Section 1320-09-02-.04 - ESCROW ADJUSTMENTS AND RELEASE REQUESTS(1) The Escrow Fund Act authorizes the release of funds from escrow only under specified circumstances. For example, the Escrow Fund Act authorizes the release of funds from escrow to the extent that an NPM "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 the master settlement agreement including after the 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". Tenn. Code Ann. § 47-31-103(a)(2)(B)(ii). To establish entitlement to an escrow adjustment on this ground, an NPM must calculate the total payments that it would have made as a Participating Manufacturer on account of the Units Sold in Tennessee during a particular year. The current official Tennessee Request for Release Form, located on the Attorney General's website, must be executed and filed with the Attorney General along with all required documents and information.(2) Adjustments to escrow accounts paid pursuant to the Escrow Fund Act, including balances due for Deposit, may occur: (a) upon a showing that the adjustment is authorized pursuant to the Escrow Fund Act in response to requests for adjustments or release; and (b) upon a showing, submitted by the Tobacco Product Manufacturer, that it is eligible for a release or adjustment under the Escrow Fund Act.(3) The Department or the Attorney General may require an additional deposit when additional information not known by the Attorney General or Department arises after the initial or most recent deposit was deemed sufficient or when a release from escrow was authorized and implemented.(4) All release requests will be governed and reviewed based upon the law, rules and regulations existing as of the date the completed Request for Release Form is filed with the Attorney General. The Attorney General will not consider release requests submitted before the time period has elapsed for which the release is requested. For example, the Attorney General will deny a release request for calendar year 2008 if it is submitted before the end of calendar year 2008.(5) To be eligible for consideration, a release request for an adjustment by an NPM must be made in writing on the State's current official Request for Release Form and must be accompanied by supporting documentation which establishes compliance with all other aspects of the Escrow Fund Act requirements and the basis for the escrow release request. The supporting documentation, at a minimum, must include: (a) A timely filed Certification of Escrow Compliance completed on the State's current official form and executed in compliance with the State's official Instructions and Definitions for Certificate of Escrow Compliance;(b) An affidavit, signed under penalty of perjury by an executive officer of the Tobacco Product Manufacturer responsible for escrow compliance, setting forth the officer's authority to bind and act on behalf of the Tobacco Product Manufacturer and demonstrating the facts which support the adjustment requested; and(c) All records and/or other documentation demonstrating the facts offered in support of the requested adjustment or release, as well as documentation evidencing the timely and full deposit into escrow prior to the request for adjustment; and any legal argument or analysis in support of the requested adjustment. The NPM shall submit a proposed calculation of the annual deposit due, a proposed calculation of the refund amount and a draft letter of instructions to the Escrow Agent concerning the proposed refund. The Attorney General or Commissioner may require an NPM to provide information or documents regarding the NPM's national sales, including, but not limited to, the NPM's bi-monthly Excise Tax Returns filed with the U.S. Treasury, Tobacco Tax and Trade Bureau (TTB), formerly the Bureau of Alcohol, Tobacco & Firearms (BATF), the Importer Trade Activity (ITRAC) data, and/or U.S. Customs Forms 7501. To document its unit sales in Tennessee (as measured by excise taxes paid), the NPM shall include copies of the filed Tennessee excise tax returns for its tobacco products or arrange for equivalent excise tax payment documentation from the State of Tennessee.(d) The Attorney General or Department may request such further information or documents, as is required in light of the specific facts, including, but not limited to, information on compliance with Escrow Fund requirements and the evidence or basis for any adjustment or release requested.(6) The Tobacco Product Manufacturer shall have the burden of proof to establish that a release or adjustment from escrow is appropriate, in whole or in part. Further, there is a presumption of correctness with regard to the calculation by the Department of the number of Units Sold in Tennessee in a particular year.(7) Requests for adjustments to escrow or release from escrow must use the most recent data available for Original Participating Manufacturers' aggregate percentage of the total market and the total payment due from the OPMs. The only data which will be accepted in such submissions is the data provided to the State from the Independent Auditor under the Master Settlement Agreement. An NPM submitting a request for an adjustment to escrow may obtain this information from the State but must maintain this information in a confidential manner consistent with State law and the confidentiality agreement.(8) The Department or the Attorney General may require, at any time, an adjustment to escrow should additional facts become available, which show that the escrow amount paid or escrow amount previously released was incorrect in any manner. Bases for adjustment include, but are not limited to, new information showing inaccurate reporting of the number of Units Sold, new information showing additional Units Sold, or a change in the OPM market share, mistake, inadvertence, or any other failure by the NPM to comply with these rules and regulations or the Escrow Fund Act.(9) A request for an adjustment of escrow account or release will be decided within a reasonable time of filing of all of the information necessary for its determination. The Tobacco Product Manufacturer has the burden to ensure that all necessary documents are filed with the Attorney General and Department. The Attorney General will send a copy of the adjustment or release determination to the Tobacco Product Manufacturer and, if the release request has been allowed in whole or in part, to the financial institution holding the funds in escrow. Decisions to deny escrow release requests in whole or in part, shall contain a short statement of the reason(s) for denial.(10) Except as provided in paragraph 13 below, when a release from escrow occurs to pay a judgment or settlement on any released claim brought against a Tobacco Product Manufacturer by the State or any releasing party located or residing in the State of Tennessee under the Escrow Fund Act, funds shall be released from escrow: (a) In the order in which they were placed in escrow; and(b) Only to the extent and only at the time it is necessary to make payments required under such judgment or settlement.(11) When a release from escrow occurs under the Escrow Fund Act due to the passage of twenty-five (25) years, funds shall be released from escrow:(a) In the order in which they were placed in escrow; and(b) Only if twenty-five (25) years have passed from the date on which the funds were actually placed into escrow. For example, an escrow deposit made during 2005, but related to sales of cigarettes in 1999, will not be eligible for release until 2030 (not 2024).(12) Upon receipt of a Request for Release form, the Attorney General or Department may elect to contact or notify other states to determine if any other states have judgments which they seek to satisfy by executing, attaching or garnishing such sub-account and to allow any other states sufficient time to take actions to attempt execution against the monies held in the Tennessee sub-account which may be available for release from the Tennessee sub-account.Tenn. Comp. R. & Regs. 1320-09-02-.04
Original rule filed January 31, 2008; effective May 30, 2008.Authority: T. C. A. § 4-4-103, § 47-31-102(10), § 67-1-102(a), §§ 67-4-2602(a)(3)(C), 67-4-2602(a)(3)(D)(i), 67-4-2602(a)(3)(D)(iv), § 67-4-2604 and § 67-4-2606(d).