As reported in the Wall Street Journal this week, the 46 state-signatories to the 1998 Master Settlement Agreement are negotiating a settlement of claims by the signatory-manufacturers that the states have failed to “diligently enforce” escrow requirements applicable to the non-signatory nonparticipating manufacturers.   The signatory-manufacturers are attempting to recoup as much as two billion dollars from the states.

The proposed settlement would require the states to enact new “model legislation” amending the escrow statutes originally enacted pursuant to the MSA in the late-1990s.   (The escrow statutes have already been amended twice pursuant to the participating manufacturers’ demands.)  The contours of this model legislation are consistent with the requirements in the Nebraska and Arkansas laws previously reported in this blog.

The primary aim of the proposed model legislation is curtailing tribal sales.  The legislation would require states to tax all tribal sales, except sales to enrolled tribe members on their territory.  The legislation would also require escrow payments for all tribal sales.  It is not clear whether all of these requirements are constitutional.  It is also unclear whether such measures would be politically viable, as existing regimes for tribal taxation have often been the product of negotiations between all interested parties that took significant time and effort.

The model legislation would impact all nonparticipating manufacturers by imposing new bonding requirements, and by potentially requiring local distributors to make escrow payments if the manufacturer does not.

For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.