According to the Las Cruces Sun-News, the New Mexico legislature’s Tobacco Settlement Revenue Oversight Committee voted this week to endorse legislation that would require nonparticipating manufacturers to make escrow payments for sales on Native American reservations.

The bill, which is expected to be introduced in January, has an unprecedented provision that would retroactively require escrow payments for reservation sales dating back to January 1, 2010.  This is probably unconstitutional.

New Mexico’s stance regarding reservation sales has changed several times in recent years.  Until 2009, New Mexico did not require escrow payments for reservation sales.  In 2009, the legislature passed a law requiring escrow for these sales.  In 2010, the legislature reinstated the escrow exemption for reservation sales.  In 2011, the legislature attempted to reinstate the escrow requirement, but Governor Martinez vetoed the measure, citing her campaign pledge not to raise taxes.

The New Mexico escrow statute is apparently a point of contention in the ongoing “diligent enforcement” arbitration between the major tobacco companies and the states.  Although the Master Settlement Agreement merely requires the settling states to pass escrow statutes that are the same as the MSA’s “model statute” — and that is what New Mexico did — the majors have claimed that New Mexico lacks a “qualifying statute.”  Virginia is the other state facing this claim.

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