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New tribal cigarette-tax compacts to be submitted to Legislature

Release Date: Mar 01, 2016

TOPEKA – (March 1, 2016) – Kansas has negotiated agreements with two resident tribes to improve accounting for cigarettes and tobacco products sold on tribal lands, Governor Sam Brownback and Attorney General Derek Schmidt announced today.

The two agreements, known as compacts, have been negotiated with the Prairie Band Potawatomi Nation and the Iowa Tribe of Kansas and Nebraska. The compacts have been signed by tribal leaders and by Governor Brownback, and they will be submitted to the Legislature when it reconvenes Wednesday.

“We appreciate the spirit of cooperation and partnership between tribal leaders and the State in reaching these agreements,” Brownback said.

Attorney General Schmidt said he will ask the Legislature later this week to begin the process of approving the compacts.

“These compacts, if approved by the Legislature, will significantly improve cooperation between the tribes and the state to prevent the illicit shipment of untaxed and unaccounted-for cigarettes from other states for sale on qualified tribal lands in Kansas,” Schmidt said. “The compacts will benefit the tribes by improving their tribal cigarette tax collections, and they will benefit the state by strengthening our ability to comply with the terms of the 1998 Tobacco Master Settlement Agreement that governs cigarette sales in our state.”

Under the 1998 tobacco settlement, known as the Master Settlement Agreement (MSA), most tobacco companies have agreed to make annual cash payments to the State of Kansas. At the same time, Kansas agreed to diligently enforce its obligations under the MSA, including accounting for cigarette sales within the state. In 2012, Kansas resolved a longstanding dispute with tobacco companies, which had accused the state, among other things,  of failing to live up to its diligent enforcement obligations under the MSA by not accounting for tobacco sales on qualified tribal lands. Before it was resolved, that dispute had placed at risk hundreds of millions of dollars in future tobacco payments for Kansas, which total about $60 million each year.

To resolve the dispute, and to eliminate the potentially large financial liability for the state, Kansas as part of the 2012 settlement agreed to strengthen its diligent enforcement efforts in the future. One step needed to accomplish that improved enforcement is to account more fully for cigarettes sold on tribal lands in Kansas. Because the tribes are considered sovereign nations, it is necessary for the state to work cooperatively with them to improve cigarette enforcement on tribal lands.

Schmidt said approval of the compacts this year will help the state comply with its enforcement obligations under the MSA.

“These compacts are a win for the State of Kansas and also for the tribes,” Schmidt said. “Legislative approval this year can strengthen our ability to protect the continued flow of millions of dollars in annual tobacco settlement payments to the state treasury.”

A copy of the compact negotiated with the Prairie Band Potawatomi Nation is available at A copy of the compact negotiated with the Iowa Tribe is available at Schmidt said compact negotiations with the other two resident tribes, the Kickapoo and the Sac and Fox, continue.

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