Amend CSHB 3540 as follows:                                                  
	(1)  On page 14, line 5, through page 17, line 2, strike 
SECTIONS 5.01, 5.02, 5.03, and 5.04 of the bill and renumber 
subsequent sections accordingly.
	(2)  On page 31, between lines 22 and 23, add ARTICLE 11 of the 
bill to read as follows and renumbering subsequent articles 
appropriately:

ARTICLE 11.  NONSETTLING MANUFACTURER FEES
	SECTION 11.01.  Chapter 161, Health and Safety Code, is 
amended by adding Subchapter U to read as follows:

SUBCHAPTER U.  FEE ON CIGARETTES AND CIGARETTE TOBACCO PRODUCTS 
MANUFACTURED BY CERTAIN COMPANIES
	Sec. 161.601.  PURPOSE.  The purpose of this subchapter is to:          
		(1)  prevent nonsettling manufacturers from undermining 
this state's policy of discouraging underage smoking by offering 
cigarettes and cigarette tobacco products at prices that are 
substantially below the prices of cigarettes and cigarette tobacco 
products of other manufacturers;
		(2)  protect the tobacco settlement agreement and 
funding, which has been reduced because of the growth of sales of 
nonsettling manufacturer cigarettes and cigarette tobacco 
products, for programs that are funded wholly or partly by payments 
to this state under the tobacco settlement agreement and recoup for 
this state settlement payment revenue lost because of sales of 
nonsettling manufacturer cigarettes and cigarette tobacco 
products;
		(3)  provide funding to enforce and administer this 
subchapter and any legislation relating to nonsettling 
manufacturers; and
		(4)  provide funding for any other purpose the 
legislature determines.
	Sec. 161.602.  DEFINITIONS.  In this subchapter:                        
		(1)  "Brand family" means each style of cigarettes or 
cigarette tobacco products sold under the same trademark and 
differentiated from one another by means of additional modifiers, 
including "menthol," "lights," "kings," and "100s."  The term 
includes any style of cigarettes or cigarette tobacco products that 
have a brand name, trademark, logo, symbol, motto, selling message, 
recognizable pattern of colors, or other indication of product 
identification that is identical to, similar to, or identifiable 
with a previously known brand of cigarettes or cigarette tobacco 
products.
		(2)  "Cigarette" means any product that contains 
nicotine and is intended to be burned or heated under ordinary 
conditions of use.  The term includes:
			(A)  a roll of tobacco wrapped in paper or another 
substance that does not contain tobacco;
			(B)  tobacco, in any form, that is functional in a 
product that, because of the product's appearance, the type of 
tobacco used in the filler, or the product's packaging and 
labeling, is likely to be offered to or purchased by a consumer as a 
cigarette; or
			(C)  a roll of tobacco wrapped in any substance 
containing tobacco that, because of the product's appearance, the 
type of tobacco used in the filler, or the product's packaging and 
labeling, is likely to be offered to or purchased by a consumer as a 
cigarette.
		(3)  "Cigarette tobacco product" means roll-your-own 
tobacco or tobacco that, because of the tobacco's appearance, type, 
packaging, or labeling, is suitable for use in making cigarettes 
and is likely to be offered to or purchased by a consumer for that 
purpose.
		(4)  "Manufacturer" means a person that manufactures, 
fabricates, or assembles cigarettes for sale or distribution. For 
purposes of this subchapter, the term includes a person that is the 
first importer into the United States of cigarettes and cigarette 
tobacco products manufactured outside the United States.
		(5)  "Nonsettling manufacturer" means a manufacturer of 
cigarettes that did not sign the tobacco settlement agreement.
		(6)  "Nonsettling manufacturer cigarettes" means 
cigarettes manufactured, fabricated, assembled, or imported by a 
nonsettling manufacturer.
		(7)  "Nonsettling manufacturer cigarette tobacco 
products" means cigarette tobacco products manufactured, 
fabricated, assembled, or imported by a nonsettling manufacturer.
		(8)  "Tobacco settlement agreement" means the Agreement 
Regarding Disposition of Settlement Proceeds filed on July 24, 
1998, in the United States District Court, Eastern District of 
Texas, in the case styled The State of Texas v. The American Tobacco 
Co., et al., No. 5-96CV-91. The term includes the subsequent 
Clarification of Agreement Regarding Disposition of Settlement 
Proceeds filed on July 24, 1998, in that litigation.
	Sec. 161.603. FEE IMPOSED. (a) A fee is imposed on the sale, 
use, consumption, or distribution in this state of:
		(1)  nonsettling manufacturerer cigarettes if a stamp 
is required to be affixed to a package of those cigarettes under 
Chapter 154, Tax Code;
		(2)  nonsettling manufacturer cigarettes that are sold, 
purchased, or distributed in this state but that are not required to 
have a stamp affixed to a package of those cigarettes under Chapter 
154, Tax Code; and
		(3)  nonsettling manufacturer cigarette tobacco 
products that are subject to the tax imposed by Section 155.0211, 
Tax Code.
	(b)  The fee imposed by this section does not apply to 
cigarettes or cigarette tobacco products that are included in 
computing payments due to be made by a settling manufacturer under 
the tobacco settlement agreement.
	(c)  The fee imposed by this subchapter is in addition to any 
other privilege, license, fee, or tax required or imposed by state 
law.
	(d)  Except as otherwise provided by this subchapter, the fee 
imposed by this subchapter is imposed, collected, paid, 
administered, and enforced in the same manner, taking into account 
that the fee is imposed on nonsettling manufacturers, as the taxes 
imposed by Chapters 154 and 155, Tax Code, as appropriate.
	Sec. 161.604. RATE OF FEE. (a) Except as provided by 
Subsection (b), the fee is imposed at the rate of two cents for:
		(1)  each nonsettling manufacturer cigarette; and                      
		(2)  each 0.09 ounce of nonsettling manufacturer 
cigarette tobacco product.
	(b)  On January 1 of each year, the comptroller shall increase 
the rate of the tax prescribed by Subsection (a) by the greater of:
		(1)  three percent; or                                                 
		(2)  the percentage increase in the most recent annual 
revised Consumer Price Index for all Urban Consumers, as published 
by the Federal Bureau of Labor Statistics of the United States 
Department of Labor.
	Sec. 161.605. DISTRIBUTOR'S REPORT. (a)  A distributor 
required to file a report under Section 154.210 or 155.111, Tax 
Code, shall, in addition to the information required by those 
sections, include in that required report, as appropriate:
		(1)  the number and denominations of stamps affixed to 
individual packages of nonsettling manufacturer cigarettes during 
the preceding month;
		(2)  the number of individual packages of nonsettling 
manufacturer cigarettes sold or purchased in this state or 
otherwise distributed in this state for sale in the United States; 
and
		(3)  any other information the comptroller considers 
necessary or appropriate to determine the amount of the fee imposed 
by this subchapter or to enforce this subchapter.
	(b)  The information required by Subsections (a)(1) and (2) 
must be itemized for each place of business and by manufacturer and 
brand family.
	(c)  The requirement to report information under this section 
shall be enforced in the same manner as the requirement to deliver 
to or file with the comptroller a report required under Section 
154.210 or 155.111, Tax Code, as appropriate.
	Sec. 161.606.  NOTICE AND PAYMENT OF FEE.  (a) Each month, not 
later than the 10th day after the date the comptroller receives the 
information required by Section 161.605, the comptroller shall:
		(1)  compute the amount of the fee imposed by this 
subchapter that each nonsettling manufacturer owes for that 
reporting period based on that information and any other 
information available to the comptroller; and
		(2)  mail to each nonsettling manufacturer a notice of 
the amount of fee the manufacturer owes.
	(b)  Not later than the 15th day of the month after the month 
in which the comptroller mails a nonsettling manufacturer a notice 
under Subsection (a), the nonsettling manufacturer shall send to 
the comptroller the amount of the fee due according to the notice.
	Sec. 161.607. CERTIFICATION TO ATTORNEY GENERAL.  (a)  Not 
later than the first day of each month, a nonsettling manufacturer 
who is required to pay the fee imposed by this subchapter  shall 
certify to the attorney general that the manufacturer is in 
compliance with this subchapter and has paid in full the fee imposed 
by this subchapter.
	(b)  The attorney general shall develop, maintain, and 
publish on the attorney general's Internet website a directory 
listing of all nonsettling manufacturers that have provided 
current, accurate, and complete certifications.
	(c)  The attorney general shall provide the list described by 
Subsection (b) to any person on request.
	Sec. 161.608.  PREPAYMENT BEFORE OFFERING NONSETTLING 
MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS FOR SALE OR 
DISTRIBUTION IN THIS STATE.  (a)  If cigarettes or cigarette tobacco 
products of a nonsettling manufacturer are not offered for sale or 
distribution in this state on September 1, 2005, the nonsettling 
manufacturer may not offer those cigarettes or cigarette tobacco 
products for sale or distribution in this state after that date 
unless the manufacturer first prepays the fee imposed by this 
subchapter for sales of cigarettes and cigarette tobacco products 
that will occur in the first calendar month in which they are sold 
or distributed in this state.
	(b)  The amount a nonsettling manufacturer is required to 
prepay under this section is equal to the greater of:
		(1)  the rate prescribed by Section 161.604 in effect on 
that date multiplied by:
			(A)  the number of cigarettes the comptroller 
reasonably projects that the nonsettling manufacturer will sell or 
distribute in this state during that calendar month; and
			(B)  each 0.09 ounce of nonsettling manufacturer 
cigarette tobacco products the comptroller reasonably projects 
that the nonsettling manufacturer will sell or distribute in this 
state during that calendar month; or 
		(2)  $50,000.                                                          
	(c)  the fee imposed by this section does not apply to 
cigarettes or cigarette tobacco products that are included in 
computing payments due to be made by a settling manufacturer under 
the tobacco settlement agreement.
	(d)  The comptroller may require a nonsettling manufacturer 
to provide any information reasonably necessary to determine the 
prepayment amount.
	(e)  The comptroller shall establish procedures to:                     
		(1)  reimburse a nonsettling manufacturer if the actual 
sales or distributions in the first calendar month are less than the 
projected sales or distributions; and
		(2)  require additional payments if the actual sales or 
distributions in the first calendar month are greater than the 
projected sales or distributions.
	(f)  A nonsettling manufacturer shall pay the fee imposed by 
this subchapter in the manner provided by Section 161.606 beginning 
in the second calendar month in which the manufacturer offers the 
cigarettes or cigarette tobacco products for sale or distribution 
in this state.
	Sec. 161.609. REPORT TO ATTORNEY GENERAL BEFORE OFFERING 
NONSETTLING MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS 
FOR SALE OR DISTRIBUTION IN THIS STATE.  (a)  In addition to 
prepaying the fee required by Section 161.608, a nonsettling 
manufacturer described by Section 161.608(a) shall, before  the 
date the cigarettes or cigarette tobacco products are offered for 
sale or distribution in this state, provide to the attorney general 
on a form prescribed by the attorney general:
		(1)  the nonsettling manufacturer's complete name, 
address, and telephone number;
		(2)  the date that the nonsettling manufacturer will 
begin offering cigarettes or cigarette tobacco products for sale or 
distribution in this state;
		(3)  the names of the brand families of the cigarettes 
or cigarette tobacco products that the nonsettling manufacturer 
will offer for sale or distribution in this state;
		(4)  a statement that the nonsettling manufacturer 
intends to comply with this subchapter; and
		(5)  the name, address, telephone number, and signature 
of an officer of the nonsettling manufacturer attesting to all of 
the included information.
	(b)  The attorney general shall make the information provided 
under this section available to the comptroller.
	Sec. 161.610.  PENALTIES FOR NONCOMPLIANCE.  (a)  Cigarettes 
and cigarette tobacco products of a nonsettling manufacturer that 
has not complied with this subchapter, including full payment of 
the fee imposed by this subchapter, shall be treated as cigarettes 
for which the tax assessed by Chapter 154 or 155, Tax Code, as 
appropriate, has not been paid, and the manufacturer is subject to 
all penalties imposed by those chapters for violations of those 
chapters.
	(b)  The comptroller shall provide to a nonsettling 
manufacturer a notice of noncompliance with this subchapter if the 
manufacturer:
		(1)  does not pay in full the fee imposed by this 
subchapter; or     
		(2)  is not included on the list described by Section 
161.607(b).    
	(c)  On receipt of the notice of noncompliance, the 
nonsettling manufacturer may not:
		(1)  pay the tax imposed by Chapter 154 or 155, Tax Code, 
as appropriate;
		(2)  affix to a package of cigarettes the stamp required 
by Section 154.041, Tax Code; or
		(3)  otherwise purchase, sell, or distribute cigarettes 
in this state.
	Sec. 161.611.  APPLICATION OF SUBCHAPTER.  This subchapter 
applies without regard to Section 154.022, Tax Code, or any other 
law that might be read to create an exemption for interstate sales.
	SECTION 11.02. (a)  Not later than September 30, 2005, a 
nonsettling manufacturer, as that term is defined by Section 
161.602, Health and Safety Code, as added by this Act, that is 
offering cigarettes or cigarette tobacco products for sale or 
distribution in this state on September 1, 2005, shall provide to 
the attorney general on a form prescribed by the attorney general:
		(1)  the nonsettling manufacturer's complete name, 
address, and telephone number;
		(2)  the date that the nonsettling manufacturer began 
offering cigarettes or cigarette tobacco products for sale or 
distribution in this state;
		(3)  the names of the brand families of the cigarettes 
or cigarette tobacco products that the nonsettling manufacturer 
offers for sale or distribution in this state;
		(4)  a statement that the nonsettling manufacturer 
intends to comply with Subchapter U, Chapter 161, Health and Safety 
Code, as added by this Act; and
		(5)  the name, address, telephone number, and signature 
of an officer of the nonsettling manufacturer attesting to all of 
the included information.
	(b)  The attorney general shall make the information provided 
under Subsection (a) of this section available to the comptroller.
	SECTION 11.03. Sections 11.01 and 11.02 take effect September 
1, 2005.