On Saturday, April 1, 2017, the Delaware Department of Finance (DOF) promulgated two regulations that would repeal all existing unclaimed property regulations and replace them with a single DOF regulation containing a revised Reporting and Examination Manual. The Secretary of State (SOS) also promulgated a regulation that outlines the method of estimation to be used for participants in the Voluntary Disclosure Agreement (VDA) Program. These promulgations are in accordance with the General Assembly’s instructions to do so in Senate Bill 13, which was passed in January and enacted by Governor John Carney on February 2, 2017. Any written submission in response to these regulations must be sent to the respective agency by Wednesday, May 3, 2017 at 4:30PM EST. (more…)
Most states are well off to the races with their 2017 legislative sessions and several states have gift card legislation pending that would impact unclaimed property holders.
On January 9, 2017, a bill (SB 113) was introduced in the Senate that would create a new unclaimed property reporting obligation for gift cards, which would apply to gift cards issued or sold after the effective date of the bill.
SB 113 would accomplish this by amending the state consumer protection law to provide that a cardholder may only redeem a gift card from “[t]he person that a gift card identifies as providing goods or services” and such person “shall transfer to the Department of State Lands, in accordance with [the Uniform Disposition of Unclaimed Property Act], any remaining balance from a gift card that a cardholder has not used within five years after the date of the last transaction that used the gift card for a purchase.” Keeping consistent with the changes above, the bill would also amend the definition of “gift card” to strike the current reference to “issuer” and replace it with the “person identified in the record as providing goods or services in exchange for displaying or surrendering the record.” Finally, the bill provides that “[a] transfer under this paragraph renders the promise to provide goods or services of which the gift card is evidence void and the cardholder may not redeem the remaining balance on the gift card for cash, goods or services after the date of the transfer.”
The bill was referred to the Senate Committee on General Government and Accountability, where the sponsor (Senator Chuck Riley) sits as chair.
The prospect of gift cards becoming reportable prospectively in Oregon is troubling in itself, but the bill would go a step further and redefine who is the issuer in the gift card context by specifying that the retailer or other entity identified on the record as providing goods or services is the issuer and has the remittance obligation—not a third-party issuer (which many retailers currently use and most have historically understood to have the reporting obligation for unredeemed gift cards in states without an exemption). The bill leaves room for the Department of State Lands to establish an expedited process for transferring gift card balances by regulation, but it would still be the onus of the retailer to provide the unredeemed balances and would diminish the benefit of having a third-party gift card processor under Oregon law.
On January 5, 2017, a bill (HB 473) was introduced in the House that would revise the definition of “gift certificate” by (1) removing the existing requirement that the promise be written; and (2) increasing the face value based exemption from $100 to $250. The bill also would increase the face value of a gift certificate that may have an expiration date under the state consumer protection law to $250. As introduced, these changes would take effect January 1, 2018.
HB 473 [...]
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 both chambers of the General Assembly, it will be sent to Governor John C. Carney Jr. for signature, and will become effective immediately upon his approval. Rumors are circling that follow-up legislation is likely, and may be considered this session. Senate Amendment The Senate Amendment adopted by both chambers made relatively minor changes to the introduced legislation. First, it struck all references to and the definition of “net card value” that was used to determine the amount presumed abandoned in the stored-value and gift card context. As passed today, “the amount unclaimed is amount representing the maximum cost to the issuer of the merchandise, goods, or services represented by the card.” The 5 year dormancy period tied to “the later of the date of purchase, the addition of funds to the stored-value card or gift card, a verification of the balance by the owner, or the last indication of interest in the property” was not changed. Second, the amendment struck all references to and the definition of “virtual currency.” This is significant because the introduced version of the legislation expressly included an expansive definition of virtual currency in the definition of “property” subject to escheat. While the inclusion of virtual currency in the definition of “property” is consistent with the approach taken in the Revised Uniform Unclaimed Property Act (RUUPA) adopted by the Uniform Law Commission (ULC) last year, the introduced Delaware legislation definition of “virtual currency” omitted two exclusions (the software or protocols governing the transfer of the digital representation of value and game-related digital content) contained in the RUUPA definition that were included after careful consideration to limit the potentially vast scope. By removing virtual currency entirely from the Delaware legislation, it will not be presumed to be property subject to escheat. Third, the Senate Amendment changes the timeframe that holders currently under audit have to submit a written application to participate in the Secretary of State VDA program or expedited audit process. As introduced, the Delaware legislation would have required these decisions to be made by July 1, 2017. As amended (and passed), this period would be extended to within 60 days from the date of the adoption of regulations pertaining to the methods of estimation used. Practice Note With the passage of this legislation, there is a lot for holders to consider. In particular, holders with an on-going audit will need to make the decision whether to: (1) make an election to join the Secretary of State VDA program; (2) expedite the audit; or (3) continue as-is. With new penalties and mandatory interest enacted as part of the legislation, securing waiver of penalties and interest should be a top [...]
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.
Revised Uniform Unclaimed Property Act Finalized for State Enactment—Legislative Drafting Notes and Interpretative Comments Added
The fourth iteration of a uniform unclaimed property act—entitled the Revised Uniform Unclaimed Property Act (RUUPA or Act)—has been finalized by the Uniform Law Commission for state enactment. The new Prefatory Note, Legislative Notes, and Comments components offer further explanatory guidance on the Act.
Settlement Reached in Temple-Inland; Delaware Internally Reviewing Unclaimed Property Audit Practices
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. (more…)