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    Minnesota Cigarette Fee Challenged

    A new 35-cent per pack tax does not affect the four big companies that reached a settlement agreement with the state in 1998.

    ST. PAUL, Minn. -- A group representing smaller cigarette manufacturers is reviewing a newly enacted fee on their cigarette sales in Minnesota, the first of its kind in the nation, to determine whether it can be challenged in court, an attorney with the group said.

    Ashley Taylor, counsel to the Council of Independent Tobacco Manufacturers of America, said the 35-cent per pack fee signed into law Tuesday by Minnesota Gov. Tim Pawlenty raises constitutional issues because it targets only tobacco companies that did not participate in a settlement with the state, according to Reuters.

    Taylor said Minnesota was the first state to impose a levy against nonparticipating manufacturers, though the tobacco group successfully stopped a similar measure from being passed in Georgia earlier this year. Minnesota was one of four U.S. states that independently settled with large cigarette companies and did not participate in a 1998 master settlement agreement involving the remaining 46 states. Those states expect to receive $206 billion from the companies over 25 years to compensate them for the cost of caring for sick smokers.

    "We think the fee violates the constitution to selectively target a segment of the industry," Taylor said, adding that the tobacco group had not yet determined whether filing a lawsuit was the appropriate action to take.

    The fee, which is expected to raise $12.9 million for Minnesota's budget over the next two fiscal years, does not affect the four big companies that settled with the state, said John Doan, a spokesman for the state's budget office. Those companies were Philip Morris USA, R.J. Reynolds, Brown & Williamson and Lorillard.

    Doan said Minnesota's fee was aimed at non-settling companies because they were not paying their "fair share" to the state. Smaller companies are not required to pay Minnesota anything under the settlement. Under the MSA with the majority of states, companies that have not signed on to the agreement have to put money into escrow accounts, where it remains for 25 years. The states cannot access the money, but the companies can use it to settle future lawsuits with the states.

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