Nebraska lawmakers advance cigarette legislation

LINCOLN, Neb. (AP) – A bill that would create a way for Nebraska to collect tobacco tax revenue from American Indian tribes advanced Wednesday through a first-round legislative vote.

The measure would call for state officials to reach compacts with tribes so they could collect money to comply with a national legal settlement with the four largest U.S. tobacco companies.

At stake is $46 million in settlement money for health care expenses. The four companies have claimed recently that states are failing to collect escrow payments from smaller tobacco manufacturers that were not part of the settlement. The escrow payments were required as part of the settlement to keep small manufacturers from having an unfair advantage.

Grand Island Sen. Mike Gloor said his bill is intended to keep Nebraska in compliance with the terms of the 1998 agreement to reimburse governments for tobacco-related health care costs. The settlement stemmed from a lawsuit filed by the attorneys general of 46 states, the District of Columbia, Puerto Rico and the Virgin Islands.

The settlement requires the four companies – Philip Morris USA, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corp. and Lorillard Tobacco Co. – to pay at least $206 billion over a 25-year period.

Gloor said one of the four, R.J. Reynolds Tobacco Company, withheld $2.5 million from its latest payment because it claims Nebraska is not complying with the settlement.

"We literally are at risk of having to pay back some of the money we use in the health care cash fund if we do not get compliant," Gloor said.

American Indian reservations and federal trust lands are generally considered sovereign nations, immune from state tobacco taxes. In March, Nebraska Tax Commissioner Doug Ewald apologized to the Ponca Tribe in Niobrara after state officials seized $14,000 worth of tribal cigarettes on the mistaken belief that they should have had a state tax stamp. The cigarettes were returned.

But the state can collect taxes on tobacco sales to non-tribal customers.

Wholesalers within the Winnebago Tribe in northeast Nebraska collect about $250,000 a year in tribal tobacco taxes. The chief executive of Ho-Chunk Inc., the tribe's economic-development arm, told the Legislature's Revenue Committee in March that tobacco and gas taxes account for tribe's entire tax base. Nebraska and the tribe already share tax revenue from gas sales.

Lance Morgan, the chief executive, told the committee that the bill was an attempt by the big tobacco companies to crush its competitors by eliminating their price advantage.

The bill advanced, 38-0, but requires two more votes before it clears the Legislature.