Protecting State Revenues Sample Clauses

Protecting State Revenues. In the framework above, the states may lose revenues due to increased NPM competition. States can prevent this problem by enacting a “Qualifying Statute” that will immunize them from downward NPM adjustments.129 Qualifying Statutes require NPMs to join the MSA or pay a per-unit amount into an escrow account.130 The amount of the escrow payments is set in such a way as to erase the cost advantage for NPMs who do not participate in the MSA.131 Further, many states have enacted Contraband Statutes to enforce their Qualifying Statutes.132 These statutes make it illegal for NPMs to sell cigarettes in a Settling State without first complying with the Qualifying Statute. For example, New York’s Contraband Statutes require manufac- turers to certify that they are in compliance with the state’s Qualifying Statute before their cigarettes can get a New York state cigarette tax stamp.133 Any cigarettes without the tax stamp may be confiscated.134 The ultimate effect of the Qualifying and Contraband Statutes is to force every nonparticipating cigarette manufacturer to join the MSA as an SPM, and thus be subject to its market share restrictions or face large fines. 128. MSA, supra note 116, §§ II(cc), (jj). To trigger this reduction (known as “the NPM adjustment”), the participating manufacturers as a whole must lose market share and an economic consulting firm must determine that the MSA was “a significant factor” con- tributing to the loss. Id. § IX(d)(1)(C), at 61. The payment obligation is reduced based on the amount of market share loss. Id. § IX (d)(1)(A). 129. The MSA defines a Qualifying Statute as one “that effectively and fully neutral- izes the cost disadvantages that the Participating Manufacturers experience vis-à-vis Non- Participating Manufacturers within such Settling State as a result of the provisions of this Agreement.” Id. § IX(d)(2)(E), at 65. If the state has a Qualifying Statute on the books, its Allocated Payment is not subject to an NPM Adjustment. Id. § IX(d)(2)(B), at 63. An “Allocated Payment” is a particular state’s share of the OPM payment obligation. Id. § II(g). 130. The MSA includes a model Qualifying Statute. Id. exhibit T. The model statute requires any tobacco product manufacturer selling tobacco products within the state to either (1) join the MSA or (2) pay a per-unit amount into a state escrow fund. Id. exhibit T, at T-3 to T-4. Every Settling State has enacted a Qualifying Statute, also known as an “Escrow Statute.” Freedom Holdin...