ST. PAUL, Minn. — A motion filed Wednesday by Minnesota Attorney General Keith Ellison claims tobacco manufacturers owe the state tens of millions of dollars.
A 1998 settlement restricted the largest tobacco manufacturers’ marketing of tobacco products and required they make annual payments to Minnesota.
Ellison alleges that after a federal corporate tax rate change in 2018, Philip Morris misrepresented the content of the settlement to the third-party payment administrator.
The settlement says manufacturers’ annual payment increases if their current after-tax profits are greater than in 1997. However, manufacturers argue they should get to recalculate their 1997 profits by applying modern corporate tax. In 2018, corporate tax rates were lowered from 35% to 21%.
The Minnesota Attorney General’s Office says the settlement calls for using 1997 tax rates when calculating after-tax profits from 1997.
Ellison alleges that using the new rate instead of the 1997 rate resulted in underpayment of $10 million per year since 2019.