
containing tobacco;
(2) 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; or
(3) 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 subdivision (1).
The term "cigarette" includes "roll-your-own" tobacco (i.e., any
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", nine-hundredths (0.09) of an ounce of
"roll-your-own" tobacco constitutes one (1) individual "cigarette". As added by P.L.223-1999, SEC.1.
IC 24-3-3-6 "Master Settlement Agreement" defined
Sec. 6. As used in this chapter, "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. As added by P.L.223-1999, SEC.1.
IC 24-3-3-7 "Qualified escrow fund" defined
Sec. 7. As used in this chapter, "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
($1,000,000,000) where the arrangement requires that the financial
institution hold the escrowed fund's 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 fund's principal except as consistent with this chapter. As added by P.L.223-1999, SEC.1.
IC 24-3-3-8 "Released claims" defined
Sec. 8. As used in this chapter, "released claims" means Released
Claims as that term is defined in the Master Settlement Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-9 "Releasing parties" defined
Sec. 9. As used in this chapter, "releasing parties" means
Releasing Parties as that term is defined in the Master Settlement
Agreement. As added by P.L.223-1999, SEC.1.
IC 24-3-3-10 "Tobacco product manufacturer" defined
Sec. 10. As used in this chapter, "tobacco product manufacturer"
means an entity that after June 30, 1999, directly (and not exclusively
through any affiliate):
(1) 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);
(2) 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; or
(3) becomes a successor of an entity described in subdivision
(1) or (2).
The term "tobacco product manufacturer" does not include an
affiliate of a tobacco product manufacturer unless the affiliate itself
falls within subdivision (1), (2), or (3). As added by P.L.223-1999, SEC.1.
IC 24-3-3-11 "Units sold" defined
Sec. 11. As used in this chapter, "units sold" means the number of
individual cigarettes sold in Indiana 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
(or "roll-your-own" tobacco containers) bearing the excise tax stamp
of the state. The department of state revenue shall, in the manner
provided by IC 4-22-2, adopt rules that are necessary to ascertain the
amount of state excise tax paid on the cigarettes of such tobacco
product manufacturer for each year. As added by P.L.223-1999, SEC.1.
IC 24-3-3-12 Tobacco product manufacturers required to become participating
manufacturer or place money in qualified escrow fund
Sec. 12. Any tobacco product manufacturer selling cigarettes to
consumers within Indiana (whether directly or through a distributor,
retailer, or similar intermediary or intermediaries) after June 30,
1999, shall do one (1) 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; or
(2) 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):
(A) 1999, $0.0094241 per unit sold after June 30, 1999.
(B) 2000, $0.0104712 per unit sold.
(C) For each of 2001 and 2002, $0.0136125 per unit sold.
(D) For each of 2003 through 2006, $0.0167539 per unit
sold.
(E) For each of 2007 and each year thereafter, $0.0188482
per unit sold.
As added by P.L.223-1999, SEC.1.
IC 24-3-3-13 Interest paid and release of escrow funds; severability
Sec. 13. (a) Subsection (b) applies unless and until all or any part
of subsection (b) is held to be unconstitutional or otherwise
unenforceable. If all or any part of subsection (b) or the application
of all or any part of subsection (b) to a person, an entity, or a
circumstance is held to be unconstitutional or invalid by a court, the
unconstitutionality or invalidity does not affect other provisions of
this chapter, and subsection (c) controls. Subsection (c) applies
unless and until all or any part of subsection (c) is held to be
unconstitutional or otherwise unenforceable. If all or any part of
subsection (c) or the application of all or any part of subsection (c)
to a person, an entity, or a circumstance is held to be unconstitutional
or invalid by a court, the unconstitutionality or invalidity does not
affect other provisions of this chapter, and subsection (d) controls.
(b) A tobacco product manufacturer that places funds into escrow
under section 12(2) of this chapter shall receive the interest or other
appreciation on such funds as earned. The funds shall be released
from escrow only under the following circumstances:
(1) To pay a judgment or settlement on any released claim
brought against the tobacco product manufacturer by the state
or any releasing party located or residing in Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent that a tobacco product manufacturer
establishes that the amount the tobacco product manufacturer is
required to place in escrow on account of units sold in Indiana
in a particular year exceeds the master settlement agreement
payments the tobacco product manufacturer would have been
required to make on account of units sold in Indiana if the
tobacco product manufacturer were a participating
manufacturer, as determined under section IX(i) of the master
settlement agreement and after final determination of all
adjustments, the excess payments shall be released from escrow
and shall revert to the tobacco product manufacturer.
(3) To the extent not released from escrow under subdivision
(1) or (2), funds shall be released from escrow and revert back
to the tobacco product manufacturer twenty-five (25) years after
the date on which the funds were placed into escrow.
(c) This subsection applies only if subsection (b) is held to be
unconstitutional or otherwise unenforceable. A tobacco product
manufacturer that places funds into escrow under section 12(2) of
this chapter shall receive the interest or other appreciation on the
funds as earned. The funds shall be released from escrow only under
the following circumstances:
(1) To pay a judgment or settlement on any released claim
brought against the tobacco product manufacturer by the state
or any releasing party located or residing in Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent not released from escrow under subdivision
(1), funds shall be released from escrow and revert back to the
tobacco product manufacturer twenty-five (25) years after the
date on which the funds were placed into escrow.
(d) This subsection applies only if subsections (b) and (c) are held
to be unconstitutional or otherwise unenforceable. A tobacco product
manufacturer that places funds into escrow under section 12(2) of
this chapter shall receive the interest or other appreciation on such
funds as earned. Such funds themselves shall be released from
escrow only under 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 Indiana. Funds shall
be released from escrow under this subdivision:
(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 a judgment or settlement.
(2) To the extent that a tobacco product manufacturer
establishes that the amount it was required to place into escrow
in a particular year was greater than the state's allocable share
of the total payments that the manufacturer would have been
required to make in that year under the Master Settlement
Agreement (as determined pursuant to section IX(i)(2) of the
Master Settlement Agreement, and before any of the
adjustments or offsets described in section IX(i)(3) of that
Agreement other than the Inflation Adjustment) had it been a
participating manufacturer, the excess shall be released from
escrow and revert back to the tobacco product manufacturer.
(3) To the extent not released from escrow under subdivision
(1) or (2), funds shall be released from escrow and revert back
to such tobacco product manufacturer twenty-five (25) years
after the date on which the funds were placed into escrow. As added by P.L.223-1999, SEC.1. Amended by P.L.252-2003,
SEC.15.
IC 24-3-3-14 Certification of compliance with chapter; failure to make annual
deposit
Sec. 14. (a) Each tobacco product manufacturer that elects to
place funds into escrow under section 12(2) of this chapter shall
annually certify to the attorney general that it is in compliance with
this chapter. The attorney general may bring a civil action on behalf
of the state against any tobacco product manufacturer that fails to
place into escrow the funds required under section 12 and section 13
of this chapter. Any tobacco product manufacturer that fails in any
year to place into escrow the funds required under section 12(2) of
this chapter shall:
(1) Be required within fifteen (15) days to place sufficient funds
into escrow to bring it into compliance with this chapter. The
court, upon a finding of a violation of section 12(2) of this
chapter, may also impose a civil penalty to be paid to the state
general fund in an amount not to exceed five percent (5%) of
the amount improperly withheld from escrow per day of the
violation and in a total amount not to exceed one hundred
percent (100%) of the original amount improperly withheld
from escrow.
(2) In the case of a knowing violation, be required within fifteen
(15) days to place sufficient funds into escrow to bring it into
compliance with section 12(2) of this chapter. The court, upon
a finding of a knowing violation of section 12(2) of this chapter,
may also impose a civil penalty to be paid to the state general
fund in an amount not to exceed fifteen percent (15%) of the
amount improperly withheld from escrow per day of the
violation and in a total amount not to exceed three hundred
percent (300%) 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 Indiana (whether
directly or through a distributor, retailer or similar
intermediary) for a period not to exceed two (2) years.
(b) Each failure to make an annual deposit required under section
12(2) of this chapter constitutes a separate violation. As added by P.L.223-1999, SEC.1.
