|By PR Newswire||
|September 10, 2010 12:08 PM EDT||
DALLAS, Sept. 10 /PRNewswire/ -- As originally signed into law, effective July 1, 2010 and subsequently extended to October 1, 2010, New Jersey's unclaimed property law requires companies holding a variety of unclaimed funds to report and remit the funds to the state after a statutory period of "dormancy" or inactivity. The recent amendments have expanded this law to include gift certificates, gift cards, and stored-value cards (SVCs), mandating that issuers turn over to state custody any unused balances on such instruments after two years of inactivity.
The new law directly targets national retailers, companies in the hospitality industry, and virtually any other business that issues SVCs and specifically dictates that the issuer of a SVC obtain the name and address and, at a minimum, retain for their records the ZIP code of the purchaser or owner of each SVC issued or sold. If the issuer does not have this information, the new law provides that the address of the owner is deemed to be in New Jersey if the SVC was issued in the state, with the result that unused balances on any such SVC must then be remitted to New Jersey unclaimed property authorities.
New Jersey's passage of Assembly Bill 3002 ("AB 3002") appears to be heading in a direct collision course with the long-established Supreme Court priority rules of escheat. In Texas v. New Jersey, 379 U.S. 674 (1965), the Supreme Court ruled that first priority to unclaimed funds belongs to the state of the creditor or owner's last-known address, as shown on the debtor's or holder's books and records. If the holder's records do not show a last-known address, the Supreme Court ruled that the funds must be remitted, secondarily, to the holder's state of incorporation. In Delaware v. New York, 507 U.S. 490 (1993), the Supreme Court reaffirmed these priority rules and declared that any state law purporting to vary them would be invalid under its unclaimed property jurisprudence.
Companies that issue their SVCs through the use of a gift card company ("GIFTCO"), especially those GIFTCOs incorporated in states where the unclaimed property laws exempt SVCs, should pay very close attention to the new law, as it may force them to choose between following the Supreme Court's priority rules, under which the state with the rightful claim to unused SVC balances exempts such property, or following AB 3002, under which the balances would be remitted to New Jersey.
Notably, at least one state, Delaware, has gone on record regarding New Jersey's attempt to modify the established priority rules by stating that holders of unclaimed property, including issuers of SVCs, can expect Delaware to follow the priority rules as laid down by the Supreme Court and that it is the holder's obligation to correctly report abandoned property to the appropriate state under the well-known priority rules. Delaware encouraged holders receiving contrary information from other states to contact Delaware's unclaimed property officials.
New Jersey's new law does not appear to provide any guidance to holders as to the consequences for failure to comply with the newly enacted provisions of AB 3002. With retailers, the hospitality industry, and others bracing for the rapidly approaching holiday season, New Jersey is considering further modifications to the law to help provide greater clarity and understanding to the issuers of SVCs in addition to some potential concessions, which have not yet been disclosed. Until New Jersey formally articulates what modifications, if any, to the new law are forthcoming, every SVC issuer, especially those utilizing a GIFTCO, is compelled to evaluate how best to comply and implement the reporting requirements of AB 3002.
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