Subject to paragraph (2), for fiscal year 1994 and subsequent fiscal years, the Secretary may make a grant under section 300x–21 of this title only if the State involved has in effect a law providing that it is unlawful for any manufacturer, retailer, or distributor of tobacco products to sell or distribute any such product to any individual under the age of 18.

(1) In general Subject to paragraph (2), for fiscal year 1994 and subsequent fiscal years, the Secretary may make a grant under section 300x–21 of this title only if the State involved has in effect a law providing that it is unlawful for any manufacturer, retailer, or distributor of tobacco products to sell or distribute any such product to any individual under the age of 18.

(2) Delayed applicability for certain States In the case of a State whose legislature does not convene a regular session in fiscal year 1993, and in the case of a State whose legislature does not convene a regular session in fiscal year 1994, the requirement described in paragraph (1) as a condition of a receipt of a grant under section 300x–21 of this title shall apply only for fiscal year 1995 and subsequent fiscal years.

For the first applicable fiscal year and for subsequent fiscal years, a funding agreement for a grant under section 300x–21 of this title is that the State involved will—

(1) In general For the first applicable fiscal year and for subsequent fiscal years, a funding agreement for a grant under section 300x–21 of this title is that the State involved will enforce the law described in subsection (a) in a manner that can reasonably be expected to reduce the extent to which tobacco products are available to individuals under the age of 18.

For the first applicable fiscal year and for subsequent fiscal years, a funding agreement for a grant under section 300x–21 of this title is that the State involved will—

(A) annually conduct random, unannounced inspections to ensure compliance with the law described in subsection (a); and

(B) annually submit to the Secretary a report describing— (i) the activities carried out by the State to enforce such law during the fiscal year preceding the fiscal year for which the State is seeking the grant; (ii) the extent of success the State has achieved in reducing the availability of tobacco products to individuals under the age of 18; and (iii) the strategies to be utilized by the State for enforcing such law during the fiscal year for which the grant is sought.

Before making a grant under section 300x–21 of this title to a State for the first applicable fiscal year or any subsequent fiscal year, the Secretary shall make a determination of whether the State has maintained compliance with subsections (a) and (b). If, after notice to the State and an opportunity for a hearing, the Secretary determines that the State is not in compliance with such subsections, the Secretary shall reduce the amount of the allotment under such section for the State for the fiscal year involved by an amount equal to—

(1) in the case of the first applicable fiscal year, 10 percent of the amount determined under section 300x–33 of this title for the State for the fiscal year;

(2) in the case of the first fiscal year following such applicable fiscal year, 20 percent of the amount determined under section 300x–33 of this title for the State for the fiscal year;

(3) in the case of the second such fiscal year, 30 percent of the amount determined under section 300x–33 of this title for the State for the fiscal year; and

(4) in the case of the third such fiscal year or any subsequent fiscal year, 40 percent of the amount determined under section 300x–33 of this title for the State for the fiscal year.

For purposes of this section, the term “first applicable fiscal year” means—

(1) fiscal year 1995, in the case of any State described in subsection (a)(2); and

(2) fiscal year 1994, in the case of any other State.

(July 1, 1944, ch. 373, title XIX, § 1926, as added Pub. L. 102–321, title II, § 202, July 10, 1992, 106 Stat. 394.)