2023 Michigan Compiled Laws › Chapter 445 - Trade and Commerce › Act 244 of 1999 - Tobacco Product Manufacturers' Escrow Accounts (445.2051 - 445.2052) › Section 445.2052 - Tobacco Product Manufacturer; Duties; Escrow Fund Deposits; Schedule; Interest or Other Appreciation; Release; Certification of Compliance; Violation; Applicability of Subsection (7); Assignment of Rights; Withdrawal of Funds; Severability.

445.2052 Tobacco product manufacturer; duties; escrow fund deposits; schedule; interest or other appreciation; release; certification of compliance; violation; applicability of subsection (7); assignment of rights; withdrawal of funds; severability.
Sec. 2.
(1) Any tobacco product manufacturer selling cigarettes to consumers within the state (whether directly or through a distributor, retailer, or similar intermediary or intermediaries) after December 28, 1999 shall do 1 of the following:
(a) Become a participating manufacturer and generally perform its financial obligations under the master settlement agreement.
(b) Place into a qualified escrow fund the following amounts (as such amounts are adjusted for inflation):
(i) 1999: $.0094241 per unit sold after December 28, 1999.
(ii) 2000: $.0104712 per unit sold.
(iii) For each of 2001 and 2002: $.0136125 per unit sold.
(iv) For each of 2003 through 2006: $.0167539 per unit sold.
(v) For each of 2007 and each year thereafter: $.0188482 per unit sold.
(2) 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:
(a) 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 department of treasury no later than May 15 of the same year.
(b) 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 department of treasury no later than August 15 of the same year.
(c) 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 department of treasury no later than November 15 of the same year.
(d) 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 department of treasury no later than February 15 of the year following the year in which the cigarettes were sold.
(3) For each of the quarters, the quarterly deposit shall be based upon units sold in that quarter together with the inflation adjustment provided by the department of treasury. 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 section 6c of the tobacco product tax act, 1993 PA 327, MCL 205.426c, shall include the final reconciled deposit figures.
(4) A tobacco product manufacturer that places funds into escrow pursuant to subsection (1)(b) shall receive the interest or other appreciation on the funds as earned. The funds themselves shall be released from escrow only under 1 or more of the following circumstances:
(a) To pay a judgment or settlement on any released claim brought against the 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 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.
(c) To the extent not released from escrow under subdivision (a) or (b), funds shall be released from escrow and revert back to such tobacco product manufacturer 25 years after the date on which they were placed into escrow.
(d) If a court of competent jurisdiction determines that subdivision (b) as amended by 2003 PA 286 is unconstitutional, subdivision (b) does not apply.
(5) Each tobacco product manufacturer that elects to place funds into escrow pursuant to subsection (1)(b) shall on a quarterly and annual basis certify to the department of treasury that it is in compliance with this section. The attorney general 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 be subject to all of the following that are applicable:
(a) Shall be required within 15 days to place sufficient funds into escrow to bring it into compliance with this section. The court, upon a finding of a violation of this subsection, may impose a civil penalty to be paid to the general fund of the state in an amount not to exceed 5% of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 100% of the original amount improperly withheld from escrow.
(b) In the case of a knowing violation, shall be required within 15 days to place sufficient funds into escrow to bring it into compliance with this section. The court, upon a finding of a knowing violation of this subsection, may impose a civil penalty to be paid to the general fund of this state in an amount not to exceed 15% of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 300% of the original amount improperly withheld from escrow.
(c) In the case of a second knowing violation, shall 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 2 years.
(6) For purposes of subsection (5), each failure to make a quarterly or an annual deposit required under subsection (1)(b) shall constitute a separate violation.
(7) If, following a court determination described in subsection (4)(d), a court of competent jurisdiction determines that subsection (4) without subsection (4)(b) is unconstitutional, then this subsection applies. A tobacco product manufacturer that places funds into escrow pursuant to subsection (1)(b) shall receive the interest or other appreciation on the funds as earned. The funds themselves shall be released from escrow only under 1 or more of the following circumstances:
(a) To pay a judgment or settlement on any released claim brought against the 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 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 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 (as determined pursuant to section IX(i)(2) of the master settlement agreement, and before any of the adjustments or offsets described in section IX(i)(3) of the master settlement agreement other than the inflation adjustment) had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer.
(c) To the extent not released from escrow under subdivision (a) or (b), funds shall be released from escrow and revert back to such tobacco product manufacturer 25 years after the date on which they were placed into escrow.
(8) Notwithstanding subsection (4), a tobacco product manufacturer that elects to place funds into escrow pursuant to subsection (1)(b) may make an irrevocable assignment of its interest in the funds to the benefit of the state. Such assignment shall be permanent and apply to all funds in the subject escrow account or that may subsequently come into the 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 the funds. The tobacco product manufacturer, the Michigan department of treasury, 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 (4). An assignment of rights executed pursuant to this section shall be in writing, signed by a duly authorized representative of the tobacco products manufacturer making the assignment, and shall become effective upon delivery of the assignment to the Michigan department of treasury and the financial institution where the escrow account is maintained.
(9) Notwithstanding subsection (4), any escrow funds assigned to the state pursuant to subsection (1)(a) shall be withdrawn by the state upon the request by the treasurer and approval of the attorney general. Any funds withdrawn pursuant to this subsection shall be deposited into the general fund and shall be calculated on a dollar-for-dollar basis as a credit against any judgment or settlement described in subsection (4) which may be obtained against the tobacco product manufacturer who has assigned the funds in the subject escrow account. Nothing in 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 act.
(10) If this act or any portion of 2003 PA 286 is held by a court of competent jurisdiction to be unconstitutional, the remaining portions of this act shall continue in full force and effect.
History:
1999, Act 244, Imd. Eff. Dec. 28, 1999 ;-- Am. 2003, Act 286, Imd. Eff. Jan. 8, 2004 ;-- Am. 2016, Act 42, Eff. June 13, 2016 ;-- Am. 2022, Act 173, Imd. Eff. July 21, 2022