Gift cards are exempt from unclaimed property reporting requirements in many states. In states where gift cards are subject to escheatment, a three-to-five year presumed abandonment period applies. But a growing minority of states are stepping up their efforts to subject unredeemed gift card amounts to escheatment.
New Jersey enacted legislation in 2010 adding unredeemed gift cards to the list of items that must be remitted to the state as unclaimed property. The presumed abandonment period for gift cards under New Jersey’s law is two years. The only other state with a two-year presumed abandonment period for gift cards is Tennessee.
This year South Dakota (H.B. 1270) shortened its presumed abandonment period for gift cards to three years from five years.
In addition to imposing a relatively short presumed abandonment period for gift cards, New Jersey’s law requires issuers of stored value cards to collect the name and address of the purchaser or owner of the card and, at a minimum, maintain a record of the owner or purchaser's zip code.This requirement allows the state to avoid the application of so-called priority rules, which require that unclaimed items be reported to the state of incorporation when the owner cannot be identified.
This requirement could create additional problems for businesses that issue gift cards. Both Delaware and New York have indicated that they do not consider a zip code, without more, as sufficient to support a state's claim to escheat, and they would expect companies domiciled in their states to report unredeemed gift card balances to the state of incorporation if the only record the issuer has of owner address is a zip code, Ethan Millar, an attorney with Alston & Bird LLP in California told Bloomberg BNA. This means that companies domiciled in those states, and perhaps others, may well face conflicting claims for the same unredeemed card balances, he said.
There is, of course, also a significant concern that other states may follow New Jersey's lead and attempt to impose a similar zip code or address collection requirement at the time of sale of a gift card, Millar added. “This is certainly possible, especially if New Jersey is successful ultimately in garnering widespread industry compliance in collecting the zip code information and reporting and remitting unredeemed card balances with New Jersey zip codes to New Jersey.”
By Steven Roll
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