Corporate Close-Up: Ohio Expands Unclaimed Property Reporting Exemptions

Recent legislation in Ohio creates new exceptions from unclaimed property reporting requirements for various types of consumer credits, prepaid electronic payment devices, and rewards cards. The legislative amendments take effect on Jan. 22, 2019.

Ohio, like all other states, requires a holder of unclaimed funds that have remained dormant for the requisite amount of time to file an annual report with the Ohio Director of Commerce. The report must provide information about each item of unclaimed funds having a value of $50 or more, and the last known owner. Additionally, the holder must attempt to notify the owner of the unclaimed funds if the holder has an address for the owner in its records.

Under current law, Ohio provides a reporting exception for any credit due a retail customer redeemable only for merchandise that is represented by a gift certificate, gift card, merchandise credit, or merchandise credit card. H.B. 353 expands the exception to specify that the credit may be redeemable for goods or services and may be represented by a gift card issued by a financial organization or business association. In addition, the legislation creates a new reporting exception for any prepaid electronic payment device that is issued by a financial organization or business association for the future purchase or delivery of goods or services, has no expiration date, is not redeemable for cash, and is redeemable upon presentation to a single merchant or service provider or an affiliated group of merchants or service providers (known as a “closed-loop prepaid card”).

The bill also establishes a new exception for any “open-loop prepaid card” that is issued by a financial organization or a business association for which the underlying funds do not expire. An “open-loop prepaid card” is a prepaid electronic payment device that can be used for the future purchase or delivery of goods or services at multiple unaffiliated merchants or service providers and is not redeemable for cash.

When H.B. 353 takes effect, a holder also will not be required to report a dormant “rewards card.” A “rewards card” includes any loyalty, incentive, or promotional type program that is issued by a financial organization or a business association whether represented by a card or electronic record. The program’s purpose must be to provide awards, rebates, or other amounts to reward the cardholder for maintaining a relationship with the card sponsor, provided no direct money is paid by the cardholder for the rewards card. The card sponsor, however, may charge the cardholder a minimal annual fee for joining the promotional program.

A holder must turn the unclaimed funds that it reports over to the state. The Division of Unclaimed Funds within the Ohio Department of Commerce is responsible for the safekeeping and return of funds to the rightful owners. While acting as a custodian, Ohio may use a portion of the reported unclaimed funds to support housing loan guarantees or the operations of other state programs.

An Ohio Legislative Service Commission fiscal analysis concludes, not surprisingly, that H.B. 353 will reduce the amount of funds deposited with the state. Although the amount of unclaimed funds reported during the past five fiscal years attributable to prepaid cards and rewards cards is unknown, the analysis also concludes that the amount probably represents a very small share of the total reported by holders and claims paid to owners during those years.

The requirements to report dormant gift certificates, customer credits, and the different types of stored value cards vary from state to state. Some states, like Alabama, Arizona, and Virginia provide an exemption from unclaimed property reporting similar to Ohio’s for customer credits, gift certificates, and stored value cards that are redeemable for merchandise or services. Other states require reporting after dormancy periods ranging from three to five years, while Florida provides an exemption for unredeemed gift certificates, but specifically requires reporting of abandoned open-loop prepaid cards.

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: What are the requirements in your state for reporting unclaimed gift cards, loyalty rewards, and other stored value products?

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