SB0396sam001 97TH GENERAL ASSEMBLY

Sen. William Delgado

Filed: 4/1/2011

09700SB0396sam001 LRB097 04208 HLH 53826 a

AMENDMENT TO SENATE BILL 396

AMENDMENT NO. ______. Amend Senate Bill 396 by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Sugar-Sweetened Beverages, Syrups, and Powder Tax Act.

Section 5. Findings. The General Assembly finds that over the past 30 years, the obesity rate in the United States has substantially increased. The prevalence of adult obesity has more than doubled during that time. According to statistics compiled by the Centers for Disease Control, nearly 27% of Illinois' adult residents in 2008 were considered obese (having a body mass index of 30 and above) and the rate was even higher among African American (36.4%) and Hispanic (30.7%) residents. The General Assembly further finds that, for children, the increase in obesity has been even more dramatic, with the obesity rate among children ages 6-11 more than quadrupling over the last 4 decades. The State of Illinois is not immune to the problem. 21% of Illinois children (age 0-17 years) are obese, the fourth worst rate in the nation.

The General Assembly further finds that obese children are at least twice as likely as non-obese children to become obese adults. Research indicates that the likelihood of an obese child becoming an obese adult increases with age; adolescents who are obese have a greater likelihood of being obese in adulthood, as compared to younger children.

The General Assembly further finds that the obesity epidemic has led to a dramatic increase in obesity-related health conditions, such as type 2 diabetes, asthma, and heart disease. These health conditions cost each of the states billions of dollars in health care costs and lost productivity. Obesity and weight-related illness accounts for $147 billion in health care costs nationally, or 9% of all medical spending per year. Obesity-related annual medical expenditures in the State of Illinois are estimated at $3.4 billion in 2003 dollars. Almost 60% of these costs are paid by public funds through Medicare and Medicaid.

The General Assembly further finds that numerous studies strongly support a link between obesity and consumption of sweetened beverages such as soft drinks, energy drinks, sweet teas and sports drinks. A study of a 5-year period between 1999 and 2004 showed that children and adolescents consumed 10-15% of their daily caloric intake from sweetened beverages, which offer little or no nutritional value and massive quantities of added sugars. For example, a 12-ounce can of soda contains the equivalent of approximately 10 teaspoons of sugar; the U.S. Department of Agriculture recommends that a person eating a 2,200-calorie diet should eat no more than 12 teaspoons of refined sugar in a day.

It is the intent of the General Assembly, by adopting this Act and creating the Illinois Health Promotion Fund, to diminish the human and economic costs of obesity in the State of Illinois. This Act is intended to discourage excessive consumption of sugar-sweetened beverages by increasing the price of these products and by creating a dedicated revenue source for programs designed to prevent and treat obesity and reduce the burden of related health conditions.

Section 10. Legislative intent. It is the intent of the General Assembly, by adopting this Act and creating the Illinois Health Promotion Fund, to diminish the human and economic costs of obesity in the State of Illinois. This Act is intended to discourage excessive consumption of sugar-sweetened beverages and to create a dedicated revenue source for programs designed to prevent and treat childhood obesity and health conditions which result from it.

Section 15. Definitions. For purposes of this Act:

"Bottle" means any closed or sealed container regardless of size or shape, including, without limitation, those made of glass, metal, paper, or plastic, or any other material or combination of materials.

"Bottled sugar-sweetened beverage" means any sugar-sweetened beverage contained in a bottle that is ready for consumption without further processing such as, without limitation, dilution or carbonation.

"Caloric sweetener" means any caloric substance suitable for human consumption that humans perceive as sweet and includes, without limitation, sucrose, fructose, glucose, or other sugars. "Caloric sweetener" excludes non-caloric sweeteners. For purposes of this definition, "caloric" means a substance which adds calories to the diet of a person who consumes that substance.

"Consumer" means a person who purchases a sugar-sweetened beverage for consumption and not for sale to another.

"Department" means the Department of Revenue.

"Distributor" means any person, including manufacturers and wholesale dealers, who receives, stores, manufactures, bottles, or distributes bottled sugar-sweetened beverages, syrup, or powder, for sale to retailers doing business in the State, whether or not that person also sells those products to consumers.

"Fund" means the Illinois Health Promotion Fund established pursuant to Section 40.

"Non-caloric sweetener" means any non-caloric substance suitable for human consumption that humans perceive as sweet and includes, without limitation, aspartame, saccharin, stevia, and sucralose. "Non-caloric sweetener" excludes caloric sweeteners. For purposes of this definition, "non-caloric" means a substance that contains fewer than 5 calories per serving.

"Person" means any natural person, partnership, cooperative association, limited liability company, corporation, personal representative, receiver, trustee, assignee, or any other legal entity.

"Place of business" means any place where sugar-sweetened beverages, syrups, or powder are manufactured or received for sale in the State.

"Powder" means any solid mixture of ingredients used in making, mixing, or compounding sugar-sweetened beverages by mixing the powder with any one or more other ingredients, including without limitation water, ice, syrup, simple syrup, fruits, vegetables, fruit juice, vegetable juice, carbonation, or other gas.

"Retailer" means any person who sells or otherwise dispenses in the State a sugar-sweetened beverage to a consumer whether or not that person is also a distributor as defined in this Section.

"Sale" means the transfer of title or possession for valuable consideration regardless of the manner by which the transfer is completed.

"State" means the State of Illinois.

"Sugar-sweetened beverage" means any nonalcoholic beverage, carbonated or noncarbonated, which is intended for human consumption and contains any added caloric sweetener. As used in this definition, "nonalcoholic beverage" means any beverage that contains less than one-half of 1% alcohol per volume. The term "sugar-sweetened beverage" does not include:

(1) beverages sweetened solely with non-caloric sweeteners;

(2) beverages consisting of 100% natural fruit or vegetable juice with no added caloric sweetener; for purposes of this paragraph, "natural fruit juice" and "natural vegetable juice" mean the original liquid resulting from the pressing of fruits or vegetables, or the liquid resulting from the dilution of dehydrated natural fruit juice or natural vegetable juice;

(3) beverages in which milk is the primary ingredient or the first listed ingredient on the label of the beverage; for purposes of this Act, "milk" means natural liquid milk regardless of animal or plant source or butterfat content; natural milk concentrate, whether or not reconstituted, regardless of animal or plant source or butterfat content; or dehydrated natural milk, whether or not reconstituted and regardless of animal or plant source or butterfat content;

(4) coffee or tea without added caloric sweetener;

(5) infant formula;

(6) medically necessary foods; and

(7) water to which neither carbonation nor any other substance has been added, except for minerals and non-caloric flavoring agents.

"Syrup" means a liquid mixture of ingredients used in making, mixing, or compounding sugar-sweetened beverages using one or more other ingredients including, without limitation, water, ice, a powder, simple syrup, fruits, vegetables, fruit juice, vegetable juice, carbonation, or other gas.

Section 20. Permit required.

(a) Every distributor doing business in the State shall file with the Department an application for a permit to engage in the business of receiving, storing, manufacturing, bottling, or distributing bottled sugar-sweetened beverages, syrup, or powder, for each place of business owned and operated by the distributor before the later of (i) the effective date of this Act or (ii) the distributor's first acts which constitute the doing of business in the State. An application for a permit shall be filed on forms to be furnished by the Department for that purpose. An application must be subscribed and sworn to by a person with legal authority to bind the business. The application shall identify the owners of the applicant, the applicant's mailing address, the place of business to which the permit shall apply, and the nature of the business in which engaged, and any other information the Department may require for the enforcement of this Act.

(b) Upon receipt of an application and any permit fee hereafter provided for, the Department may issue to the applicant, for the place of business designated, a non-assignable permit, authorizing the sale of sugar-sweetened beverages, syrups, and powder in the State. No distributor shall sell any sugar-sweetened beverage, syrup, or powder without first obtaining a permit to do so under this Act. Permits issued pursuant to this Section shall expire on January 31 of each year and may be renewed annually.

(c) A permit may not be transferred from one person to another, and a permit shall at all times be prominently displayed in a distributor's place of business. The Department may refuse to issue a permit to any person previously convicted of violations of this Act under such procedures as the Department may establish by rule.

Section 25. Tax imposed.

(a) There is hereby imposed an excise tax on every distributor for the privilege of selling the products governed by this Act in the State, calculated as follows.

(1) $1.28 per gallon/$0.01 per ounce of bottled sugar-sweetened beverages sold or offered for sale to a retailer for sale in the State to a consumer.

(2) The tax on syrup and powder sold or offered for sale to a retailer for sale in the State to a consumer, either as syrup or powder or as a sugar-sweetened beverage derived from that syrup or powder, is equal to $1.28 per gallon/$0.01 per ounce for each gallon or ounce of sugar-sweetened beverage produced from that syrup or powder. For purposes of calculating the tax, the volume of sugar-sweetened beverage produced from syrup or powder shall be the larger of (i) the largest volume resulting from use of the syrup or powder according to any manufacturer's instructions or (ii) the volume actually produced by the retailer, as reasonably determined by the Department.

(3) The tax amounts set forth in this Section shall be adjusted annually by the Department in proportion with the Consumer Price Index for All Urban Consumers for All Items for the Midwest Statistical Area, as reported by the United States Bureau of Labor Statistics or any successor to that index.

(b) A retailer that sells bottled sugar-sweetened beverages, syrup, or powder in the State to a consumer, on which the tax imposed by this Section has not been paid by a distributor, is liable for the tax imposed in subsection (a) at the time of sale to a consumer.

(c) The tax imposed by this Act is in addition to all other occupation or privilege taxes imposed by the State of Illinois, by any political subdivision thereof, or by any municipal corporation.

Section 30. Report of sales and tax remittances.

(a) Any distributor or retailer liable for the tax imposed by this Act shall, on or before the last day of March, June, October, and December of each year, return to the Department under oath of a person with legal authority to bind the distributor or retailer, a statement containing its name and place of business, the quantity of sugar-sweetened beverages, syrup, and powder subject to the excise tax imposed by this Act sold or offered for sale in the preceding calendar quarter, and any other information required by the Department, along with the tax due.

(b) The State Treasurer shall credit the proceeds of the tax to the Illinois Health Promotion Fund.

Section 35. Records of distributors. Every distributor and every retailer subject to this Act shall maintain for not less than 2 years accurate records, showing all transactions that gave rise, or may have given rise, to tax liability under this Act. Such records are subject to inspection by the Department at all reasonable times during normal business hours.

Section 40. Establishment of Illinois Health Promotion Fund. There is hereby created a trust fund in the State treasury called the Illinois Health Promotion Fund. Fifty percent of moneys collected pursuant to the taxes imposed by this Act, and all interest on those moneys, shall be paid into the Illinois Health Promotion Fund. All costs to implement this Act shall be paid from the Illinois Health Promotion Fund.

Section 45. Expenditure of Illinois Health Promotion Fund.

(a) All moneys in the Illinois Health Promotion Fund, after tax administration costs have been deducted, shall be appropriated and allocated as follows:

(1) Twenty percent to the Illinois Department of Public Health to coordinate grants to State-certified public health departments to improve public health infrastructure. Funded projects will improve workforce and systems development, chronic disease surveillance and monitoring systems, chronic disease program evaluation, and regional coordination that includes networking, coordination, standardization, and cross-jurisdictional cooperation for the efficient delivery of public health services (e.g., resource sharing) to ensure that public health goals are effectively and efficiently met.

(2) Thirty percent for community-based childhood obesity prevention programs. This funding shall support programs that use educational, environmental, policy, and other public health approaches that achieve the following goals: eliminate racial, ethnic, and socioeconomic disparities in childhood obesity rates; improve access to and consumption of healthy, safe, and affordable foods; reduce access to and consumption of calorie-dense, nutrient-poor foods; encourage physical activity; decrease sedentary behavior; and raise awareness about the importance of nutrition and physical activity to childhood obesity prevention. The Illinois Director of Public Health shall be responsible for the distribution of these funds to community-based organizations and to State-certified public health departments, with priority given to counties, municipalities, and other geographic jurisdictions that have childhood obesity prevention coalitions to build broad-based support for childhood obesity prevention.

(3) Thirty percent to elementary and secondary schools for educational, environmental, policy, and other public health approaches that promote nutrition and physical activity. The approaches funded pursuant to this subsection can include improving or building school recreational facilities that are used for recess and physical education; providing continuing education training for physical education teachers; hiring qualified physical education teachers; implementing policies that encourage walking and biking to and from school (i.e. school siting, school travel plans); improving the quality and nutrition of school breakfasts, lunches, and snacks; ensuring free, clean drinking water access throughout the school day; and incorporating practical nutrition education into the curriculum. The State Board of Education is responsible for the allocation and distribution of these funds.

(4) Ten percent for chronic disease prevention and treatment programs. Funding shall be focused on prevention, treatment, and community-based services to expand clinical disease prevention and management care. Funding shall support medicaid reimbursement for pediatric specialty care services to improve access for children to medical services. The Director of Public Health shall be responsible for identifying activities and allocating these funds.

(5) Ten percent to fund oral health treatments and services to underserved populations. The funds shall be used for the development of new clinics in high need areas throughout Illinois, medicaid reimbursements for direct services with a focus on preventative dental services such as semi-annual office visits and teeth cleaning, and salaries for dentists. The Director of Public Health shall be responsible for coordinate grants to distribute funds.

(b) All moneys in the Children's Health Promotion Fund shall be expended only for the purposes expressed in this Act, and shall be used only to supplement existing levels of service and not to supplant current federal, state, or local funding for existing levels of service.

(c) The Illinois Director of Public Health and the Illinois State Board of Education are hereby empowered to make such rules and regulations, and provide such procedural measures, as shall bring into effect the purposes of this Section. The rules and regulations may provide for specific programs to be funded consistent with the allocation of funds set forth above.

Section 50. Exemptions. The following are exempt from the tax imposed by this Act:

(1) Bottled sugar-sweetened beverages, syrups, and powder sold to the United States Government and American Indian Tribal Governments.

(2) Bottled sugar-sweetened beverages, syrups, and powder sold by a distributor or a retailer expressly for resale or consumption outside the State.

(3) Bottled sugar-sweetened beverages, syrups, and powder sold by a distributor to another distributor that holds a permit issued pursuant to Section 20 of this Act, if the sales invoice clearly indicates that the sale is exempt. If the sale is to a person who is both a distributor and a retailer, the sale shall also be tax exempt and the tax shall be paid when the purchasing distributor-retailer resells the product to a retailer or a consumer. This exemption does not apply to any other sale to a retailer.

Section 55. Penalties.

(a) Any person subject to the provisions of this Act who fails to pay the entire amount of tax imposed by this Act by the date that payment is due, fails to submit a report or maintain records required by this Act, does business in the State without first obtaining a permit as required by this Act, or violates any other provision of this Act or rules and regulations promulgated by the Department for the enforcement of this Act, shall be guilty of a misdemeanor and shall also be liable for the penalties set forth and incorporated by reference into this Section.

(b) Incorporation by reference. All of the provisions of Sections 4, 5, 5a, 5b, 5c, 5d, 5e, 5f, 5g, 5h, 5i, 5j, 6, 6a, 6b, 6c, 8, 9, 10, 11, 11a, and 12 of the Retailers' Occupation Tax Act, and all applicable provisions of the Uniform Penalty and Interest Act that are not inconsistent with this Act, apply to distributors of sugar-sweetened beverages to the same extent as if those provisions were included in this Act. References in the incorporated Sections of the Retailers' Occupation Tax Act to retailers, to sellers, or to persons engaged in the business of selling tangible personal property mean distributors, retailers, or both when used in this Act. References in the incorporated Sections to sales of tangible personal property mean sales of sugar-sweetened beverages, syrups, or powder when used in this Act.

Section 60. Unpaid taxes a debt. All taxes and penalties imposed under the provisions of this Act remaining due and unpaid shall constitute a debt to the State, which may be collected from the person owing the same by suit or otherwise.

Section 65. Records of Department. At the end of each month, the State Auditor General shall check the books and records of the Department and its accounts with any bank or banks, and shall verify the amounts collected pursuant to this Act and paid into the Children's Health Promotion Fund. Any duty herein required of the State Auditor General may be performed by any duly trained clerk in his office, designated by the State Auditor General for that purpose.

Section 70. Exercise of powers and duties. Whenever in this Act any reference is made to any power or duty of the Department, the reference is construed to mean that the power or duty shall be exercised by the Department, under the supervision and direction of the Director of Revenue.

Section 75. Rules and regulations. The Department is hereby empowered to adopt rules, and provide such procedural measures, in cooperation with the State Auditor General, as may be reasonably necessary to accomplish the purposes of this Act.

Section 80. Severability. If any provision of this Act, any rule or regulation made under this Act, or the application of this Act to any person or circumstance is held invalid by any court of competent jurisdiction, the remainder of the Act, rule, or regulation, and the application of the provision to other persons or circumstances shall not be affected. The invalidity of any Section or Sections or parts of any Section of this Act shall not affect the validity of the remainder of the Act.

Section 100. The State Finance Act is amended by adding Section 5.786 as follows:

(30 ILCS 105/5.786 new)

Sec. 5.786. The Illinois Health Promotion Fund.

Section 999. Effective date. This Act takes effect January 1, 2012.".