(a) Effective July 1, 1998, and for all subsequent fiscal years, all revenues produced from the sale or renewal of new specialty earmarked motor vehicle registration plates, as defined in § 55-4-201, after deducting the expense the department has incurred in designing, manufacturing and marketing the plates and, if applicable, disabled driver decals in accordance with § 55-21-103(a)(6), shall be allocated as follows:

(1) Fifty percent (50%) of the funds shall be allocated to the nonprofit organization or state agency or fund earmarked to receive the funds by the statute authorizing the issuance of the plate. The funds shall be used solely to fulfill the purpose or to accomplish the goal specified in the statute authorizing the issuance of the plate;

(2) Forty percent (40%) of the funds shall be allocated to the Tennessee arts commission created in title 4, chapter 20; and

(3) Ten percent (10%) of the funds shall be allocated to the state highway fund.

(b)

(1) The revenues allocated to the Tennessee arts commission pursuant to subdivision (a)(2) shall be distributed by the arts commission in the form of grants to arts organizations or events which meet criteria established by the arts commission for receiving grants, within the following parameters:

(A) One-third (⅓) of the funds shall be distributed to qualifying arts organizations or events in urban counties; and

(B) Two-thirds (⅔) of the funds shall be distributed to qualifying arts organizations or events in rural counties.

(2) Before the revenue allocated in subdivisions (b)(1)(A) and (B) are granted to the particular local arts organizations or events, an amount not to exceed fifty percent (50%) of the revenues allocated to the Tennessee arts commission pursuant to subdivision (a)(2) may be expended for other grants and activities as determined by the commission.

(c) It is the legislative intent that funds statutorily earmarked from the sale or renewal of new specialty earmarked plates shall only be allocated to:

(1) A nonprofit organization;

(2) A department, agency or other instrumentality of state government; or

(3) A special reserve fund to be utilized by a state agency to effectuate a purpose deemed to be in the state's best interest.

(d) Nothing in this section shall be construed as reallocating the revenues produced from the regular motor vehicle registration fees, or renewals thereof, imposed by part 1 of this chapter. Such revenues shall be allocated in accordance with § 55-6-107.

(e) For the purposes of this section, “urban counties” are those counties that are included within a metropolitan statistical area, as defined by the federal office of management and budget and as enumerated in the most current edition of Tennessee Statistical Abstract. “Rural counties” are those counties that are not included within a metropolitan statistical area, as defined by the federal office of management and budget.