IMF C.S.S.B. 55 75(R)BILL ANALYSIS STATE AFFAIRS C.S.S.B. 55 By: Zaffirini (Berlanga) 5-21-97 Committee Report (Substituted) BACKGROUND According to research on cigarette addiction, 89% of adult daily smokers started smoking before 18 years of age. Although Texas law prohibits the sale of cigarettes or tobacco products to minors, statistics show that incidence of tobacco use by Texas youth has increased. In 1994, the American Journal of Public Health reported that the estimated number of smokers in Texas between 12-18 years of age is 202,871, and the estimated number of cigarette packs sold illegally to minors is 20.22 million. Statewide surveys concerning the access and availability through over-the-counter and vending machine purchases indicate that too many youths are successful in acquiring cigarettes and tobacco products. In an attempt to restrict minors' access to tobacco, this bill increases the fees for permits to sell cigarettes and tobacco products and dedicates those funds to enforcement and education. Additionally, C.S.S.B. 55 requires sales clerks to verify age through a photo ID; prohibits minors from possessing or using tobacco; requires all tobacco sales to be vendor assisted, except in areas not open to minors at any time; and prohibits distribution of free tobacco samples. PURPOSE As proposed, C.S.S.B. 55 would: _ Require proof of identification for anyone under 27 to purchase tobacco products; _ Prohibit tobacco vending machines except in adults-only facilities; _ Prohibit distribution of free samples or coupons for tobacco to minors; _ Allow unannounced inspections of retailers; _ Prohibit outdoor advertising of tobacco within 1000 feet of school or church; _ Set a 10 percent fee on all outdoor tobacco advertising; _ Prohibit possession or use of tobacco by minors; _ Require minors possessing or using tobacco to attend a tobacco awareness program and if they do not minors would lose their drivers license; _ Require the comptroller to create a Tobacco Use Public Awareness Campaign; and _ Significantly raise tobacco permit fees. RULEMAKING AUTHORITY It is the committee's opinion that this bill expressly grants additional rulemaking authority to the comptroller in SECTION 2.01 (Sec. 161.123(d), Health and Safety Code), SECTION 4.04 (Sec. 154.1143(b), Tax Code), and SECTION 4.09 (Sec.155.0593(b), Tax Code). Rulemaking authority is transferred from the board to the comptroller in SECTION 1.01 (Sec. 161.084(c), Health and Safety Code). A specific limitation on the adoption of rules by the comptroller is provided in SECTION 1.01 (Sec. 161.088(a), Health and Safety Code). SECTION BY SECTION ANALYSIS ARTICLE 1. New heading: DISTRIBUTION OF CIGARETTES OR TOBACCO PRODUCTS SECTION 1.01. Amends Chapter 161H, Health and Safety Code, as follows: SUBCHAPTER H. DISTRIBUTION OF CIGARETTES OR TOBACCO PRODUCTS Sec. 161.081. DEFINITIONS. Defines "cigarette," "permit holder," "retail sale," "retailer," "tobacco product," and "wholesaler." Sec. 161.082. SALE OF CIGARETTES OR TOBACCO PRODUCTS TO PERSON YOUNGER THAN 18 YEARS OF AGE PROHIBITED; PROOF OF AGE REQUIRED. Subsection (a) revises language to add "with criminal negligence" to the provision that an offense is committed if the person sells, gives or causes to be sold or given a cigarette or tobacco to someone who is younger than 18 years of age, omits the words " as a commercial enterprise" and other language about knowing that the person is receiving the cigarette or product. Subsection (b) adds language to establish that an employee is criminally responsible for an offense that occurs in connection with a retail sale as specified and is subject to prosecution. Subsection (c) makes a conforming change. Subsection (d) makes conforming changes. Removes "Texas driver's license or" and clarifies that apparently valid proof of identification presented to the defendant is a defense. Subsection (e) makes conforming changes. Revises language to clarify that a proof of identification satisfies the requirements of Subsection (d) if it contains a photograph and consistent information as specified and was issued by a governmental agency. Specifies items that may be included as proof of identification. Sec. 161.083. SALE OF CIGARETTES OR TOBACCO PRODUCTS TO PERSON YOUNGER THAN 27 YEARS OF AGE. Subsection (a) prohibits a person from selling, giving, or causing to be sold or given a cigarette or tobacco product to someone younger than 27 years of age unless presented an apparently valid proof of identification, pursuant to federal regulation as specified. Subsection (b) requires a retailer to adequately supervise and train agents and employees to prevent a violation. Subsection (c) specifies satisfactory proof of identification. Subsection (d) establishes that a violation of this section is not a violation of this subchapter for purposes of Sec. 154.1142 or 155.0592, Tax Code, notwithstanding any other provision of law. Sec. 161.084. WARNING NOTICE. Subsection (a) adds the words "cigarettes or" to clarify that this section applies to the sale of cigarettes or tobacco products. Subsection (b) adds language to the sign required to be posted as specified to include the statement: "Purchasing or attempting to purchase tobacco products by a minor under 18 years of age is prohibited by law." Upon conviction, a "class c misdemeanor, including" a fine of up to "$500" may be imposed. "Violations may be reported to the Texas Comptroller's office by calling (insert toll-free telephone number)." Subsection (c) replaces the "board" with the "comptroller" in regards to who is required to determine, by rule, the design and size of the sign. Subsection (d) replaces the "department" with the "comptroller" as to who is required to provide the sign as specified. Makes conforming changes. Sec. 161.085. NOTIFICATION OF EMPLOYEES AND AGENTS. Requires each permit holder to notify, as specified, each employee engaged in retail sales of cigarettes or tobacco products regarding state law. Sets forth conditions and requirements regarding the notice, including information and signed statements as specified. Requires the permit holder to retain the signed forms as specified. Provides that failure to notify employees as required is a Class C misdemeanor. Provides that a showing of proof as specified, is a defense. Requires proof to be shown, as specified, within 72 hours of the offense. Sec. 161.086. VENDOR ASSISTED SALES REQUIRED; VENDING MACHINES. Subsection (a) prohibits a retailer or other person from offering cigarettes or tobacco products, or installing or maintaining a vending machine containing cigarettes or tobacco products, except as specified. Subsection (b) specifies that Subsection (a) does not apply to a facility that is not at any time open to persons younger than 18 years of age. Subsection (c) allows the comptroller or a peace officer, with or without warrant, to seize, seal, or disable a vending machine as specified. Requires that property seized be in accordance with, and subject to forfeiture to the state under Chapter 154H, Tax Code and Chapter 155E, Tax Code. Subsection (d) establishes that a person who violates Subsection (a) commits a Class C misdemeanor. Sec. 161.087. DISTRIBUTION OF CIGARETTES OR TOBACCO PRODUCTS. Prohibits a person from distributing a free sample of a cigarette or tobacco product or a coupon or other item, as specified, to anyone younger than 18 years old. Prohibits a permit holder from accepting, redeeming, offering to accept or redeem, or hiring someone to accept or redeem an item that may be used for a free, discounted, or sample cigarette or tobacco product if the recipient is less than 18 years old, except as specified. Prohibits the redemption of a coupon for cigarette or tobacco products by mail or courier. Provides that the prohibitions regarding the use of coupons or other items as specified are not applicable to a transaction between permit holders unless the transaction is a retail sale. Provides that a person violating this section commits a Class C misdemeanor. Sec. 161.088. ENFORCEMENT: UNANNOUNCED INSPECTIONS. Subsection (a) requires the comptroller to enforce this subchapter in partnership and cooperation with county sheriffs and municipal police chiefs and ensure the state's compliance with law and regulations as specified. Limits the comptroller from adopting rules governing this subchapter or Subchapter K, N, or O, as specified. Subsection (b) allows the comptroller to make block grants, as specified. Requires that random unannounced inspections be conducted at least annually. Requires the comptroller to rely on sheriffs or chiefs of police to the fullest extent possible. Subsection (c) allows the comptroller to enter into interagency contracts as specified to facilitate effective administration and enforcement of this subchapter. Subsection (d) requires that use of a person acting as a minor decoy be in a manner that promotes fairness. Allows a person to be enlisted by the comptroller to act as a decoy only if specified requirements are met. Subsection (e) requires the comptroller to annually prepare a report for submission by the governor as specified. Sec. 161.089. PREEMPTION OF LOCAL LAW. Establishes that this subchapter does not preempt a local regulation, as specified nor affect the authority of a political subdivision to adopt or enforce an ordinance or requirement relating to cigarettes or tobacco products, provided that the regulation, ordinance or requirement meet certain specified requirements. Sec. 161.090. REPORTS OF VIOLATION. Requires a local or state law enforcement agency or other governmental unit to notify the comptroller, on the 10th day of every month, or the first working day thereafter, of any violation of this subchapter that was detected, investigated, or prosecuted in the preceding month. ARTICLE 2. ADVERTISING OF CIGARETTES OR TOBACCO PRODUCTS SECTION 2.01. Amends Chapter 161K, Health and Safety Code, as follows: SUBCHAPTER K. PROHIBITION OF CERTAIN CIGARETTE OR TOBACCO PRODUCT ADVERTISING; FEE Sec. 161.121. DEFINITIONS. Adds a definition for "cigarette" and makes conforming changes. Sec. 161.122. PROHIBITION RELATING TO CERTAIN SIGNS; EXCEPTIONS. Replaces "500" with "1000" feet, thus increasing the distance that must be kept between specified advertisements and a church or school. Removes language pertaining to an advertising contract before August 1991. Adds an exception for a sign that was located closer than 1000 feet, but not closer than 500 feet, before September 1, 1997. Makes a conforming change. Sec. 161.123. ADVERTISING FEE. Provides that a purchaser of advertising is liable for and required to remit a fee that is 10 percent of the gross sales price of any outdoor advertising of cigarettes and tobacco products in Texas. Requires the comptroller to collect the fee and deposit the money as specified. Prohibits any contractual nullification of fee liability. Requires the comptroller to establish, by rule, fee collection periods and payment methods; requires the comptroller to adopt any other rules necessary to administer and enforce this section. Defines "gross sales price." Sec. 161.124. USE OF ADVERTISING FEE. Requires the comptroller to deposit the fee to a special account called the tobacco education and enforcement education fund. Allows account money to be appropriated for administration, enforcement, and an education advertising campaign as specified. Sec. 161.125. ADMINISTRATIVE PENALTY. Allows the comptroller to impose, by order, a penalty against an advertising purchaser as specified. Allows the penalty amount to be no more than $5,000. Establishes that each day a violation continues or occurs is considered a separate violation. Requires that the amount of the penalty to be based on certain facts and considerations as specified. Requires the comptroller to prescribe the procedure for the imposition of the penalty as specified. Establishes that a proceeding is subject to Chapter 2001, Government Code. Requires the comptroller to give notice if, by order, it is found that a violation has occurred. Allows the comptroller to refer the matter to the attorney general for collection. Requires a collected penalty, as specified, to be deposited into the general revenue fund. ARTICLE 3. YOUTH TOBACCO USE SECTION 3.01. Amends Chapter 161, Health and Safety Code, by adding Subchapters N and O, as follows: SUBCHAPTER N. TOBACCO USE BY MINORS Sec. 161.251. DEFINITIONS. Defines "cigarette" and "tobacco product." Sec. 161.252. POSSESSION, PURCHASE, CONSUMPTION, OR RECEIPT OF CIGARETTES OR TOBACCO PRODUCTS BY MINORS PROHIBITED. Provides that an individual younger than 18 years old commits an offense under certain conditions. Provides an exception to the application of this section if the individual possessed the cigarette or tobacco product in the presence of certain persons. Provides an exception to the application of this section if the individual is participating in an inspection or test of compliance in accordance with Section 161.088. Establishes that an offense under this section is a Class C misdemeanor. Sec. 161.253. TOBACCO AWARENESS PROGRAM. Requires the court, upon conviction of an individual for an offense under Section 161.252, to suspend execution of sentence and require the defendant to attend a tobacco awareness program approved by the comptroller. Allows the court to require the parent or guardian of the defendant to attend the tobacco awareness program with the defendant. Sets forth provisions and requirements regarding the tobacco awareness program and tobacco-related community service. Requires the court, upon receipt of certain evidence, to execute the sentence, but allows reduction of the fine to not less than half of what was previously imposed. Sec.161.254. DRIVER'S LICENSE SUSPENSION OR DENIAL. Requires the court to order the Department of Public Safety (DPS) to suspend or deny issuance of a driver's license or permit if the defendant does not provide the evidence as specified. Sets forth certain requirements regarding notice of court action by the DPS. Sec. 161.255. EXPUNGEMENT OF CONVICTION. Allows an individual convicted of an offense under Section 161.252 to apply to the court to have the conviction expunged. Requires the court to order the conviction and any document related to the offense to be expunged from the individual's record upon finding the tobacco awareness program or tobacco-related community service satisfactorily completed as ordered. Prohibits the conviction from being shown or made known for any purpose. Sec. 161.256. JURISDICTION OF COURTS. Allows a justice court or municipal court to exercise jurisdiction over any matter in which a court under this subchapter may impose a requirement to attend a tobacco awareness program or perform community service, as specified, or order driver's license or permit suspension or denial. Sec. 161.257. APPLICATION OF OTHER LAW. Provides that Title 3, Family Code, is not applicable to a proceeding under this subchapter. SUBCHAPTER O. PREVENTION OF TOBACCO USE BY MINORS Sec. 161.301. TOBACCO USE PUBLIC AWARENESS CAMPAIGN. Requires the comptroller to develop and implement a public awareness campaign designed to reduce tobacco use by minors in this state. Allows the campaign to use advertisements or media to provide educational information about tobacco use. Allows the comptroller to contract with another person to develop and implement the public awareness campaign, with the specified exception relating to a person or entity that is required to register with the Texas Ethics Commission. ARTICLE 4. RELATED TAX CODE PROVISIONS SECTION 4.01. Amends Section 154.111 Tax Code, by revising the application fee amounts in Subsection (b) so that the fee that must accompany an application for a bonded agent's permit is $300, rather than $100; for a distributor's permit $300, rather than $100; and $200, rather than $50, for a wholesaler's permit. Replaces "treasurer" with "comptroller" in terms of who the permit has been received from. Adds to the fee list: $180 for a retailers permit. Adds Subsection (g) to provide that an application for a retailer's permit before September 1, 1999 must be accompanied by a $125 fee, notwithstanding the $180 fee as specified. Establishes that this subsection expires December 31, 1999. Repeals Sec. 154.111(c), Tax Code. SECTION 4.02. Amends Section 154.121, Tax Code, to require that revenue from the sale of retailer's permits be deposited to the general revenue fund. Allows appropriations only as specified. Makes a conforming change. SECTION 4.03. Amends Chapter 154D, Tax Code, by adding Section 154.1142, as follows: Sec. 154.1142. DISCIPLINARY ACTION FOR CERTAIN VIOLATIONS. Subsection (a) establishes that a retailer is subject to disciplinary action under conditions as specified. Subsection (b) allows the comptroller to suspend the permit or administratively assess a fine if after notice and hearing, it is found that a permit holder is in violation at a place of business for which a permit was issued as specified. Allows the comptroller to require the permit holder to pay a fine not to exceed amounts as specified, according to if and how many times the permit holder has been found in violation of Subchapter H or K, Chapter 161, Health and Safety Code, at that place of business during the preceding 12 months . Subsection (c) requires the comptroller to revoke the permit if the permit holder has been found in violation as specified on four or more previous and separate occasions at that same place of business during the preceding 12 months. Subsection (d) prohibits a retailer whose permit has been revoked as specified from applying for a retailer's permit for the same place of business in less than six months after the revocation date. SECTION 4.04. Amends Chapter 154D, Tax Code, by adding Section 154.1143, as follows: Sec. 154.1143. ACTIONS OF EMPLOYEE. Subsection (a) allows the comptroller to suspend a permit, but not revoke the permit as specified if certain conditions are found in regards to a violation by an employee. Subsection (b) requires the comptroller to adopt rules or policies establishing the minimum requirements for approved seller training programs. Requires the comptroller to approve, on application, seller training programs meeting the requirements that are sponsored privately or by public community colleges. Allows the comptroller to charge an application fee, as specified. Subsection (c) allows the comptroller to approve a program as specified, that is sponsored by a permit holder for the training of employees if there are at least 100 persons who sell tobacco products employed. SECTION 4.05. Amends Section 154.504, Tax Code, to add language which clarifies that a person is subject to a $100 fine for the commission of an offense regarding the sale of cigarettes in smaller quantities than a package containing at least 20 cigarettes. SECTION 4.06. Amends Section 155.049, Tax Code, to conform with Sec.154.111 in revising the amounts listed for different permit application fees in subsection (b), and adding subsection (g) concerning permits issued or renewed before September 1, 1999. Repeals Sec. 155.049(c), Tax Code. SECTION 4.07. Amends Section 155.058, Tax Code, to conform with the changes made regarding the deposit and appropriation of revenue in Sec. 154.121. SECTION 4.08. Amends Chapter 155C, Tax Code, by adding Section 155.0592, entitled "Disciplinary Action for Certain Violations" to conform with the new language in Sec. 154.1142. SECTION 4.09. Amends Chapter 155C, Tax Code, by adding Section 155.0593, entitled "Actions of Employee" to conform with the new language in Sec. 154.1143. ARTICLE 5. FEDERAL WAIVER; TRANSITION; EFFECTIVE DATE; EMERGENCY CLAUSE SECTION 5.01. (a) requires the comptroller to request exemption and to allow delay of implementing the affected provision of law if the comptroller determines that an exemption from federal preemption from the Food and Drug Administration is necessary. Subsection (b) requires the comptroller to publish in the Texas Register notice as specified if a provision of law affected by a delay in implementation under Subsection (a) contains a criminal penalty. Provides that the provision is effective on the 90th day after the date that notice of the grant of an exemption is published. SECTION 5.02. (a) establishes the effective date of this Act as September 1, 1997, except as provided by Subsection (b). Subsection (b) establishes that Sections 161.083, 161.085, 161.086 and Chapter 161N, Health and Safety Code, as added by this Act take effect January 1, 1998. Subsections (c) and (d) make application of this Act prospective and provide that existing law is continued in effect for purpose of application to acts occurring or offenses committed before the effective date of this Act. Subsection (e) provides that the increase in the amount of a fee as provided by Section 154.111 and 155.049, Tax Code, as amended by this Act, takes effect for and is applicable to the permit years beginning on or after March 1, 1998, and June 1, 1998, as applicable. SECTION 5.03. Establishes that notwithstanding any other law, the implementation and execution of the programs established by this Act are contingent on the availability of funds as specified. SECTION 5.04. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE In SECTION 1.01, C.S.S.B. 55 changes Sec. 161.082(b) of the original to provide that an employee of a retail establishment is criminally responsible and subject to prosecution for an offense in the sale or distribution of cigarettes or tobacco products to a minor. Removes subsection (f) that stated that compliance with Sec. 161.085 is not a defense to prosecution. The substitute revises Sec. 161.083 concerning the sale to persons younger than 27 years of age to: clarify that it is pursuant to federal regulations; remove the provision regarding a fine of up to $100 per violation; and specify that a violation of this section is not a violation of the subchapter for purposes of specified Tax Code sections. The language of the required sign in Sec. 161.084 of the substitute bill has been altered to specify that the act of purchasing by a minor or its attempt is illegal and that the act of providing tobacco products to a minor is illegal. Also added is the sentence regarding how to report violations and the space to insert the toll-free number to the Texas Comptroller's office. The substitute bill removes Sec. 161.085 (a)(2) from the original, so as to leave out from that section the clause concerning sale or distribution to those under 27 years of age; renumbers the subsequent subdivision in subsection (a) to conform. Adds peace officers to the list of persons who can demand a permit holder to provide the notice required in subsection (a). Sec. 161.087(b) makes nonsubstantive technical changes. Sec. 161.088(a) adds "except as expressly authorized by law" to the comptroller's rulemaking authority. (c) is added to allow the comptroller to enter into interagency contracts; Subsections (d) and (e) are relettered to conform. Sec. 161.090 changes "thereafter" to "after that date." In SECTION 2.01, C.S.S.B. 55 makes revisions in the ordering and substance of Subchapter K. Sec. 161.122 in the substitute bill was originally numbered as Sec. 161.123. Also added to the substitute version of this section is subsection (e) which grants an exception for existing signs located farther than the former 500 foot, but closer than the now required 1,000 feet. Subchapter K, Sec. 161.123 of the substitute adds language to both the heading and the content of what was originally Sec.161.122. This section adds the provision that the purchaser of advertising is liable and required to remit fees for any outdoor advertising, and specifies that such fee liability cannot be contracted away. Subsections (d) and (e) are also added. Furthermore the substitute adds Sec. 161.124 and 161.25 to this Subchapter. Neither the use of the advertising fee nor the administrative penalty section were in the original bill. In SECTION 3.01, adds language to Sec. 161.301(b) to prohibit the comptroller from contracting with a person or entity required to file with the Ethics Commission under Chapter 305, Government Code. In SECTION 4.01, C.S.S.B. 55 reduces the amount of the retailer's permit in Sec. 154.111(b)(5). Subsection (g) is added to this section to reduce the application fee for a permit issued or renewed before September 1, 1999 and to provide an expiration date. SECTION 4.03 of the substitute bill (Sec.154.1142, Chapter 154D, Tax Code) has new language which clarifies that the violations being referred to are ones which occur at a single place of business for which a permit is issued. The same clarification is added throughout the substitute's SECTION 4.03 and SECTION 4.04. The substitute revises Sec. 154.1142 to add a new subsection (a) that specifies that the retailer is subject to disciplinary action for offenses committed by agents and employees as specified, and sets forth more specific conditions and determinations that pertain to the assessment of fines and/or permit revocation. Reletters subsequent subsections and adds subsection (d) referred to above that deals with permit revocation. Adds new SECTION 4.04 of the substitute also adds a section to the Tax Code (Sec. 154.1143) regarding actions of retail employees and seller training programs. Subsequent sections are renumbered to conform. Conforming changes are made to the remainder of SECTION 4. SECTION 4.06's Tax Code provisions, for example, are changed to match the fee revisions already made concerning the retailer's permit. Whenever applicable, the changes the substitute bill put in place in Chapter 154 of the Tax Code are carried over to conform in Chapter 155. Specifically added ( but also in conformity) is Sec. 155.0593 regarding employees and their actions. Adds new SECTION 4.09 regarding actions of retail employees and seller training programs. SECTION 5.01 changes the entity responsible for publication of notices in the Texas Register from the Texas Board of Health to the comptroller. SECTION 5.02 makes a conforming change. Adds new SECTION 5.03 to add language to make law contingent on availability of funds. SECTION 5.04 makes a conforming change.