OLR Bill Analysis
AN ACT ESTABLISHING A BOTTLE RECYCLING FEE IN LIEU OF A REFUNDABLE DEPOSIT.
This bill replaces the existing bottle redemption system with a two-phase beverage container recycling system covering an expanded range of containers. Under the new system retail customers pay a minimum four-cent, nonrefundable recycling fee instead of a redeemable nickel deposit on covered beverage containers, as the current system requires. The bill terminates the new recycling program on July 1, 2025.
In the first phase of the new recycling system, starting October 1, 2017, the bill imposes a recycling fee on items not redeemable under current law: juice; tea; sports drinks; and spirits or alcohol in containers of up to 50 milliliters (“nips”). The bill refers to these beverages as “early recycling fee beverages.”
The second phase, starting July 1, 2018, expands the recycling program by also imposing the minimum four-cent recycling fee on containers that are now redeemable. These include containers for beer and other malt beverages, mineral water, soda and other carbonated soft drinks, and water. As under current law, containers include bottles, cans, jars, and cartons made of glass, metal, or plastic.
Beginning July 1, 2018, the bill requires that two cents of each four-cent recycling fee be used to (1) develop reuses for the recycled containers and (2) help compensate solid waste haulers and municipalities for increases in the volume of recycled material.
The bill increases, for the nine months between October 1, 2017 and July 1, 2018, the handling fee distributors pay retailers and redemption centers. It increases, from 1.5 cents to 2.5 cents, the handling fee for beer and malt beverages, and, from 2 cents to 3 cents, the handling fee for soda and carbonated drinks, mineral water, and water. It eliminates redemption centers as of July 1, 2018.
The bill generally imposes on the recycling program the same administrative and enforcement requirements that now apply to the bottle redemption program, including specifying that the recycling fee is not part of an item's price for sales tax purposes.
The governor or Office of Policy and Management secretary may delay implementation of provisions of the bill that take effect July 1, 2018 for manufacturers, dealers, or distributors of noncarbonated beverages (water, juice, tea, sports drinks, or nips) if they can show that the recycling fee would create undue hardship for their businesses. But the bill must be implemented no later than October 1, 2019. It is not clear how the bill affects manufacturers and distributors.
The bill also makes conforming changes.
EFFECTIVE DATE: October 1, 2017 for the provisions affecting juice, tea, sports drinks, and certain liquor bottles and July 1, 2018 for the provisions affecting beverages now redeemable.
EARLY RECYCLING FEE (PHASE I)
Fee Amount and Base
Starting October 1, 2017, the bill imposes a recycling fee of at least four cents on containers of juice; tea; sports drinks; and spirits or alcohol in containers of up to 50 milliliters (“nips”). Containers include certain bottles, cans, jars, and cartons made of glass, metal, or plastic. Unlike the current bottle redemption system, the bill does not require that these containers be specially marked or identified. (The bill defines several terms, such as distributor and manufacturer, to which it does not later refer in this section.)
Under the bill, a recycling fee initiator (hereinafter “initiator”) is the first dealer to collect the recycling fee on an early recycling fee beverage. The bill, similar to the current bottle redemption law, requires initiators to open a special interest-bearing account in a state branch of a financial institution, such as a bank, trust company, or credit union, and deposit into the account an amount equal to the recycling fee for each container they sell. They must make this deposit no later than one month after selling the container. Money in this account must be kept separate from other funds the initiator possesses and held in a special fund in trust for the state. All interest, dividends, and returns earned on the special account must be paid directly into the account.
By January 31, 2018, each initiator must pay the balance outstanding in the special account attributable to the four-month period from October 1, 2017 through January 30, 2018 to the Department of Revenue Services (DRS) commissioner for deposit into the General Fund. Subsequent balances must be paid on a quarterly basis by the initiator by the last day of the month following the quarter (i.e., the balance for the quarter ending March 31 must be paid by April 30). Presumably, the second quarterly payment following the four-month period would include only fees collected in February and March.
An initiator who does not make the required payment on time must pay a penalty of 10% of the amount due, or $50, whichever is greater. The initiator must also pay interest of 1% per month, or portion thereof, on the amount due and unpaid. The initiator must make the payments to DRS electronically. It cannot use any funds in the special account to pay any penalty or interest.
The bill authorizes the DRS commissioner to examine the accounts and records of any initiator, including related receipts, disbursements, and other items the commissioner deems appropriate. The attorney general may take any appropriate action to enforce the bill, acting either independently or on complaints by the commissioners of DRS or the Department of Energy and Environmental Protection (DEEP).
Under the bill, payments made by initiators are considered a tax for purposes of certain DRS administrative procedures, such as limits on interest paid on certain overpayments and liens on personal property. The DRS audit, collection, and other tax administration procedures applicable to the admissions and dues taxes apply to the payments except where inconsistent.
Handling Fee Increases
The bill requires the DRS commissioner, from October 1, 2017 until July 1, 2018, to make recycling fee revenue available for payment to redemption centers to enable them to receive higher handling fees. It increases the handling fee for beer and malt beverages from 1.5 cents to 2.5 cents, and the handling fee for mineral water, soda and carbonated soft drinks, and water from 2 cents to 3 cents. The bill eliminates redemption centers as of July 1, 2018.
Reports to DRS
Each initiator must report to DRS quarterly, by the last day of the month following the quarter. The report must be on a form prescribed by the DRS commissioner, submitted electronically, and provide the information he deems necessary. It must include at least the following information:
1. the account balance at the beginning of the quarter;
2. all recycling fees credited to the account during the quarter, including fees paid to the initiator, and all interest, dividends, or returns received;
3. all withdrawals made from the account, including all service and overdraft charges, and all payments made to it; and
4. the account balance at the close of the quarter.
The DRS or DEEP commissioner, as applicable, must impose fines of between $50 and $100 for a first violation of its provisions on early recycling fee beverages, between $100 and $200 for a second violation, and between $250 and $500 for each subsequent violation. The penalties are similar to those now imposed for violations of the bottle redemption program.
RECYCLING FEE AND BOTTLE REDEMPTION (PHASE II)
Fee Amount and Base
Starting July 1, 2018, the bill eliminates the bottle redemption program and replaces it with a minimum four-cent recycling fee on beverage containers subject to the current bottle redemption law. These include containers for beer and other malt beverages, mineral water, soda and other carbonated soft drinks, and water. It also imposes this recycling fee on the early recycling fee beverages covered under the first phase: juice; tea; sports drinks; and spirits or liquor in containers of up to 50 milliliters (“nips”).
For the purposes of phase two, containers are bottles, cans, jars, or cartons made of glass, metal, or plastic, but not containers containing three or more liters of water or made of high-density polyethylene. Unlike the current redemption system, the bill does not require these containers to be specially marked or identified.
Current law requires the bottle deposit to be a uniform amount throughout the distribution process. The bill maintains this requirement for the recycling fee on carbonated beverages, but not for noncarbonated beverages.
Under the bill, a phase two initiator is any dealer that collects the recycling fee. Similar to phase one and the bottle redemption program, the bill requires initiators to open special accounts at a state branch of a financial institution in which to deposit an amount equal to the recycling fee for each beverage container the initiator sells. It requires each initiator to make (presumably, deposit) the “recycling fee” no later than one month after the beverage's sale date.
Its requires each initiator, by October 31, 2018, to pay the balance outstanding in the special account attributable for the period between July 1, 2018 and September 30, 2018 to the DRS commissioner for deposit into the General Fund. As with the payment by early recycling initiators, subsequent payments must be made to the DRS commissioner for deposit in the General Fund for each quarter by the last day of the month following the quarter. The same penalty, record inspection, enforcement, and tax provisions apply to these initiators as to initiators of early recycling fee containers.
Unlike early recycling fee initiators, however, phase two initiators must deduct from each such payment to DRS an amount equal to the recycling fees charged to dealers determined to be permanently uncollectable in the preceding quarter. (It is not clear to what this refers, since the bill does not require dealers to pay the recycling fee).
Reporting Requirements for Initiators of Redeemable Containers
The bill requires these initiators to submit, on October 31, 2018, a report for the period between July 1, 2018 and September 30, 2018 to both the DEEP and DRS commissioners, and to submit this and subsequent quarterly reports in the same manner and containing the same information as the quarterly reports filed by early recycling fee initiators.
Small Manufacturer Exemption
A manufacturer who bottles and sells 250,000 or fewer containers of noncarbonated beverages, including water, juice, tea, sports drinks, and nips, that are 20 ounces or less in size may apply to DEEP to be exempt from the phase two recycling fee requirements. They must apply no later than October 31, 2018, and must reapply each year thereafter to remain exempt. (Under current law, these manufacturers may apply for an exemption from the redemption system.) As under current law, the commissioner must approve such an application no later than 30 days after receiving the application, provided the applicant meets the bill's requirements. It is not clear why manufacturers, who are not affected by the bill, would seek an exemption.
Recycling Fee Account
Starting July 1, 2018, the bill creates a recycling fee account in the General Fund into which DRS must deposit two cents of every recycling fee. The account may also receive funds from private or public sources, including the federal or a municipal government.
It creates three subaccounts within the recycling fee account. These are the (1) collectors' subaccount, (2) tipping fee subaccount, and (3) beverage container use subaccount. The DRS commissioner must distribute money in the recycling fee account equally among these three subaccounts.
Collectors' and Tipping Fee Subaccounts
Money in the collectors' subaccount must be used to pay solid waste haulers to reflect any verifiable increase in the number of beverage containers they haul because of the elimination of the bottle redemption program. Money in the tipping fee subaccount must be paid to municipalities whose tipping fees increase because the bill has created an increase in the amount of recycled items. Such payments do not affect the payment of grants to a municipality for resources recovery facilities.
For both of these subaccounts DEEP and DRS must determine the terms and amount of any payment, including how often payments are made. The DEEP commissioner may adopt regulations to implement these provisions in consultation with DRS.
Beverage Container Reuse Subaccount
DEEP and the Recycle CT Foundation Inc. must use money in this subaccount to develop reuses for recycled beverage containers. They must fund research, projects, and purposes, including industry and businesses and other efforts that result in such reuse. The DEEP commissioner, in consultation with Recycle CT, must determine the requirements and terms of any funds awarded, including the amount of funding. In developing the requirements, the commissioner may consult with Connecticut Innovations, Inc., which must provide him with any information he finds necessary. The commissioner may adopt implementing regulations.
DEPOSIT REFUNDS TO DEALERS BY CERTAIN INITIATORS
Under current law, deposit initiators are the first distributors to collect the deposit on a beverage container sold in Connecticut. The bill requires, regardless of any other law, any balance in a special account as of March 31, 2018 and June 30, 2018 (presumably for each calendar quarter ending on these dates) to be held in trust for the state by the deposit initiator and used to refund deposits to dealers until August 31, 2018. Any balance remaining on September 1, 2018 must be paid to DRS for deposit in the General Fund.
Connecticut Bottle Redemption System (“Bottle Bill”)
The state's redemption system generally requires consumers to pay a five-cent deposit on each purchased bottle or can of beer, malt beverages, soda water, carbonated soft drinks, and water. The deposit may be redeemed by returning the beverage container to a retailer or bringing it to a redemption center. Unclaimed deposits are transferred to the state's General Fund (CGS § 22a-243 et seq.).
Recycle CT Foundation
This is a state-chartered foundation whose purpose is to coordinate and support research and education to increase the rates of recycling and reuse (CGS § 22a-228a).
Joint Favorable Substitute