Bill refining cigarette regulations for MSA compliance advanced

Cigarette regulations intended to keep Nebraska compliant with the Master Settlement Agreement (MSA) were advanced from general file April 27.

The Master Settlement Agreement was entered into on Nov. 23, 1998, between the state and tobacco product manufacturers.

LB590, introduced by Grand Island Sen. Mike Gloor, would change laws regulating tobacco licenses, tobacco sales, cigarette taxes, the state directory of cigarettes, escrow deposits under the MSA and reporting requirements. The bill also would authorize the state to negotiate a compact with Native American tribes regarding tobacco products.

Under the MSA, Gloor said, tobacco companies provide annual payments to states to cover public health costs associated with tobacco use. States must implement qualifying statutes to require companies that are not part of the agreement to put money in escrow as if they were paying their share of the settlement, he said.

Gloor said tobacco manufacturers have disputed state enforcement of escrow requirements and have claimed that they are entitled to an adjustment of their annual payments. Consequently, arbitration commenced in July 2010 to resolve payments made from 2003-2010, Gloor said, adding that $46 million is in dispute for Nebraska.

LB590 is needed to ensure compliance with the MSA and prevent a loss of revenue, Gloor said.

“If this bill does not pass, there could be some fairly severe financial ramifications for this state and our legislative budgeting process,” Gloor said.

Among other provisions, enforcement measures in the bill would include:

• requiring nonparticipating manufacturers to post bond if their cigarettes have not been sold in the state or they fail to make escrow deposits;
• requiring nonparticipating manufacturers to make escrow payments on a quarterly basis;
• increasing the frequency of stamping agent reports and holding agents liable for nonparticipating manufacturers escrow payments if their products are stamped;
• revoking stamping agent licenses for inadequate reporting, outstanding escrow deposits or sales of unstamped cigarettes;
• requiring cigarette manufacturers and importers to report all sales into Nebraska within 15 days;
• removing manufacturers from the state directory that fail to submit required reports; and
• revoking stamp agent licenses and removing manufacturers from the state directory for violations of similar laws in other states.

A Revenue Committee amendment, adopted 35-0, would require that compact agreements with tribes include provisions to require that tribal taxes are imposed equally on all cigarettes and other tobacco products. The agreement also would require that all cigarette packages bear the state stamp or a tribal stamp and would prohibit the sale of cigarettes not included in the state directory unless the cigarettes include a tribal stamp and the tribe makes escrow deposits.

After adopting a technical amendment offered by Kearney Sen. Galen Hadley 35-0, lawmakers voted 38-0 to advance LB590 from general file.