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New tribal cigarette-tax compact submitted to Legislature

Release Date: Mar 27, 2017

TOPEKA – (March 27, 2017) – Kansas has negotiated an agreement with the Sac and Fox Nation of Missouri in Kansas and Nebraska to improve accounting for cigarettes and tobacco products sold on tribal lands, Governor Sam Brownback and Attorney General Derek Schmidt announced today.

The agreement, known as a compact, has been signed by tribal leaders and by Governor Brownback, and was submitted to the Legislature earlier this month. Two similar compacts negotiated with the Prairie Band Potawatomi Nation and the Iowa Tribe of Kansas and Missouri were approved by the Legislature and signed into law in April 2016. A compact with the Kickapoo Tribe was signed in December 2016 and also awaits approval by the Legislature.

Under the 1998 tobacco Master Settlement Agreement (MSA), participating tobacco manufacturers agreed to make annual cash payments to the State of Kansas to resolve the state’s liability claims. In exchange, Kansas agreed to diligently enforce certain obligations under the MSA, including accounting for cigarette sales within the state. In 2012, Kansas resolved a longstanding dispute with tobacco manufacturers, which had accused the state, among other things,  of failing to live up to its diligent enforcement obligations 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 typically total $50-$60 million each year.

To resolve the dispute, and to eliminate a potential large financial liability for the state, Kansas as part of the 2012 settlement agreed to expand its diligent enforcement efforts to tribal lands. One step needed to accomplish that expanded enforcement obligation 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 obtain accurate and comprehensive sales data.

Schmidt said approval of the compacts this year will help the state demonstrate compliance with its enforcement obligations under the MSA. The compact with the Sac and Fox Nation of Missouri in Kansas and Nebraska is the final compact to be reached with the four resident tribes in Kansas, allowing the state to account for tobacco sales on all reservation lands in the state.

A copy of the compact negotiated with the Sac and Fox Nation of Missouri in Kansas and Nebraska is available at http://bit.ly/2odqO0r.

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