Washington (Jan. 22, 2003) -- Landowners, producers and tobacco quota owners who receive money from the National Tobacco Settlement Trust must report those payments as income each year, the Internal Revenue Service said Tuesday.The payments are considered gross income for federal tax purposes and are taxable as ordinary income. Many tobacco farmers and others associated with tobacco production receive settlement payments from the trust, which was established to provide aid to tobacco growers and tobacco quota owners. The payments compensate for lost revenue because of decreased demand for tobacco, and ease potential economic consequences in states where tobacco is grown.

Tobacco companies are required to make the payments as part of the National Tobacco Grower Settlement. Farmers in 14 states will receive the payments over a 12-year period that began in 1999. The 14 states are Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia.

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