the tobacco buyout
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The Tobacco Buyout. Scott Sanford September 2005. Outreach. 500,000 official signup letters sent to quota holders and producers (6,000 printed in Spanish) 600,000 notices sent to quota holders and producers (6,000 printed in Spanish) - PowerPoint PPT PresentationTRANSCRIPT
The Tobacco BuyoutThe Tobacco Buyout
Scott SanfordScott SanfordSeptember 2005September 2005
OutreachOutreach500,000 official signup letters sent to quota holders and producers (6,000 printed in Spanish)
600,000 notices sent to quota holders and producers (6,000 printed in Spanish)
Ads in Progressive Farmer, Farm Journal, Flue-Cured Tobacco Farmer, and the Farm Progress family of magazines.
40 Regional radio ads
200 local newspaper ads running bimonthly from March to May
Bilingual national call center
Fair and Equitable Tobacco Reform ActFair and Equitable Tobacco Reform Act
Terminates tobacco quota program
Terminates tobacco price support
Provides transitional payments to quota holders and producers
Provides for assessments as a source of funds for payments
Establishes “Tobacco Trust Fund”
Provides for disposition of CCC loan stocks
Who is Getting Paid?Who is Getting Paid?
Contract payments are offered to tobacco quota owners and tobacco producers
Contract payments shall constitute full and fair consideration for the termination of such tobacco marketing quotas and related price support.
Contract payments are to be made during each of the fiscal years 2005 - 2014 in annual amounts equal to 1/10th of the total payment due each quota owner and quota producer.
Signup period for the program was March 14, 2005 through June 17, 2005.
Continuous sign-up (for those who missed original sign-up) is local FSA County Office (only for future payments).
November 1 each FY is cut-off for sign-up for the FY payment
How Much Are They Getting Paid?How Much Are They Getting Paid?Contract payments are calculated based on quota
levels established in the 2002 marketing year.
Contract payments to tobacco quota owners are determined by multiplying the base quota level by $7 per pound. Base quota levels are determined by the basic quota established in the 2002 marketing year.
Contract payments to tobacco producers are determined by multiplying the base quota level by $3 per pound. Actual
payment rates vary according to the producer’s share of the risk associated with producing the quota during 2002 – 2004.
As of September 16, 2005, FY05 payments total $932 million.
What Can You Do With These What Can You Do With These Payments (Contracts)?Payments (Contracts)?
A recipient may receive CCC payments in 10 annual installments.
A recipient may involve a third party through—Assignment of payment, or,Successor-in-interest contract.
A recipient may arrange for a lump sum payment.
What Can You Do With These What Can You Do With These Payments (Contracts)?—Payments (Contracts)?—cont.cont.
Quota holder or producer contracts will not be eligible to be transferred if—
An assignment of payment is currently on file for the contract, or
The transferor has a delinquent debt (claim), or
The transferor has a TTPP receivable (i.e., overpayment).
Assignment of PaymentsAssignment of Payments
May be entered into at anytime.
All or any part of payment stream may be assigned.
Subject to administrative offset under the Debt Collection Improvement Act of 1966.
Revocable at any time with the consent of the assignee.
May be used beginning with the first payment in 2005.
Form CCC-959, Tobacco Transition Payment Program Assignment of Payment (March 31, 2005) must be used.
Successor-In-Interest ContractSuccessor-In-Interest Contract May be entered into starting with the fiscal year 2006.
May not be revoked.
Enter into a successor-in-interest contract by November 1st in order to receive the subsequent January payment.
Succeed to whole contract (partial successor-in-interest contracts are not allowed).
Prior and subsequent actions of the original contract holder will not affect the rights of the successor.
CCC will allow sale of successor-in-interest contracts to another party.
Flue Cured Tobacco Stabilization Corporation
Burley Tobacco Growers Cooperative Association
Burley Stabilization Corporation
Stemming Tobacco District
Eastern Tobacco
Type 22
Type 35
Western Tobacco
Type 23
Type 35
Wisconsin Cigar
Dark Tobacco
Total1
Tobacco Association Losses Incurred by CCC
Inventory Losses Related to CCC Held Tobacco LoansInventory Losses Related to CCC Held Tobacco Loans
$125,631,359.19
135,096,477.01
27,208,737.11
385,351.77
570,852.23
221,336.07
2,096,345.47
76,399.44
156,219.14
282,813.95
$291,725,891.381$287,210,590.32 losses recognized as of June 30, 2005 and $4,515,300.86 recognized after June 30, 2005.
CCC Tobacco Loan Stock Sales – FY 2005CCC Tobacco Loan Stock Sales – FY 2005
Burley/Flue
Burley/Flue
Minor
Minor
Burley
Total
26
28
29
30
31
3/25/2005
4/12/2005
4/22/2005
5/23/2005
6/19/2005
100,209,023
11,180,899
2,201,822
1,769,074
11,649,480
89,028,124
11,180,899
432,748
1,769,074
11,649,480
114,060,325
11,180,899
0
1,769,074
0
0
$163,743,034.16
$8,723,186.33
$773,612.13
$2,265,881.13
$30,057,649.90
$205,563,363.65
$1.84
$0.78
$1.79
$1.28
$2.58
$1.80
Tobacco Invitation Quantity Sales Average
Type # Date Quantity (lbs) Sold Balance Proceeds Price
Who Is Paying for the Buyout? Who Is Paying for the Buyout?
Each tobacco product manufacturer and importer that sells tobacco products in domestic commerce in the United States.
Treasury lists about 800 companies with permits to manufacture or import tobacco products.
National AssessmentNational Assessment
The national quarterly assessment reflects contract payments made to tobacco quota holders and producers and other expenditures of the Tobacco Trust Fund. The total assessment over 10 years is not to exceed $10.14 billion.
The national quarterly assessment is then apportioned to each class of tobacco using the following percentages:
• 96.331 Cigarettes• 2.783 Cigars• 0.539 Snuff• 0.171 Roll-Your-Own Tobacco• 0.111 Chewing Tobacco• 0.066 Pipe Tobacco
Cigarettes: small (#) 377,241,580,953 23,085,086,000 400,326,666,953 $19.50/thou 7,806,370,006 96.331
Cigarettes: large (#) 0 0 0 $40.95/thou 0 0
Cigars: small (#) 2,301,972,488 172,369,000 2,474,341,488 $1.828/thou 4,523,096 0.056
Cigars: large (#) 4,018,523,214 514,566,000 4,533,089,214 $48.75/thou 220,988,099 2.727
Snuff (lbs) 74,700,715 8,369 74,709,084 $0.585/lb 43,704,814 0.539
Chewing tobacco (lbs) 45,906,067 174,399 46,080,466 $0.195/lb 8,985,691 0.111
Pipe tobacco (lbs) 4,155,205 698,086 4,853,291 $1.0969/lb 5,323,575 0.066
Roll your own (lbs) 11,353,137 1,254,008 12,607,145 $1.0969/lb 13,828,777 0.171
Total 8,103,724,058 100.001
Calculation of Initial Assessments for Each Class of Tobacco Under Section 625 (c)
2003 Calendar Year Amount1 Maximum Estimated Allocation
Product Domestic Imports Total Tax Rate 2 Taxes by class (%)
1Source: Alcohol and Tobacco Tax and Trade Bureau, National Revenue Center, December 2003 Monthly Statistical Release, Re-issued August 19, 2004, Report Symbol TTB s 5200-12-2003. www.ttb.gov/tobacco/stats/index.htm.2Source: Alcohol and Tobacco Tax and Trade Bureau, Tax and Fee Rate. www.ttb.gov/alcohol/info/atftaxes.htm.
Small cigarettes
Large cigarettes
Small cigars
Large cigars
Snuff
Chewing tobacco
Pipe
Roll your own
96.839
0.000
0.048
2.328
0.475
0.112
0.076
0.122
96.674
0.000
0.051
2.443
0.497
0.110
0.073
0.152
96.331
0.000
0.056
2.727
0.539
0.111
0.066
0.171
95.999
0.000
0.066
2.978
0.565
0.104
0.064
0.224
Class 2001 2002 2003 2004
Tobacco Class Market Shares by Taxes Paid, 2001- 2004Tobacco Class Market Shares by Taxes Paid, 2001- 2004
Percent
Manufacturer/Importer Assessments Manufacturer/Importer Assessments
Individual manufacturer/importer assessments are calculated by multiplying each company’s quarterly market share by the national quarterly assessment for that class of tobacco.
Each company’s market share is calculated by dividing the total taxes paid (total volume for cigars) by that company for the quarter by
the total taxes paid (total volume for cigars) by all companies that reported to CCC for that class of tobacco.
Any company with a market share of less than 0.0001 is excluded from the assessment.
A new market share is then calculated for each company by dividing the total taxes paid (total volume for cigars) by that company for the quarter by the total taxes paid (total volume for cigars) by all assessed companies.
Tobacco Class Cigarettes Cigars Snuff Roll Your
OwnChewing Tobacco
Pipe Tobacco
Total1
Percent 96.331 2.783 0.539 0.171 0.111 0.066 100.001
Assessment $244,199,085 $7,054,905 $1,366,365 $433,485 $281,385 $167,310 $253,502,535
Tobacco Class Cigarettes Cigars Snuff Roll Your
OwnChewing Tobacco
Pipe Tobacco Total1
Percent 96.331 2.783 0.539 0.171 0.111 0.066 100.001
Assessment $512,232,475 $14,798,382 $2,866,090 $909,279 $590,234 $350,950 $531,747,409
1Since CCC had not incurred any costs this total is 1/40th of the 10-year maximum total cost of the program of $10.14 billion.
National Assessment
September 2005
March and June 2005
1This total includes one-fortieth of the estimated $9.6 billion in contract payments; $287,210,591 in CCC loan losses; and $4,531,501 for payments to a financial institution to help carry out this program.
CLASS: CigarettesGross Excise Taxes Paid
April 2005-June 2005Assessment
9/1/2005
Total Taxes Paid by Class of Tobacco
(1)
Total Taxes Paid by Your Company
Your Company’s
Share(2)
Total Taxes Paid by Assessed Companies
(3)
Your Company’s Share
(3)
Your Company’s Assessment
(4)
$1,994,385,856 $1,047,108 .0005 $1,993,459,087 .000525272 $269,061
(1) Total gross taxes paid by all companies that reported to CCC for this class of tobacco.(2) Rounded to 4 decimal places as required by 7 U.S.C. 518-519a.(3) Excludes those companies with a market share of less than .0001.(4) Share of assessment (.000525272) multiplied by national quarterly assessment for class of tobacco ($269,061).
Gross Removals Subject to TaxApril 2005-June 2005
Assessment9/1/2005
Total Volume by Class of Tobacco
(1)
Your Company’s Total
Your Company’s Share (2)
Volume of Gross Removals by Assessed Companies (3)
Your Company’s Share
(3)
Your Company’s Assessment
(4)
2,074,030,716 1,920,000 .0009 2,072,463,641 .000926434 $ 13,710
(1) Total gross taxes paid by all companies that reported to CCC for this class of tobacco.(2) Rounded to 4 decimal places as required by 7 U.S.C. 518-519a.(3) Excludes those companies with a market share of less than .0001.(4) Share of assessment (.000926434) multiplied by national quarterly assessment for class of tobacco ($ 13,710).
CLASS: Cigars
Manufacturer/Importer AssessmentsManufacturer/Importer Assessments
Class Cigarettes Cigars Snuff Roll-own Chew Pipe Total
Units Number Number Pounds Pounds Pounds Pounds
January-March 2005
Total Units 85,613,009,876 2,056,728,869 18,943,461 3,405,071 9,621,804 1,075,095
Total Excise Taxes Paid $1,669,704,040 $52,065,146 $11,082,451 $3,735,137 $1,876,582 $1,178,779 $1,739,642,135
Total Companies Reporting 91 135 13 27 15 20
Total Companies Assessed1 67 69 6 26 14 20
Total Excise Taxes Paid by
Assessed Companies $1,669,166,963 $52,014,485 $11,081,538 $3,735,069 $1,876,564 $1,178,779 $1,739,053,398
Total Assessment $244,199,085 $7,054,905 $1,366,365 $433,485 $281,385 $167,310 $253,502,535
Share of Assessment 96.331% 2.783% 0.539% 0.171% 0.111% 0.066% 100.001%
Total Units of Assessed Companies 85,585,657,938 2,055,388,574 18,941,979 3,405,009 9,621,714 1,075,095
Assessment per unit $0.0029 $0.0034 $0.0721 $0.1273 $0.0292 $0.1556
Smallest assessment $12,381 $371 $282 $46 $16 $14
April-June 2005
Total Units 102,275,102,944 2,074,030,716 20,766,393 3,894,131 10,714,176 1,202,797
Total Excise Taxes Paid $1,994,385,856 $47,696,851 $12,147,721 $4,271,602 $2,093,148 $1,316,065 $2,061,911,243
Total Companies Reporting 88 149 12 31 16 27
Total Companies Assessed1 64 82 7 27 15 24
Total Excise Taxes Paid by
Assessed Companies $1,993,459,087 $47,633,318 $12,147,271 $4,271,093 $2,093,127 $1,315,992 $2,060,919,888
Total Assessment $512,232,475 $14,798,382 $2,866,090 $909,279 $590,234 $350,950 $531,747,410
Share of Assessment 96.331% 2.783% 0.539% 0.171% 0.111% 0.066% 100.001%
Total Units of Assessed Companies 102,227,457,189 2,072,463,641 20,765,623 3,893,657 10,714,065 1,202,722
Assessment per unit $0.0050 $0.0071 $0.1380 $0.2335 $0.0551 $0.2918
Smallest assessment $37,279 $796 $183 $63 $39 $33
1Market share of 0.01% or higher.
Tobacco Assessment Summary