Gift Cards and Unclaimed Property Laws in ME, MA and NH

By Merrill Barter December 23, 2014

This explanation is a follow-up to an article that was included in our February 2014 Newsletter.  The previous article provided a brief summary of some of the issues related to unclaimed and abandoned property (UAP).  In this article, we will look specifically at the treatment of gift cards in 3 states – Maine, Massachusetts, and New Hampshire.

As discussed in the previous article, property held by a business (the Holder) for which the owner has not made a claim, or cannot be identified or found after a specified period of time (the dormancy period), is treated as UAP.  In many states, if the Holder is unable to identify the owner and return the property, then it must be turned over to the state of the owner’s last-known address, or if this is not known, the Holder’s state of domicile (the state of incorporation for a corporation, the state of the principal place of business for an unincorporated Holder).

During this time of year, many businesses sell (and many of us purchase) gift cards.  Their convenience makes them extremely popular, and they generate significant revenue for businesses that sell them.  The owner is most often unknown – businesses keep track of the value of gift cards issued and their purchase dates (for accounting purposes), but not (typically) the purchasers’ information.  And the seller generally has no way of knowing the identity of the card’s recipient.  So what happens if the recipient never uses it?  Does the seller get to keep the money?  The answer, of course, varies by state.

Maine

Gift cards may not have a stated expiration date – the owner must always have the right to redeem the card.  However, a gift card is assumed to be abandoned if it is unclaimed by the owner for more than two years after December 31 of the year in which it was sold or the most recent activity on the card occurred.  The amount subject to escheatment is 60% of the unclaimed value on the card.  For gift cards that are sold on or after December 31, 2011, the unclaimed value of the cards after the two year dormancy period will only be treated as escheatable if the business sells at least $250,000 in face value of gift obligations during the previous calendar year.

Massachusetts

Gift cards issued on or after June 1, 2003 must be valid for not less than seven years after the date of issuance.  The date of issuance and expiration date must be clearly identified on the card, on a receipt, or made available through a website or toll-free telephone number.  If these requirements are met, the business may keep the unredeemed value if and when the card expires.

This contrasts with previous rules.  Prior to June 1, 2003, gift cards were required to be valid for at least two years, and any value remaining upon the card’s expiration had to be turned-over to the Commonwealth.

New Hampshire

New Hampshire’s UAP law does not specifically address the treatment of gift cards, but information provided by the Unclaimed Property Division at the New Hampshire State Treasury indicates that they are treated in the same manner as gift certificates.  Under the State’s UAP laws, gift certificates with a value of over $100 that are unclaimed by the owner for more than 5 years are presumed abandoned, and subject to escheatment.  Gift certificates (and presumably gift cards) with a value of $100 or less are not subject to the State’s UAP provisions.

The above information is meant to provide a general overview of the rules in these states.  Some other factors that have not been addressed and that could impact whether gift cards are subject to escheatment (and if so, to which state) include:

• In what state were the cards sold?
• What type of entity sold the cards (i.e. sole proprietorship, corporation, partnership or limited liability company)?
• If the entity is a corporation, where is it incorporated?
• Are gift cards subject to the UAP laws in the entity’s state of incorporation or principal place of business (for other than a corporation)?

The varying treatment of gift cards in the states described above illustrates to some degree the complexity of states’ UAP laws and reporting requirements, which create compliance difficulties for businesses.  It is important for businesses to understand both the existence of UAP rules, and the unique rules specific to the states in which they operate to avoid unpleasant surprises.  We would be happy to help our readers determine how to apply these rules.  If you have any questions, please contact Merrill Barter.