2014 Kentucky Revised Statutes CHAPTER 131 - DEPARTMENT OF REVENUE 131.602 Tobacco product manufacturer's options to become participating manufacturer or to contribute to qualified escrow fund -- Management of escrow fund -- Penalties for failure to place required funds in escrow -- Assignment of escrow funds to Commonwealth -- Credit of assigned funds against judgment -- Opinion of Attorney General required prior to assignment.
Download as PDF
131.602 Tobacco product manufacturer's options to become participating
manufacturer or to contribute to qualified escrow fund -- Management of
escrow fund -- Penalties for failure to place required funds in escrow -Assignment of escrow funds to Commonwealth -- Credit of assigned
funds against judgment -- Opinion of Attorney General required prior to
assignment.
(1)
(2)
(3)
Any tobacco product manufacturer selling cigarettes to consumers within this
state, whether directly or through a distributor, retailer, or similar intermediary
or intermediaries, after June 30, 2000, shall do one (1) of the following:
(a) 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
(b) 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 2000: $0.0104712 per unit sold after June 30, 2000;
2.
For each of 2001 and 2002: $0.0136125 per unit sold;
3.
For each of 2003 through 2006: $0.0167539 per unit sold; and
4.
For 2007 and each year thereafter: $0.0188482 per unit sold.
A tobacco product manufacturer that places funds into escrow pursuant to
subsection (1)(b) of this section 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:
(a) To pay a judgment or settlement on any released claim brought against
such tobacco product manufacturer by Kentucky or any releasing party
located or residing in Kentucky. Funds shall be released from escrow
under this paragraph in the order in which they were placed into escrow
and only to the extent and at the time necessary to make payments
required under such judgment or settlement;
(b) To the extent that a tobacco product manufacturer establishes that the
amount it 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 it been a participating manufacturer, the excess shall be
released from escrow and revert back to such tobacco product
manufacturer; or
(c) To the extent not released from escrow under paragraph (a) or (b) of this
subsection, funds shall be released from escrow and revert back to such
tobacco product manufacturer twenty-five (25) years after the date on
which they were placed into escrow.
Each tobacco product manufacturer that elects to place funds into escrow
pursuant to subsection (1)(b) of this section shall annually certify to the
Attorney General that it is in compliance with subsections (1)(b) and (2) of this
section. The Attorney General may bring a civil action on behalf of Kentucky
(4)
(5)
against any tobacco product manufacturer that 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 section shall:
(a) Be required within fifteen (15) days to place such funds into escrow as
shall bring it into compliance with this section. The court, upon a finding of
a violation of subsection (1)(b) or (2) of this section, may impose a civil
penalty, to be paid to the general fund of Kentucky, 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;
(b) In the case of a knowing violation, be required within fifteen (15) days to
place such funds into escrow as shall bring it into compliance with this
section. The court, upon a finding of a knowing violation of subsection
(1)(b) or (2) of this section, may impose a civil penalty, to be paid to the
general fund of Kentucky, 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; and
(c) In the case of a second knowing violation, be prohibited from selling
cigarettes to consumers within Kentucky, whether directly or through a
distributor, retailer, or similar intermediary, for a period not to exceed two
(2) years.
Each failure to make an annual deposit required under this section shall
constitute a separate violation.
Notwithstanding the provisions of subsection (2) of this section, a tobacco
product manufacturer that elects to place funds into escrow pursuant to
subsection (1)(b) of this section may make an irrevocable assignment of its
interest in the funds to the benefit of the Commonwealth of Kentucky. Such
assignment shall be permanent and apply to all funds in the subject escrow
account or that may subsequently come into such account, including those
deposited into the escrow account prior to the assignment being executed,
those deposited into the escrow account after the assignment is executed, and
interest or other appreciation on such funds. The tobacco product
manufacturer, the Attorney General, and the financial institution where the
escrow account is maintained may make such amendments to the qualified
escrow account agreement as may be necessary to effectuate an assignment
of rights executed pursuant to this subsection or a withdrawal of funds from the
escrow account pursuant to subsection (5) of this section. An assignment of
rights executed pursuant to this subsection shall be in writing, signed by a duly
authorized representative of the tobacco product manufacturer making the
assignment, and shall become effective upon delivery of the assignment to the
Attorney General and the financial institution where the escrow account is
maintained.
Notwithstanding the provisions of subsection (2) of this section, any escrow
funds assigned to the Commonwealth pursuant to subsection (4) of this section
shall be withdrawn by the Commonwealth upon request by the Treasurer of the
Commonwealth and approval of the Attorney General. Any funds withdrawn
(6)
pursuant to this subsection shall be deposited in the general fund and shall be
calculated on a dollar-for-dollar basis as a credit against any judgment or
settlement described in subsection (2)(a) of this section which may be obtained
against the tobacco product manufacturer who has assigned the funds in the
subject escrow account. Nothing in this subsection or in subsection (4) of this
section shall be construed to relieve a tobacco product manufacturer from any
past, current, or future obligations the manufacturer may have pursuant to this
chapter.
Notwithstanding subsections (4) and (5) of this section, no assignment of
escrows created pursuant to subsection (1)(b) of this section shall be made by
a tobacco product manufacturer, or shall be accepted by the Treasurer of the
Commonwealth, unless and until the Attorney General has provided an opinion
to the Treasurer, with a copy of the opinion provided to the Governor and the
Legislative Research Commission, that amendments to KRS 131.600 and
subsections (4) and (5) of this section will not jeopardize the Commonwealth's
payments under the master settlement agreement in the form of a
nonparticipating manufacturer adjustment.
Effective:April 25, 2006
History: Amended 2006 Ky. Acts ch. 252, Pt. XIX, sec. 1, effective April 25, 2006.
-- Amended 2004 Ky. Acts ch. 135, sec. 2, effective July 13, 2004. -- Created
2000 Ky. Acts ch. 342, sec. 2, effective June 30, 2000.
Disclaimer: These codes may not be the most recent version. Kentucky may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.