SALT LAKE CITY – Utah Attorney General Sean Reyes announced a settlement agreement resolving Philip Morris USA, R.J. Reynolds, and other major tobacco companies’ challenge to Utah’s enforcement of a 1990s-era tobacco settlement, resulting in an estimated $300 million coming to Utah over the next ten years.
“This is a monumental win for Utah in many ways,” Reyes said in a press release. “Not only will we see an immediate payout of approximately $60 million, with additional payouts of $240 million over the next ten years, but we also received terms in the settlement to better protect in perpetuity the multi-million dollar annual payments Utah receives from Tobacco companies.”
The agreement settles a dispute with major tobacco companies over enforcement of the 1998 Tobacco Master Settlement Agreement. The MSA requires the tobacco companies to make annual payments to the 46 states involved in the settlement, including Utah.
The MSA settled state litigation for health care costs and other damages caused by cigarette smoking, according to the National Association of Attorneys General. The payment provisions compensate the states in part for the billions of dollars associated with treating tobacco-related diseases under state Medicaid programs. To date, states have received more than $50 billion in settlement payments, the attorneys general association said.
“The funds received will assist the State in fighting cancer and improving the health of Utahans among many other benefits,” Reyes said. “We appreciate the encouragement and input along the way from the Governor, his Cabinet, and the Legislature, which passed a supporting resolution. In particular, Chairman John Valentine and the Utah Tax Commission were essential in making this happen for the State.”
During the recent dispute, tobacco companies alleged deficiencies in Utah’s enforcement of the MSA that would have put continued annual payments at risk. With the agreement, Utah secures payment to Utah of MSA funds and gains time to make important regulatory changes to implement heightened enforcement obligations.
“The State Tax Commission is fully committed to the terms of the supplement to the Master Settlement Agreement signed on March 16, 2018,” said John Valentine, Utah State Tax Commissioner. “In accordance with the commitments made there, we will enhance tobacco tax enforcement of Internet sales, contraband sales of tobacco products, and tobacco products sold on reservations to non-Native American customers.”
The Attorney General’s Office is committed to ensuring that tobacco companies meet their obligations to Utah under the MSA without delay or uncertainty. This agreement ensures prompt and reliable payments into the State Endowment Fund and in support of vital health-related programs, including cancer research, Medicaid, Children’s Health Insurance Program, and alcohol, tobacco, and drug prevention.
“Because of the waiver we negotiated with the participating manufacturers,” Reyes said, “Utah will save tens of millions in not having to arbitrate almost two decades worth of claims. This new agreement will give us until 2022 to restructure our compliance and enforcement regime to meet the settlement obligations without further arbitration challenges.”