2014 Tennessee Code
Title 47 - Commercial Instruments And Transactions
Chapter 31 - Tobacco Manufacturers' Escrow Fund
§ 47-31-103 - Requirements of tobacco product manufacturers.

(a) Any tobacco product manufacturer selling cigarettes to consumers within the state of Tennessee, whether directly or through a distributor, retailer or similar intermediary or intermediaries, after May 26, 1999, shall do one of the following:

(1) Become a participating manufacturer, as defined in § II(jj) of the master settlement agreement, and generally perform its financial obligations under the master settlement agreement; or

(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:

(i) 1999: $0.0094241 per unit sold after May 26, 1999;

(ii) 2000: $0.0104712 per unit sold;

(iii) For each of 2001 and 2002: $0.0136125 per unit sold;

(iv) For each of 2003 through 2006: $0.0167539 per unit sold; and

(v) For each of 2007 and each year thereafter: $0.0188482 per unit sold.

(B) The escrow fund deposits required by this section shall be made in quarterly installments following the quarter in which sales took place. For purposes of this section, the calendar year shall be divided into the following quarters: January 1 through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31. Deposits for sales for each quarter shall be made according to the following schedule:

(i) Deposits for sales occurring in the first quarter, January 1 through March 31, are due April 30 of the same year. A certification of the first quarter deposit shall be filed with the attorney general and reporter no later than May 15 of the same year;

(ii) Deposits for sales occurring in the second quarter, April 1 through June 30, are due July 31 of the same year. A certification of the second quarter deposit must be filed with the attorney general and reporter no later than August 15 of the same year;

(iii) Deposits for sales occurring in the third quarter, July 1 through September 30, are due October 31 of the same year. A certification of the third quarter deposit shall be filed with the attorney general and reporter no later than November 15 of the same year; and

(iv) Deposits for sales occurring in the fourth quarter, October 1 through December 31, are due January 31 of the following year. A certification of the fourth quarter deposit shall be filed with the attorney general and reporter no later than February 15 of the year following the year in which the cigarettes were sold.

(C) For each of the quarters, the quarterly deposit shall be based upon units sold in that quarter together with an estimated inflation adjustment provided by the attorney general and reporter. An annual reconciliation deposit shall be made on or before April 15 of the year following the year in which the cigarettes were sold to account for the actual annual inflation adjustment. A statement of the reconciliation deposit and the final reconciled deposit figures shall be included with the annual certification, due on or before April 30 of the year following the year in which the cigarettes were sold. Additionally, the annual certification required under § 67-4-2602 shall include the final reconciled deposit figures.

(D) A tobacco product manufacturer that places funds into escrow pursuant to subdivision (a)(2)(A) 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:

(i) 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 subdivision (a)(2)(D)(i):

(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;

(ii) 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 § IX(i) of the master settlement 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

(iii) To the extent not released from escrow under subdivision (a)(2)(D)(i) or (ii), 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.

(3) Each tobacco product manufacturer that elects to place funds into escrow pursuant to subdivision (a)(2) shall certify on a quarterly and annual basis to the attorney general and reporter that it is in compliance with subdivision (a)(2). The attorney general and reporter 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 this section. Any tobacco product manufacturer that fails 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 subdivision (a)(2), may impose a civil penalty, to be paid to the general fund of the state, 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 subdivision (a)(2), may impose a civil penalty, to be paid to the general fund of the state, 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 the state, whether directly or through a distributor, retailer or similar intermediary, for a period not to exceed two (2) years.

(b) Each failure to make a quarterly or annual deposit required under this section constitutes a separate violation.

(c) In any successful action initiated by the attorney general and reporter, the court shall order reimbursement to the attorney general and reporter for the reasonable costs and expenses of investigation and prosecution of actions under subdivision (a)(3), including attorneys' fees.