Connecticut Seal

Substitute Senate Bill No. 35

Public Act No. 04-218

AN ACT CONCERNING CERTAIN TOBACCO PRODUCT MANUFACTURERS, A SALES TAX-FREE WEEK AND THE TAX ON HEALTH CARE CENTERS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2004) As used in sections 1 to 8, inclusive, of this act:

(1) "Brand family" means all styles of cigarettes sold under the same trade mark and differentiated from one another by means of additional modifiers or descriptors, including, but not limited to, menthol, lights, kings and 100's, and includes any use of a brand name, alone or in conjunction with any other word, trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other indicia of product identification identical or similar to, or identifiable with, a previously known brand of cigarettes;

(2) "Cigarette" has the same meaning as provided in section 4-28h of the general statutes;

(4) "Nonparticipating manufacturer" means any tobacco product manufacturer that is not a participating manufacturer;

(5) "Participating manufacturer" has the meaning as provided in section II(jj) of the Master Settlement Agreement, as defined in section 4-28h of the general statutes, and all amendments thereto;

(6) "Qualified escrow fund" has the same meaning as provided in section 4-28h of the general statutes;

(7) "Stamper" means, in the case of cigarettes other than roll-your-own tobacco, a person that under chapter 214 of the general statutes may lawfully purchase unstamped packages of cigarettes and affix Connecticut cigarette tax stamps to such packages, and, in the case of roll-your-own tobacco, a person licensed as a distributor under chapter 214a of the general statutes and required to pay the tax due on such tobacco under said chapter 214a;

(8) "Tobacco product manufacturer" has the same meaning as provided in section 4-28h of the general statutes; and

(9) "Units sold" has the same meaning as provided in section 4-28h of the general statutes.

Sec. 2. (NEW) (Effective October 1, 2004) (a) Any tobacco product manufacturer whose cigarettes are sold in this state, whether directly or through a distributor, retailer or similar intermediary or intermediaries, shall execute a certification annually on a form prescribed by the commissioner, certifying under penalty of law for false statement that, as of the date of such certification, such tobacco product manufacturer is either a participating manufacturer or is in full compliance with the provisions of sections 4-28h to 4-28j, inclusive, of the general statutes. Such tobacco product manufacturer shall deliver such certificate to the commissioner and Attorney General no later than April thirtieth of each year. Each tobacco product manufacturer shall maintain all invoices and documentation of sales and other such information relied upon for such certification for a period of five years unless otherwise required by law to maintain them for a longer period of time.

(b) If a tobacco product manufacturer is a participating manufacturer, such manufacturer shall include in its certification a list of its brand families. The participating manufacturer shall update such list thirty days prior to any addition to, or modification of, its brand families by executing and delivering a supplemental certification to the Attorney General and the commissioner.

(c) If the tobacco product manufacturer is a nonparticipating manufacturer, such manufacturer shall include in its certification: (1) A list of all of its brand families and the number of units of each brand family that were sold in the state during the preceding calendar year; (2) a list of all of its brand families that have been sold in the state at any time during the current calendar year; (3) an indication, by an asterisk, of any brand family sold in the state during the preceding calendar year that is no longer being sold in the state as of the date of such certification; and (4) the name and address of any other manufacturer of such brand families in the preceding or current calendar year. Each nonparticipating manufacturer shall update such list thirty days prior to any addition to, or modification of, its brand families by executing and delivering a supplemental certification to the Attorney General and the commissioner.

(d) If the tobacco product manufacturer is a nonparticipating manufacturer, such manufacturer shall further (1) certify that such nonparticipating manufacturer is registered to do business in this state pursuant to title 33 or 34 of the general statutes as a foreign corporation or business entity or has appointed an agent for service of process and provided notice thereof as required by section 4 of this act, (2) certify that such nonparticipating manufacturer has established and continues to maintain a qualified escrow fund and has executed a qualified escrow agreement that governs the qualified escrow fund, (3) certify that such nonparticipating manufacturer is in full compliance with the provisions of sections 4-28h to 4-28j, inclusive, of the general statutes and sections 1 to 8, inclusive, of this act, and any regulations adopted under sections 4-28h to 4-28j, inclusive, of the general statutes and sections 1 to 8, inclusive, of this act, and (4) provide (A) the name, address and telephone number of the financial institution where the nonparticipating manufacturer has established such qualified escrow fund required pursuant to the provisions of sections 4-28h to 4-28j, inclusive, of the general statutes and all regulations adopted under sections 4-28h to 4-28j, inclusive, of the general statutes; (B) the account number of such qualified escrow fund and subaccount number for the state of Connecticut; (C) the amount that such nonparticipating manufacturer placed in such fund for cigarettes sold in the state during the preceding calendar year, the date and amount of each such deposit, and such evidence or verification as may be deemed necessary by the commissioner or the Attorney General, to confirm the foregoing; and (D) the amounts of and dates of any withdrawal or transfer of funds the nonparticipating manufacturer made at any time from such fund or from any other qualified escrow fund into which it ever made escrow payments pursuant to the provisions of sections 4-28h to 4-28j, inclusive, of the general statutes and all regulations adopted under sections 4-28h to 4-28j, inclusive, of the general statutes.

(e) A tobacco product manufacturer may not include in its certification a brand family unless (1) in the case of a participating manufacturer, the participating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of calculating its payments under the Master Settlement Agreement for the relevant year, in the volume and shares determined pursuant to the Master Settlement Agreement; and (2) in the case of a nonparticipating manufacturer, such nonparticipating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of sections 4-28h to 4-28j, inclusive, of the general statutes. Nothing in this section shall be construed as limiting or otherwise affecting the state's right to maintain that a brand family constitutes cigarettes of a different tobacco product manufacturer for purposes of calculating payments under the Master Settlement Agreement or for purposes of sections 4-28h to 4-28j, inclusive, of the general statutes.

Sec. 3. (NEW) (Effective October 1, 2004) (a) (1) Not later than July 1, 2005, the commissioner shall develop and make available for public inspection, on the Department of Revenue Services' website and in such other forms as the commissioner deems appropriate, a directory listing of all tobacco product manufacturers that have provided current and accurate certifications conforming to the requirements of section 2 of this act and all brand families that are listed in such certifications. The commissioner shall update the directory as necessary in order to correct mistakes and to add or remove a tobacco product manufacturer or brand family to keep the directory current and in conformity with the requirements of sections 1 to 8, inclusive, of this act.

(2) The commissioner shall not include or retain in such directory the name or brand families of any manufacturer that has failed to provide the required certification or whose certification the commissioner determines is not in compliance with the provisions of section 2 of this act, unless such violation has been remedied to the satisfaction of the commissioner.

(3) The commissioner shall not include or retain in the directory any brand family of a nonparticipating manufacturer if the commissioner concludes: (A) All escrow payments required pursuant to the provisions of sections 4-28h to 4-28j, inclusive, of the general statutes for any period for any brand family, whether or not listed by such nonparticipating manufacturer, have not been fully paid into a qualified escrow fund governed by a qualified escrow agreement that has been approved by the Attorney General, or (B) any outstanding final judgment, including interest thereon, for a violation of sections 4-28h to 4-28j, inclusive, of the general statutes has not been fully satisfied for such brand family and such manufacturer.

(b) It shall be unlawful for any person:

(1) To affix a tax stamp to a package or other container of cigarettes of a tobacco product manufacturer or brand family not included in the directory; and

(2) To sell, offer, possess for sale or distribute in this state, cigarettes of a tobacco product manufacturer or brand family not included in the directory.

(c) A violation of subsection (b) of this section shall be a class A misdemeanor.

(d) Any person who violates subsection (b) of this section engages in an unfair and deceptive trade practice in violation of section 42-110b of the general statutes.

(e) A determination by the commissioner not to include a brand family or tobacco product manufacturer in the directory maintained pursuant to this section or to remove such brand family or manufacturer from the directory shall be subject to review in the manner prescribed by section 12-311 of the general statutes.

Sec. 4. (NEW) (Effective October 1, 2004) (a) Any nonparticipating manufacturer that has not registered to do business in this state, pursuant to title 33 or 34 of the general statutes, as a foreign corporation or business entity shall, as a condition precedent to having its brand families listed or retained in the directory maintained pursuant to section 3 of this act, appoint and continually engage without interruption the services of an agent in this state to act as agent for the service of process on whom all process and any action or proceeding against it concerning or arising out of the enforcement of the provisions of sections 1 to 8, inclusive, of this act and the provisions of sections 4-28h to 4-28j, inclusive, of the general statutes may be served in any manner authorized by law. Such service shall constitute legal and valid service of process on the nonparticipating manufacturer. The nonparticipating manufacturer shall provide the name, address, telephone number and proof of the appointment and availability of such agent to, and to the satisfaction of, the commissioner and the Attorney General.

(b) A nonparticipating manufacturer shall provide notice to the commissioner and the Attorney General at least thirty calendar days prior to termination of the authority of an agent and shall further provide proof, to the satisfaction of the commissioner and the Attorney General, of the appointment of a new agent no less than five calendar days prior to the termination of an existing agent appointment. In the event an agent terminates an agency, the nonparticipating manufacturer shall notify the commissioner and the Attorney General of such termination not later than five calendar days after such termination and shall include proof, to the satisfaction of the commissioner and the Attorney General, of the appointment of a new agent.

(c) Any nonparticipating manufacturer whose products are sold in this state without appointing or designating an agent as required in this section shall be deemed to have appointed the Secretary of the State as such agent and may be proceeded against in courts of this state by service of process upon the Secretary of the State, except that the appointment of the Secretary of the State as such agent shall not satisfy the condition precedent to having the brand families of the nonparticipating manufacturer listed or retained in the directory.

Sec. 5. (NEW) (Effective January 1, 2005) (a) Not later than twenty-five days after the end of each month, and more frequently if so directed by the commissioner, each stamper shall submit such information as the commissioner requires to facilitate compliance with sections 1 to 8, inclusive, of this act, including, but not limited to, a list by brand family of the total number of cigarettes, or in the case of roll-your-own tobacco, the equivalent stick count, for which the stamper affixed stamps during the previous month. The stamper shall maintain, and make available to the commissioner for a period of five years, all invoices and documentation of purchases and sales of all nonparticipating manufacturer cigarettes and any other information relied upon in reporting to the commissioner. Each stamper shall provide and update as necessary an electronic mail address to the commissioner.

(b) The commissioner may disclose to the Attorney General any information received under sections 1 to 8, inclusive, of this act and requested by the Attorney General for purposes of determining compliance with and enforcing the provisions of sections 1 to 8, inclusive, of this act. The commissioner and the Attorney General shall share with each other the information received under sections 1 to 8, inclusive, of this act, and may share such information with other federal, state or local agencies only for purposes of enforcement of sections 1 to 8, inclusive, of this act, the provisions of sections 4-28h to 4-28j, inclusive, of the general statutes or corresponding laws of other states.

(c) The Attorney General may require at any time from a nonparticipating manufacturer proof of the amount of money in the qualified escrow fund maintained by such manufacturer for the purpose of compliance with provisions of sections 4-28h to 4-28j, inclusive, of the general statutes. Such proof shall be provided to such manufacturer by the financial institution in which such manufacturer has established such fund. Such proof shall include the amount of money in such fund, exclusive of interest, the amount and date of each deposit to such fund and the amount and date of each withdrawal from such fund.

(d) In addition to the information requested to be submitted pursuant to subsection (a) of this section and section 2 of this act, the commissioner may require a stamper or tobacco product manufacturer to submit any additional information including, but not limited to, samples of the packaging or labeling of each brand family, as is necessary to enable the Attorney General to determine whether a tobacco product manufacturer is in compliance with the provisions of sections 1 to 8, inclusive, of this act.

(e) To promote compliance with the provisions of sections 1 to 8, inclusive, of this act, the commissioner may adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, requiring a tobacco product manufacturer subject to the requirements of subsection (c) of section 2 of this act to make the escrow deposits required in quarterly installments during the year in which the sales covered by such deposits are made. The commissioner may require production of information sufficient to enable the commissioner to determine the adequacy of the amount of the installment deposit.

Sec. 6. (NEW) (Effective October 1, 2004) (a) In addition to any other civil or criminal remedy provided by law, upon a determination that a stamper has violated subsection (b) of section 3 of this act or any regulation adopted under sections 1 to 8, inclusive, of this act, the commissioner, after a hearing, may revoke or suspend the license of such stamper in the manner provided by section 12-295 of the general statutes. Each stamp affixed and each offer to sell cigarettes in violation of subsection (b) of section 3 of this act shall constitute a separate violation. The commissioner may also assess such stamper a civil penalty in an amount not to exceed the greater of five hundred per cent of the retail value of the cigarettes, or five thousand dollars, upon a determination of violation of subsection (b) of section 3 of this act.

(b) Any cigarettes that have been sold, offered for sale or possessed for sale in this state, in violation of subsection (b) of section 3 of this act shall be deemed contraband goods under section 12-305 of the general statutes and such cigarettes shall be subject to seizure as provided in section 12-305 of the general statutes. All such cigarettes so seized shall be destroyed and not resold.

(c) The Attorney General, on behalf of the commissioner, may seek an injunction to restrain a threatened or actual violation of subsection (b) of section 3 of this act or subsections (a) or (d) of section 5 of this act by a stamper and to compel the stamper to comply with said subsections. The commissioner may adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, to effect the purposes of this section.

Sec. 7. (NEW) (Effective October 1, 2004) (a) In any action brought by the state to enforce the provisions of sections 1 to 6, inclusive, of this act, the state shall be entitled to recover, when it is the prevailing party, the costs of investigation, expert witness fees, costs of the action and reasonable attorneys' fees.

(b) If a court determines that a person has violated the provisions of sections 1 to 6, inclusive, of this act, the court shall order any profits, gains, gross receipts or other benefits from the violation to be paid to the state. Unless otherwise expressly provided in sections 1 to 6, inclusive, of this act, the remedies or penalties provided by sections 1 to 6, inclusive, of this act are cumulative to each other and to the remedies or penalties available under all other laws of this state.

(c) No person shall be issued a license or granted a renewal of a license to act as a stamper unless such person has certified in writing, under penalty for false statements, that such person will comply with sections 1 to 6, inclusive, of this act.

Sec. 8. (NEW) (Effective October 1, 2004) If a court of competent jurisdiction finds that the provisions of sections 1 to 8, inclusive, of this act and sections 4-28h to 4-28j, inclusive, of the general statutes conflict and cannot be reconciled, then sections 4-28h to 4-28j, inclusive, of the general statutes shall supersede the provisions of sections 1 to 8, inclusive, of this act. If any section, subsection, subdivision, subparagraph, sentence, clause or phrase of sections 1 to 8, inclusive, of this act causes sections 4-28h to 4-28j, inclusive, of the general statutes to no longer constitute a qualifying or model statute, as those terms are defined in the Master Settlement Agreement, then that portion of sections 1 to 8, inclusive, of this act shall not be valid. If any section, subsection, subdivision, subparagraph, sentence, clause or phrase of sections 1 to 8, inclusive, of this act is for any reason held to be invalid, unlawful or unconstitutional, such decision shall not affect the validity of the remaining portions of sections 1 to 8, inclusive, of this act or any part thereof.

Sec. 9. Subsection (b) of section 4-28i of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2004):

(b) A tobacco product manufacturer that places funds into escrow pursuant to subsection (a) of this section shall receive the interest, or other appreciation on such funds, as earned. Such funds shall be released from escrow only (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 the state. Funds shall be released from escrow under this subdivision in the order in which the funds were placed into escrow and only to the extent and at such time as is necessary to make payments required under such judgment or settlement; (2) 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 this state in a particular year was greater than [the state's allocable share of the total payments that such manufacturer would have been required to make in that year under the Master Settlement Agreement had it been a participating manufacturer, as such payments are determined pursuant to section IX(i)(2) of that 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] the Master Settlement Agreement payments, as determined pursuant to section IX(i) of said agreement including after final determinations 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 [that] such tobacco product manufacturer; or (3) to the extent not released from escrow under subdivision (1) or (2) of this subsection, funds shall be released from escrow and revert back to such tobacco product manufacturer twenty-five years after the date on which such funds were placed into escrow.

Sec. 10. (Effective from passage) If a court of competent jurisdiction holds that subdivision (2) of subsection (b) of section 4-28i of the general statutes, as amended by section 9 of this act, is unconstitutional, then the amendment to said subsection made by said section 9 shall not be given effect.

Sec. 11. Section 4-28e of the general statutes is amended by adding subsection (f) as follows (Effective July 1, 2004):

(NEW) (f) For the fiscal year ending June 30, 2005, and each fiscal year thereafter, the sum of one hundred thousand dollars is appropriated to the Department of Revenue Services and the sum of twenty-five thousand dollars is appropriated to the office of the Attorney General for the enforcement of the provisions of sections 1 to 7, inclusive, of this act and sections 4-28h to 4-28j, inclusive.

Sec. 12. Subsection (b) of section 12-15 of the general statutes, as amended by section 238 of public act 03-6 of the June 30 special session, is repealed and the following is substituted in lieu thereof (Effective from passage):

(b) The commissioner may disclose (1) returns or return information to (A) an authorized representative of another state agency or office, upon written request by the head of such agency or office, when required in the course of duty or when there is reasonable cause to believe that any state law is being violated, or (B) an authorized representative of an agency or office of the United States, upon written request by the head of such agency or office, when required in the course of duty or when there is reasonable cause to believe that any federal law is being violated, provided no such agency or office shall disclose such returns or return information, other than in a judicial or administrative proceeding to which such agency or office is a party pertaining to the enforcement of state or federal law, as the case may be, in a form which can be associated with, or otherwise identify, directly or indirectly, a particular taxpayer except that the names and addresses of jurors or potential jurors and the fact that the names were derived from the list of taxpayers pursuant to chapter 884 may be disclosed by the judicial branch; (2) returns or return information to the Auditors of Public Accounts, when required in the course of duty under chapter 23; (3) returns or return information to tax officers of another state or of a Canadian province or of a political subdivision of such other state or province or of the District of Columbia or to any officer of the United States Treasury Department or the United States Department of Health and Human Services, authorized for such purpose in accordance with an agreement between this state and such other state, province, political subdivision, the District of Columbia or department, respectively, when required in the administration of taxes imposed under the laws of such other state, province, political subdivision, the District of Columbia or the United States, respectively, and when a reciprocal arrangement exists; (4) returns or return information in any action, case or proceeding in any court of competent jurisdiction, when the commissioner or any other state department or agency is a party, and when such information is directly involved in such action, case or proceeding; (5) returns or return information to a taxpayer or its authorized representative, upon written request for a return filed by or return information on such taxpayer; (6) returns or return information to a successor, receiver, trustee, executor, administrator, assignee, guardian or guarantor of a taxpayer, when such person establishes, to the satisfaction of the commissioner, that such person has a material interest which will be affected by information contained in such returns or return information; (7) information to the assessor or an authorized representative of the chief executive officer of a Connecticut municipality, when the information disclosed is limited to (A) a list of real or personal property that is or may be subject to property taxes in such municipality, or (B) a list containing the name of each person who is issued any license, permit or certificate which is required, under the provisions of this title, to be conspicuously displayed and whose address is in such municipality; (8) real estate conveyance tax return information or controlling interest transfer tax return information to the town clerk or an authorized representative of the chief executive officer of a Connecticut municipality to which the information relates; (9) estate tax returns and estate tax return information to the Probate Court Administrator or to the court of probate for the district within which a decedent resided at the date of the decedent's death, or within which the commissioner contends that a decedent resided at the date of the decedent's death or, if a decedent died a nonresident of this state, in the court of probate for the district within which real estate or tangible personal property of the decedent is situated, or within which the commissioner contends that real estate or tangible personal property of the decedent is situated; (10) returns or return information to the Secretary of the Office of Policy and Management for purposes of subsection (b) of section 12-7a; (11) return information to the Jury Administrator, when the information disclosed is limited to the names, addresses, federal Social Security numbers and dates of birth, if available, of residents of this state, as defined in subdivision (1) of subsection (a) of section 12-701, as amended; (12) pursuant to regulations adopted by the commissioner, returns or return information to any person to the extent necessary in connection with the processing, storage, transmission or reproduction of such returns or return information, and the programming, maintenance, repair, testing or procurement of equipment, or the providing of other services, for purposes of tax administration; (13) without written request and unless the commissioner determines that disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation, returns and return information which may constitute evidence of a violation of any civil or criminal law of this state or the United States to the extent necessary to apprise the head of such agency or office charged with the responsibility of enforcing such law, in which event the head of such agency or office may disclose such return information to officers and employees of such agency or office to the extent necessary to enforce such law; (14) names and addresses of operators, as defined in section 12-407, as amended, to tourism districts, as defined in section 10-397; [and] (15) names of each licensed dealer, as defined in section 12-285, and the location of the premises covered by the dealer's license; and (16) to a tobacco product manufacturer that places funds into escrow pursuant to the provisions of subsection (a) of section 4-28i, return information of a distributor licensed under the provisions of chapter 214 or chapter 214a, provided the information disclosed is limited to information relating to such manufacturer's sales to consumers within this state, whether directly or through a distributor, dealer or similar intermediary or intermediaries, of cigarettes, as defined in section 4-28h, and further provided there is reasonable cause to believe that such manufacturer is not in compliance with section 4-28i, as amended by this act.

Sec. 13. (NEW) (Effective July 1, 2004, and applicable to sales occurring on or after July 1, 2004) From the third Sunday in August until the Saturday next succeeding, inclusive, the provisions of chapter 219 of the general statutes shall not apply to sales of any article of clothing or footwear intended to be worn on or about the human body the cost of which article to the purchaser is less than three hundred dollars. For purposes of this section, clothing or footwear shall not include (1) any special clothing or footwear primarily designed for athletic activity or protective use and which is not normally worn except when used for the athletic activity or protective use for which it was designed, and (2) jewelry, handbags, luggage, umbrellas, wallets, watches and similar items carried on or about the human body but not worn on the body in the manner characteristic of clothing intended for exemption under this section.

Sec. 14. Subsection (a) of section 12-202a of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage and applicable to income years commencing on or after January 1, 2005):

(a) Each health care center, as defined in section 38a-175, that is governed by sections 38a-175 to 38a-192, inclusive, shall pay a tax to the Commissioner of Revenue Services for the calendar year commencing on January 1, 1995, and annually thereafter, at the rate of one and three-quarters per cent of the total net direct subscriber charges received by such health care center during each such calendar year on any new or renewal contract or policy [by such health care center during each such calendar year, which] approved by the Insurance Commissioner under section 38a-183. Such payment shall be in addition to any other payment required under section 38a-48.

Approved on June 8, 2004