Yesterday the Illinois House of Representatives voted to override Governor Bruce Rauner’s veto of Senate Bill (SB) 9, the revenue bill supporting the State’s Fiscal Year (FY) 2017-2018 Budget. Just days before the vote, SB 9 was amended to include a revised version of the Illinois Unclaimed Property Bill (House Bill (HB) 2603) on which we’ve previously reported. The new law (part of Public Act 100-0022) is known as the Revised Uniform Unclaimed Property Act (RUUPA). The RUUPA becomes effective January 1, 2018. Below is a brief summary of a few of the highlights of which holders should be aware.

Gift Cards, Loyalty Cards and Game-Related Digital Content Exempt

Unlike HB 2603, the Illinois RUUPA expressly excludes “gift cards” from the definition of “property” subject to escheat. Pulling (in-part) from the Uniform Law Commission (ULC) definition, “gift card” is defined in the Illinois RUUPA as “a stored-value card: (i) issued on a prepaid basis in a specified amount; (ii) the value of which does not expire; (iii) that is not subject to a dormancy, inactivity, or service fee; (iv) that may be decreased in value only by redemption for merchandise, goods, or services upon presentation at a single merchant or an affiliated group of merchants; and (v) that, unless required by law, may not be redeemed for or converted into money or otherwise monetized by the issuer.”
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Earlier this year, an unclaimed property rewrite bill (HB 2603) was introduced in the Illinois House that would require holders to retroactively report a number of property types currently exempt. The provision would require a retroactive period of 10 report years. Items that are currently exempt that would become reportable include gift cards and property resulting from business-to-business (B2B) transactions.
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On January 26, 2017, the Delaware House approved comprehensive unclaimed property rewrite legislation (SB 13) that was passed by the Senate (with committee amendments) last week.  Our summary of many of the key provisions of the bill (as introduced) is available here.  Because the amended version of SB 13 has now passed

The Delaware General Assembly has introduced legislation that would significantly rewrite the Delaware unclaimed property statute by repealing the three current subchapters and replacing them with a single unclaimed property subchapter. This article highlights key proposed changes in the bill.

Read the full article.

Another federal judge slams Delaware’s unclaimed property audit methodology but rejects the holder’s reliance on the priority rules as a defense to the audit demands. See Marathon Petroleum Corp. et al. v. Cook et al., No. 1:16-cv-00080-LPS (D. Del., Sept. 23, 2016)The court recognized the unjustness of Delaware’s audit approach, but followed a previous case finding the priority rules can only be raised by states with competing claims.
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The court case challenging Delaware’s unclaimed property audit methodologies has settled following an opinion brutalizing Delaware’s position. This settlement leaves the US District Court for the District of Delaware (District Court) holding as precedent, but the issue of what methods Delaware must jettison remains open.

Last Friday, Temple-Inland and Delaware filed a joint motion to dismiss with prejudice in the District Court after the parties agreed to settle the dispute. While the settlement agreement was not publicly disclosed, we understand that Delaware agreed to withdraw its entire assessment (totaling $2,128,834.13) and pay Temple-Inland’s attorneys’ fees and costs, including expert witness reports. The settlement avoids an affirmation by the US Court of Appeals for the Third Circuit that Delaware’s audit practices and estimation techniques collectively “shock the conscience,” but remains a significant holder victory given that the Temple-Inland District Court opinion, which is detailed in our prior blog, can now be cited as binding (and finally resolved) precedent by similarly situated holders under audit by the State.
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On June 28, 2016, the much-anticipated memorandum opinion of the US District Court for the District of Delaware in Temple-Inland, Inc. v. Cook et al., No. 14-654-GMS was released on the parties’ cross-motions for summary judgment, finding Delaware’s extrapolation methodology and audit techniques collectively violate substantive due process.  According to Judge Gregory M. Sleet, “[t]o put the matter gently, [Delaware has] engaged in a game of ‘gotcha’ that shocks the conscience.”  The opinion also specifically called third-party auditor Kelmar Associates LLC’s formula used for estimation into question, noting that the use of a holder’s calendar sales as the denominator in the ratio used to estimate liability raises questions given the lack of connection between abandoned property and the economy.  In sum, this opinion is a “must read” for any unclaimed property advisor or holder going through a Delaware audit and is likely to have a drastic impact on both on-going and future unclaimed property audits.  Holders should contact their unclaimed property advisors immediately to begin discussing how to proceed based on this groundbreaking development.
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Background

As detailed in our blog last month, MoneyGram Payment Systems, Inc. (MoneyGram) is stuck in between a rock and a hard place as states continue to duel with Delaware over the proper classification of (and priority rules applicable to) MoneyGram’s escheat liability for uncashed “official checks.”  The dispute hinges on whether the official checks are properly classified as third-party bank checks (as Delaware directed MoneyGram to remit them as) or are more similar to “money orders” (as alleged by Pennsylvania, Wisconsin and numerous other states participating in a recent audit of the official checks by third-party auditor TSG). If classified as third-party bank checks, the official checks would be subject to the federal common law priority rules set forth in Texas v. New Jersey, 379 U.S. 674 (1965) and escheat to MoneyGram’s state of incorporation (Delaware) since the company’s books and records do not indicate the apparent owner’s last known address under the first priority rule. However, if the official checks are classified as more akin to money orders under the federal Disposition of Abandoned Money Orders and Traveler’s Checks Act of 1974 (Act), as determined by TSG and demanded by Pennsylvania, Wisconsin and the other states, they would be subject to the special statutory priority rules enacted by Congress in response the Supreme Court of the United States’ Pennsylvania v. New York decision and escheat to the state where they were purchased. See 12 U.S.C. § 2503(1) (providing that where any sum is payable on a money order on which a business association is directly liable, the state in which the money order was purchased shall be entitled exclusively to escheat or take custody of the sum payable on such instrument).

In addition to the suit filed by the Pennsylvania Treasury Department seeking more than $10 million from Delaware covered in our prior blog, the Wisconsin Department of Revenue recently filed a similar complaint in federal district court in Wisconsin, alleging Delaware owes the state in excess of $13 million. Other states participating in the TSG audit (such as Arkansas, Colorado and Texas) also recently made demands to MoneyGram and Delaware.

It is interesting to note that in 2015, Minnesota (MoneyGram’s former state of incorporation) turned over in excess of $200,000 to Pennsylvania upon its demand for amounts previously remitted to Minnesota for MoneyGram official checks. Apparently not only do the states in which the transaction occurred disagree with but even a former state of incorporation took the majority path.  
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On June 18, 2015, a bill (S.B. 141) was unanimously approved by the Delaware Senate that would place limits on the look-back period and permanently extend the Voluntary Disclosure Agreement (VDA) program. This represents the second bill this year that seeks to implement the recommended changes contained in the Unclaimed Property Task Force’s