Joseph A. Lombardo
The State of New Jersey has asked the United States Supreme Court to hear a case involving the state’s dispute against retailers regarding unused funds on gift cards being regarded as unclaimed property and handed over to the state. A report claims that The Garden State estimates that at least 114 million dollars a year go unclaimed on gift cards sold in the state. The issue stems from a 2010 amendment to the NJ abandoned property law in which the state expanded the definition of ‘abandoned property’ to include unused funds on gift cards. As any attorney might guess, the state probably has plans for that unused cash.
A main point of contention is that The Supreme Court has already decided on a set of rules governing what is considered unclaimed property that can be seized by states. Federal unclaimed property laws says that funds can only be seized in the state in which the purchaser lives. However, if there is no record on file with the business regarding which state the purchaser lives in, secondary priority is placed with the state in which the seller of a good is incorporated. There is often no record of residence in the sale of gift cards. The angle here is that not many states consider unused dollars on gift cards as revenue. So New Jersey amended its abandoned property law to include unused gift card balances as unclaimed property, which they can claim if either, 1. another state that has first priority does not classify gift card balances as unclaimed property, or 2. the card that was purchased in another state goes unused for five years and the other state does not claim the property. Neither of those issues has been clearly defined by the Supreme Court.
Retailers would have options if they chose to change the terms of their cards to protect their customers.
In lawsuits challenging NJ’s amendment to the unclaimed property law, two lesser courts have already ruled against the state. The original version of the amendment allowed the state to claim unused balances after two years, that was challenged in court and then changed to five years.
The Supreme Court is reportedly going to make a decision some time this month whether they want to hear the case and decide on the issues of whether states can claim unused gift card funds as unclaimed property, which state would have priority in the claim, and where secondary priority would lie, i.e. whether it matters where the customer bought the card or where the company they bought the card from is incorporated.
Do You Think New Jersey Should Be Able to Claim Funds From Unused Gift Cards?
Sound off in the comments. This one should be interesting. I will keep you posted on further updates.
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