Notice of Intended Action

Tobacco master settlement agreement, adopt ch 234; rescind ch 258

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ARC 8737C

REVENUE DEPARTMENT[701]

Notice of Intended Action

Proposing rulemaking related to tobacco master settlement agreement
and providing an opportunity for public comment

The Revenue Department hereby proposes to adopt new Chapter 234, “Tobacco Master Settlement Agreement,” and to rescind Chapter 258, “Tobacco Master Settlement Agreement,” Iowa Administrative Code.

Legal Authority for Rulemaking

This rulemaking is proposed under the authority provided in Iowa Code sections 453C.1(10), 453D.5(5) and 453D.7(3).

State or Federal Law Implemented

This rulemaking implements, in whole or in part, Iowa Code chapters 453C and 453D.

Purpose and Summary

The purpose of the proposed rulemaking is to adopt new Chapter 234 and rescind and reserve Chapter 258. Chapter 258 contains rules required or necessary to ascertain the amount of excise tax paid on cigarettes sold by participating and nonparticipating tobacco manufacturers in Iowa each year and ensure tobacco product manufacturers comply with the Master Settlement Agreement (MSA). The rules also establish provisions for escrow accounts and provide for periodic compliance reports. Iowa’s model directory and escrow statutes, and corresponding rules, are required to conform to the MSA. All settling states have enacted qualifying statutes. Violations of the model statutes threaten the integrity of the MSA, the fiscal soundness of the State, and the public health. The Department determined the rules are necessary and aid the public’s understanding about what is required of tobacco product manufacturers under the MSA.

However, the Legislature’s recent passage of 2024 Iowa Acts, Senate File 345 and House File 2677, on the regulation of devices and vapor products, required, and in the case of House File 2677, mandated, the adoption of new administrative rules. The Department has determined that the current placement of the administrative rules on cigarette and tobacco-related and adjacent topics does not allow for these new forthcoming chapters of rules to be placed near the others, hindering the public’s accessibility to these rules. Therefore, the Department proposes readopting the rules on the excise tax paid on cigarettes sold by participating and nonparticipating tobacco manufacturers in Iowa and tobacco product manufacturer compliance with the MSA in new Chapter 234. Moving the rules from Chapter 258 to Chapter 234 will provide the public easier accessibility to this and other cigarette- and tobacco-related administrative rules. The Department proposes revisions to the text of the rules for better organization and clarification and to remove unnecessary, obsolete, and duplicative statutory language as required by Executive Order 10.

The Administrative Rules Coordinator provided preclearance for publication of this Notice of Intended Action on December 10, 2024.

Regulatory Analysis

A Regulatory Analysis for this rulemaking was published in the Iowa Administrative Bulletin on November 13, 2024. A public hearing was held on the following date(s):

●December 4, 2024

No public comments on the Regulatory Analysis were received at the hearing or in writing. No changes have been made to the text since publication of the Regulatory Analysis.

Fiscal Impact

This rulemaking has no fiscal impact to the State of Iowa.

Jobs Impact

After analysis and review of this rulemaking, no impact on jobs has been found.

Waivers

Any person who believes that the application of the discretionary provisions of this rulemaking would result in hardship or injustice to that person may petition the Department for a waiver of the discretionary provisions, if any, pursuant to rule 701—7.28(17A).

Public Comment

Any interested person may submit written or oral comments concerning this proposed rulemaking, which must be received by the Department no later than 4:30 p.m. on February 11, 2025. Comments should be directed to:

Matt Bishop
Department of Revenue
Hoover State Office Building
P.O. Box 10457
Des Moines, Iowa 50306
Phone: 515.452.9205
Email: matt.bishop@iowa.gov

Public Hearing

Public hearings at which persons may present their views orally or in writing will be held as follows:

February 11, 2025
1 to 2 p.m.

Via videoconference call
meet.google.com/dfi-ijbx-deo

February 12, 2025
1 to 2 p.m.

Via videoconference call
meet.google.com/mki-dfmd-ybz

Persons who wish to make oral comments at a public hearing may be asked to state their names for the record and to confine their remarks to the subject of this proposed rulemaking.

Any persons who intend to attend a public hearing and have special requirements, such as those related to hearing or mobility impairments, should contact the Department and advise of specific needs.

Review by Administrative Rules Review Committee

The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rulemaking by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rulemaking at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6).

The following rulemaking action is proposed:

ITEM 1.Adopt the following new701—Chapter 234:

CHAPTER 234

TOBACCO MASTER SETTLEMENT AGREEMENT

DIVISION I

TOBACCO MASTER SETTLEMENT AGREEMENT

701—234.1(453C) National uniform tobacco settlement and definitions.

234.1(1) Purpose. In 1998, the state of Iowa joined a multistate agreement with cigarette manufacturers called the Master Settlement Agreement (MSA). Subsequent to entering into that agreement, in 1999 the Iowa general assembly enacted Iowa Code chapter 453C that requires the department to promulgate regulations to ascertain the amount of excise tax paid on cigarettes sold by nonparticipating tobacco product manufacturers in Iowa each year.

234.1(2) Definitions. For the purposes of this chapter, the definitions set forth in Iowa Code section 453C.1 apply.

701—234.2(453C) Annual report.

234.2(1) Filing. A report must be filed by tobacco products distributors, cigarette distributors, and persons who sell tobacco products at retail that were purchased from a person who is not required to file a distributor report.

234.2(2) Annual reporting. The report must be filed annually on or before the last day of the month following the close of the calendar year in which the sales were made and must be in a form and manner prescribed by the department. The reports must be submitted electronically via GovConnectIowa.

234.2(3) Report information. The report must include the following information with respect to units sold that were not purchased from a participating tobacco product manufacturer or units sold that were purchased from a participating tobacco product manufacturer but are not units sold as covered by the MSA:

a.Number of units sold.

b.Brand of the units sold.

c.Name and address of the person from whom each unit was purchased.

d.Name and address of the manufacturer of the unit, if known.

e.Name and address of the importer of the unit, if known, and whether that importer is the exclusive importer of the unit, if known.

234.2(4) Other reporting. A retailer may need to file a report when purchasing roll-your-own tobacco or cigarettes over the Internet, through a catalog from a vendor located outside of Iowa, from an Indian tribe or from an enrolled member of an Indian tribe located on a reservation in or outside Iowa, by mail order, or from a vendor located in another state.

234.2(5) Reporting purchases from participating tobacco product manufacturer. A retailer must also, upon request by the department, report information with respect to units sold that were purchased from any participating tobacco product manufacturer.

701—234.3(453C) Recordkeeping. Every person who sells at retail tobacco products purchased from a person who is not required to file a report required by this chapter, and every tobacco products distributor and cigarette distributor subject to this reporting rule, must maintain complete and accurate records and underlying documentation for five years to support the data required to be supplied to the department under rule 701—234.2(453C). Upon request, all requested records and documents must be provided to the department.

701—234.4(453C) Disclosure to attorney general permitted. The department may disclose any and all information filed pursuant to rule 701—234.2(453C) to the attorney general for use in enforcing compliance with Iowa Code chapter 453C.

These rules are intended to implement Iowa Code chapter 453C.

DIVISION II

TOBACCO PRODUCT MANUFACTURERS’ OBLIGATIONS AND PROCEDURES

701—234.5(453D) Purpose and definitions.

234.5(1) Purpose. Violations of Iowa Code chapter 453C threaten the integrity of the tobacco MSA, the fiscal soundness of the state, and the public health. In 2003, the general assembly enacted Iowa Code chapter 453D to establish procedural enforcement enhancements to aid in the enforcement of Iowa Code chapter 453C.

234.5(2) Definitions. For purposes of this division, the definitions set forth in Iowa Code section 453D.2 apply.

701—234.6(453D) Directory of tobacco product manufacturers.

234.6(1) Directory of cigarettes approved for stamping and sale in Iowa.

a.A tobacco product manufacturer and a brand family shall not be included in the directory authorized by Iowa Code section 453D.3 after April 30 each year until and unless the tobacco product manufacturer has provided current and accurate certification conforming to the requirements of Iowa Code section 453D.3.

b.Nonparticipating manufacturers and their brand families shall not be included in the directory after April 30 each year until and unless the attorney general has determined that the nonparticipating tobacco product manufacturer is in full compliance with Iowa Code section 453D.3 and that neither Iowa Code section 453D.3(2)“b”(1) nor 453D.3(2)“b”(2) applies to the nonparticipating tobacco product manufacturer or a brand family it seeks to have included in the directory.

c.A tobacco product manufacturer or brand family shall be deleted from the directory if a determination is made by the attorney general that the tobacco product manufacturer no longer meets the requirements of Iowa Code section 453D.3, or that either Iowa Code section 453D.3(2)“b”(1) or 453D.3(2)“b”(2) applies.

234.6(2) Notice of inclusion in directory. The attorney general shall notify a tobacco product manufacturer by mail that the tobacco product manufacturer has met the requirements of Iowa Code section 453D.3 and will be included in the directory. This notice shall include each brand family that the attorney general determines will be included in the directory.

234.6(3) Notice of noninclusion in or deletion from the directory. Tobacco product manufacturers that have applied for inclusion in the directory shall be notified in writing of a decision made by the attorney general not to include in or to delete from the directory the tobacco product manufacturer or a brand family. Such notice shall be served on the tobacco product manufacturer’s agent for service of process by certified mail.

234.6(4) Procedure for contesting notice of noninclusion or deletion.

a.Appeals. A tobacco product manufacturer that disagrees with a decision made by the attorney general in relation to the directory may contest the validity of the decision within 60 days of the date of the decision by filing an appeal of that decision with the department. Appeals shall conform generally to the requirements of the “appeals” rule contained in 701—Chapter 7 to the extent applicable. The appeal will, thereafter, be processed and a contested case hearing will be held in general conformity with the requirements of the “filings with the department” and “service by the department” subrules contained in 701—Chapter 7; the requirements of the “docket,” “answer,” “commencement of contested case proceedings,” “discovery,” and “prehearing conference” rules contained in 701—Chapter 7; the requirements of the “orders” subrule contained in 701—Chapter 7; and the requirements of the “record and transcript,” “application for rehearing,” and “ex parte communication and disqualification” rules contained in 701—Chapter 7 to the extent applicable. The burden of proof shall be on the tobacco product manufacturer to establish that the tobacco product manufacturer or a particular brand family is entitled to be listed in the directory.

b.Orders. The form, status, finality and appealability of orders shall be controlled by the general provisions of the “orders” subrule contained in 701—Chapter 7, except that no appeal to, or motion of, any other agency is authorized. All parties to the contested case may appeal any orders entered in relation to the contested case.

c.Stays and bonds. Stays of the decision of the attorney general during the pendency of the contested case proceedings and judicial review of the final contested case order of the department may be sought under the requirements of the “stays” subrule contained in 701—Chapter 7. However, the addition or retention of a tobacco product manufacturer or brand family in the directory shall not be ordered during the pendency of the contested case proceedings and judicial review of the final contested case order unless a sufficient bond has been provided to the attorney general to ensure that all escrow amounts owed at the time of bonding and all escrow amounts reasonably expected to become due during the pendency of the contested case and all related appeals will be satisfied if the tobacco product manufacturer does not ultimately prevail in its challenge. Such bonds shall be subject to update on a quarterly basis on motion of the attorney general.

d.Forfeit of bond. If a claim is made that a particular entity is the tobacco product manufacturer, the entity obtains an order allowing the entity and any of the brands the entity claims to be responsible for to be listed in the directory pending final resolution of the entity’s status, and it is ultimately determined that the entity is not the tobacco product manufacturer, the required bond is forfeited to the state.

These rules are intended to implement Iowa Code chapter 453D.

ITEM 2.Rescind and reserve 701—Chapter 258.

Revenue Department

Open For Comments

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Public Hearing

Official Document

  • Tobacco master settlement agreement, adopt ch 234; rescind ch 258
  • Published on 1/22/2025
  • 40 Views , 0 Comments
  • Notice of Intended Action

The official published PDF of this document is available from the Iowa General Assembly’s Administrative Rules page.

View Official PDF

View the Iowa Administrative Bulletin for 1/22/2025.

View Bulletin

Administrative Rule References

The following administrative rule references were added to this document. You may click a reference to view related notices.

Rule 701-234.1 Rule 701-234.2 Rule 701-234.3 Rule 701-234.4 Rule 701-234.5 Rule 701-234.6

Iowa Code References

The following Iowa code references were added to this document. You may click a reference to view related notices.

Iowa Code 453C Iowa Code 453C.1 Iowa Code 453D Iowa Code 453D.2 Iowa Code 453D.3 Iowa Code 453D.3(2)
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