Tobacco Transition Payment Program Examination Treatment of Assets Related to the Tobacco Transition Payment Program

• The Tobacco Transition Payment Program terminates the federal tobacco marketing quota and price support loan programs. It also establishes a 10-year transitional payment program for eligible tobacco quota holders (i.e., land owners) and producers (i.e., farmers) with annual installments beginning in fiscal year 2005 and ending in fiscal year 2014. The sign-up period to be eligible to receive the 2005 payment began on March 14, 2005, and ended on June 17, 2005.
• Financial institutions may offer individual producers and quota holders a lump sum payment – in exchange for the stream of annual payments received under the tobacco buyout program – through either an assignment of payments or a successor-in-interest contract. Assignments may begin with the fiscal year 2005 payment, while successor-in-interest contracts may not begin until the fiscal year 2006 payment.
• The attached examiner guidance provides information about the Tobacco Transition Payment Program. It also describes risk-management examination procedures to be used for state nonmember banks that enter into related assignment of payments arrangements or successor-in-interest contracts.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Lending Officer
Compliance Officer

Case Manager Nikita Smith at nsmith@fdic.gov or (901) 818-5705.

Note:
FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/financial-institution-letters/2005/index.html .

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html .

Paper copies of FDIC FILs may be obtained through the FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342 or (703) 562-2200).