Section 51-25-02 - RequirementsA tobacco product manufacturer selling cigarettes to consumers within the state, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, after April 8, 1999, must do one of the following:
1. Become a participating manufacturer, as that term is defined in section II(jj) of the master settlement agreement, and generally perform its financial obligations under the master settlement agreement; or2.a. Place into a qualified escrow fund by April fifteenth of the year following the year in question, the following amounts, as such amounts are adjusted for inflation: (1) 1999: $.0094241 per unit sold after April 8, 1999;(2) 2000: $.0104712 per unit sold;(3) For each of 2001 and 2002: $.0136125 per unit sold;(4) For each of 2003 through 2006: $.0167539 per unit sold; and(5) For each of 2007 and each year thereafter: $.0188482 per unit sold.b. A tobacco product manufacturer that places funds into escrow pursuant to subdivision a shall receive the interest or other appreciation on the funds as earned. The funds may be released from escrow only under the following circumstances:(1) 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 must be released from escrow under this paragraph 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 the 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 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 the manufacturer would have been required to make on account of such units sold had it been a participating manufacturer, the excess must be released from escrow and revert back to such tobacco product manufacturer; or(3) To the extent not released from escrow under paragraph 1 or 2, funds must be released from escrow and revert back to the tobacco product manufacturer twenty-five years after the date on which they were placed into escrow.c. Each tobacco product manufacturer that elects to place funds into escrow pursuant to this subsection shall annually certify to the state tax commissioner that it is in compliance with this subsection. The state tax commissioner shall refer every instance of noncompliance to the attorney general. 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 in any year to place into escrow the funds required under this section must:
(1) Be required within fifteen days to place the funds into escrow as will bring it into compliance with this section. The court, upon a finding of a violation of this subdivision, may impose a civil penalty to be paid to the general fund of the state in an amount not to exceed five percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed one hundred percent of the original amount improperly withheld from escrow;(2) In the case of a knowing violation, be required within fifteen days to place the funds into escrow as will bring it into compliance with this section. The court, upon a finding of a knowing violation of this subdivision, may impose a civil penalty to be paid to the general fund of the state in an amount not to exceed fifteen percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed three hundred percent of the original amount improperly withheld from escrow; and(3) In the case of a second knowing violation, 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 two years.d. Each failure to make an annual deposit required under this section constitutes a separate violation.3.Notwithstanding subdivision b of subsection 2, a tobacco product manufacturer that deposits funds into escrow under subdivision a of subsection 2, or a transferee of rights therein, may make an irrevocable assignment of the tobacco manufacturer's interest in the funds to the benefit of the state. The assignment executed in accordance with this section is permanent and applies to all funds in the escrow account and which subsequently may come into the account, including funds deposited into the account before the assignment is executed, funds deposited into the account after the assignment is executed, and interest and other appreciation on the funds. The tobacco product manufacturer, the attorney general, and the financial institution that maintains the escrow account may make an amendment to the qualified escrow account agreement as necessary to effectuate an assignment of the rights executed under this subsection or the withdrawal of funds from the escrow account under subdivision b of subsection 2. An assignment executed under this subsection must be in writing, and be signed by a duly authorized representative of the assignor and assignee and becomes effective upon delivery of the assignment to the attorney general and the financial institution at which the escrow account is maintained.4. Notwithstanding subdivision b of subsection 2, escrow funds assigned to the state under subsection 3 must be withdrawn by the state on the approval of the attorney general. Funds withdrawn under this subsection must be deposited into the general fund and must be calculated on a dollar-for-dollar basis as a credit against any judgment or settlement described in subdivision b of subsection 2 which may be obtained against the tobacco product manufacturer or transferee that has assigned the funds in the escrow account to the state. This section may not be construed to relieve a tobacco product manufacturer from any past, current, or future obligation the manufacturer may have under this chapter or chapter 51-25.1. Amended by S.L. 2023 , ch. 448( HB 1274 ), § 2, eff. 8/1/2023.