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2005 SESSION

054581324
HOUSE BILL NO. 2919
AMENDMENT IN THE NATURE OF A SUBSTITUTE
(Proposed by the House Committee on Appropriations
on February 3, 2005)
(Patron Prior to Substitute--Delegate Hogan)
A BILL to amend and reenact the Code of Virginia by adding a section numbered 58.1-439.15:01, relating to payments to tobacco farmers of domestic leaf tobacco.

Be it enacted by the General Assembly of Virginia:

1.  That the Code of Virginia is amended by adding a section numbered 58.1-439.15:01 as follows:

§ 58.1-439.15:01. Tax incentives for use of domestic tobacco.

A. Definitions.

As used in this section, unless the context requires a different meaning: 

“Domestic tobacco” means tobacco grown, produced and processed entirely within the United States of America.

“Master Settlement Agreement" means the same as that term is defined in § 3.1-336.1.

“Small tobacco product manufacturer” means an entity that in the calendar year of making an assignment pursuant to § 3.1-336.2:1 directly (and not exclusively through any affiliate) manufactures fewer than 5 billion cigarettes, whose cigarettes contain a minimum of 75 percent domestic tobacco, who is not participating in the Master Settlement Agreement, who is in compliance with all obligations imposed pursuant to Article 5 (§ 3.1-336.1 et seq.) and Article 6 (§ 3.1-336.3 et seq.) of Chapter 18 of Title 3.1, and who has executed an assignment and payment to the Commonwealth in accordance with Article 5.1 (§ 3.1-336.2:1 et seq.) of Chapter 18 of Title 3.1.  No person shall be eligible for a credit under this section for any tobacco that he grows and sells to a small tobacco product manufacturer if he is an agent or director of the small tobacco product manufacturer.  

B. For taxable years beginning on or after January 1, 2006, any small tobacco product manufacturer who intends to apply for incentive payments pursuant to this section shall, by March 1 of each year, submit to the Department such information as the Department may require to establish: (i) the percentage of domestic tobacco contained in cigarettes produced by such manufacturer; and (ii) the total pounds of domestic tobacco purchased or expected to be purchased by such manufacturer in the current calendar year. At the time purchase of such domestic tobacco is made, the small tobacco product manufacturer making the purchase shall certify to the Department that the sale is occurring and the amount of domestic tobacco being used in the manufacture of cigarettes which it sells. For all such certifications made by a manufacturer within a calendar year, the Department shall cause incentive payments for which the small tobacco product manufacturer is eligible to be made to the small tobacco product manufacturer. The Tax Commissioner shall, as soon as practicable after the following January 1, but no later than the following January 15, make a written certification to the Comptroller of the amount of the incentive payment to be made to the small tobacco product manufacturer. As soon as practicable after receipt of the Tax Commissioner's certification, but no later than the following February 1, the Comptroller shall draw his warrant from funds in the appropriate escrow account pursuant to § 3.1-336.2 on the Treasurer of Virginia in the proper amount in favor of the small tobacco product manufacturer.

C. For taxable years beginning on or after January 1, 2006, but before January 1, 2007, the incentive payments shall be the price paid per pound of domestic tobacco used in the manufacture of cigarettes which it sells, provided that the aggregate incentive payments for which a small tobacco product manufacturer may be eligible in any such year shall not exceed a total sum equal to 25 percent of the amount that the manufacturer paid for all prior calendar years net of any escrow funds that are released and reverted back to the small tobacco product manufacturer into a qualified escrow account established pursuant to Article 5 (§ 3.1-336.1 et seq.) of Chapter 18 of Title 3.1 as of the April 16 immediately preceding the date the incentive payments are made. The amount paid into a qualified escrow account in calendar year 2005 for purposes of the incentive payments shall be computed net of any escrow funds that are released and reverted back to the small tobacco product manufacturer for the prior calendar year that are attributable to calendar year 2005 escrow payments plus such payments for prior years, pursuant to subdivision B 2 of § 3.1-366.2 as it was in effect on June 30, 2005.

For taxable years beginning on or after January 1, 2007, but before January 1, 2008, the incentive payments shall be the price paid per pound of domestic tobacco used in the manufacture of cigarettes which it sells in the taxable year, provided that the aggregate incentive payments for which a small tobacco product manufacturer may be eligible in any such year shall not exceed a total sum equal to 20 percent of the amount that the manufacturer paid for the prior calendar year into a qualified escrow account established pursuant to Article 5 (§ 3.1-336.1 et seq.) of Chapter 18 of Title 3.1 as of the April 16 immediately preceding the first day of the taxable year.

For taxable years beginning on or after January 1, 2008, but before January 1, 2009, the incentive payments shall be the price paid per pound of domestic tobacco used in the manufacture of cigarettes which it sells in the taxable year, provided that the aggregate incentive payments for which a small tobacco product manufacturer may be eligible in any such year shall not exceed a total sum equal to 15 percent of the amount that the manufacturer paid for the prior calendar year into a qualified escrow account established pursuant to Article 5 (§ 3.1-336.1 et .seq.) of Chapter 18 of Title 3.1 as of the April 16 immediately preceding the first day of the taxable year.

For taxable years beginning on or after January 1, 2009, but before January 1, 2010, the incentive payments shall be the price paid per pound of domestic tobacco used in the manufacture of cigarettes which it sells in the taxable year, provided that the aggregate incentive payments for which a small tobacco product manufacturer may be eligible in any such year shall not exceed a total sum equal to 10 percent of the amount that the manufacturer paid for the prior calendar year into a qualified escrow account established pursuant to Article 5 (§ 3.1-336.1 et seq.) of Chapter 18 of Title 3.1 as of the April 16 immediately preceding the first day of the taxable year.

For taxable years beginning on or after January 1, 2010, but before January 1, 2011, the incentive payments shall be the price paid per pound of domestic tobacco used in the manufacture of cigarettes which it sells in the taxable year, provided that the aggregate incentive payments for which a small tobacco product manufacturer may be eligible in any such year shall not exceed a total sum equal to 5 percent of the amount that the manufacturer paid for the prior calendar year into a qualified escrow account established pursuant to Article 5 (§ 3.1-336.1 et seq.) of Chapter 18 of Title 3.1 as of the April 16 immediately preceding the first day of the taxable year.

For taxable years beginning on or after January 1, 2011, there shall be no incentive payments made pursuant to this section.

2.  That the Department of Taxation shall within 280 days of the passage of this act develop and make publicly available guidelines governing the payments to small tobacco product manufacturers purchasing domestic tobacco. The development of such guidelines shall be exempt from the provisions of the Administrative Process Act (§ 2.2-4000 et seq.) of the Code of Virginia.