[author: Sharon R. Paxton]
Legislation adopted in July 2012 authorizes Delaware’s Secretary of State (as opposed to the State Escheator) to enter into voluntary disclosure agreements with holders of unclaimed property who are not currently reporting any or all amounts or types of property, with reduced look-back periods. As a result of this legislation, eligible holders may limit the reporting of unclaimed property to 1996 or 1993, compared to the general obligation under Delaware unclaimed property laws to report such property back to 1981, or 1991 for those making voluntary disclosure agreements.
Many companies are particularly susceptible to significant unclaimed property exposure in Delaware because holders who fail to maintain owner address data generally must report and remit unclaimed property to their state of domicile (state of incorporation for corporate entities), which often is Delaware.
Holders that provide notice of intent to disclose by June 30, 2013, and enter into a disclosure agreement and pay by June 30, 2014, will not be required to report property from years before 1996. Holders that provide notice between July 1, 2013 and June 30, 2014, and enter into an agreement and pay by June 30, 2015, will not be required to report property from years before 1993. Also, the state’s right to audit a company entering into a VDA is more limited under this new program, unless there is evidence of fraud or willful misrepresentation.
Companies that are already under examination or that have provided notice of voluntary disclosure or entered into a disclosure agreement on or before June 30, 2012 do not qualify for this program. However, holders involved in the standard VDA program prior to June 30, 2012 generally will be allowed to apply the same shortened look-back periods, provided payment is made by June 30, 2014 for the 1996 look-back period or June 30, 2105 for the 1993 look-back period.
New Jersey Stored Value Cards
On June 29, 2012, New Jersey’s Governor signed legislation making several changes to New Jersey’s unclaimed property law as it relates to stored value cards (“SVCs”). Under the new provisions, the dormancy period for SVCs issued on or after July 1, 2010 has been increased from two years to five years, and SVCs issued before July 2010 are not reportable as unclaimed property. The amount of a general purpose, reloadable SVC that is presumed abandoned is the value of the card, in money, on the date it is presumed abandoned. For all other SVCs, the amount presumed to have been abandoned is limited to 60% of the value of the card, in money, on the date it is presumed abandoned.
This legislation also established a four-year moratorium on enforcement of the law’s data collection requirements (which require the issuer of a SVC to obtain the name and address of the purchaser or owner, and, at a minimum, to maintain a record of the zip code of the purchaser or owner). This moratorium provides time for the holder community to work with New Jersey to arrive at a mutually acceptable arrangement concerning data collection requirements. In addition, this legislation repealed the “place of purchase presumption,” which, in instances where the address was not collected when an SVC was sold in New Jersey, created a presumption that the owner of the SVC was located in New Jersey. (This provision was found to be unenforceable by the United States Court of Appeals for the Third Circuit in New Jersey Retail Merchants Association v. Sidamon-Eristoff, 669 F.3d 374 (3rd Cir. 2012). On October 29, 2012, the United States Supreme Court denied New Jersey’s petition for certiorari.)
Finally, the recent legislation expands the available reporting exemptions to include SVCs donated, or sold below face value, to charitable or educational organizations and cards redeemable for admission to various events and venues. New Jersey continues to exempt certain SVCs distributed under promotional or customer loyalty programs and SVCs issued by an issuer that in the past year sold SVCs with a face value of $250,000 or less. The legislation also added various consumer protections relating to SVCs.