January is a busy month as many state legislatures head back into session. Several state legislatures are looking to change the rules on gift cards. Gift cards remain an important issue in unclaimed property, as estimates say that $45 billion worth of gift cards may have gone unredeemed since 2005. State legislatures continue to eye this money as potential ways to balance state budgets.
In 2012, a New York Assemblyman introduced a bill to collect sales tax at the time gift cards were sold. As Barganier pointed out at the time, there are some fundamental problems with collecting sales tax at the beginning of the sales cycle, including the portability of gift cards - the goods that are eventually purchased using the gift card may not be subject to a New York sales tax. Now, a new bill would clarify that gift cards are exempt from sales tax. The bill has been referred to the Ways and Means Committee.
Oregon's bill, if passed, would have the greatest impact on national gift card issuers. First, the state would set the dormancy period as three years from the date of purchase or issuance of the gift card or the last transaction on the card. This would be less than the federal CARD Act of 2009's requirement that gift cards not expire for at least five years. The Consumer Financial Protection Bureau ("CFPB") has said that a state dormancy period of less than five years is preempted if the state does not require the holder to honor the value of the gift card, even if it has been remitted as unclaimed property.
Second, the Oregon bill provides for significant changes in the priority rules for the reporting of unclaimed property. The bill is similar to the New Jersey bills that changed the priority rules for gift cards, providing for a place of purchase presumption. Under federal common law, the priority rules have been established as first to the state of the owner's residence, as established by the books and records of the holder, and second, to the holder's state of incorporation. Some states have provided for a third priority rule for the place of transaction, but that is only effective if neither the first nor second priority rules provide for reporting unclaimed property.
Retailers and others heavily opposed the changes in New Jersey. Eventually, a case made it to the Third Circuit Court of Appeals, where the Court affirmed a District Court's ruling that the place of purchase presumption was in conflict with the Supreme Court jurisprudence. Continued efforts have been made in both the courts and the state legislature to completely undo all changes made by the 2010 New Jersey gift card law. The last vestige of the law is a data collection requirement which would be eliminated by SB 2335, passed both houses in December 2014.
Third, the bill provides that the amendments would be apply only to gift cards sold after the effective date of the Act. In New Jersey, the 2010 law applied to all cards, regardless of when they were sold. Both the Third Circuit and the District Court ruled that the New Jersey amendments could not apply retroactively to gift cards sold before the effective date.
HB 2543 has been referred to the Consumer Protection and Government Effectiveness Committee.
House Bill 42 was introduced and referred to the Corporations committee. The bill would update Wyoming law to reflect the business and technology changes from paper based gift certificates to electronic stored value cards. It would also provide for a five year dormancy period from the date of issuance or the date of last activity, whichever is later. The five year dormancy period would conform to the CARD Act's requirements for gift card expiration dates to be no less than five years.