November 20, 2017 Illinois legislature approves technical corrections to its recently enacted revised unclaimed property law, namely the definitions of gift card and stored value card On November 8, 2017, the Illinois legislature approved a technical trailer bill (Senate Bill 868) (hereinafter, the bill), intended in part to clarify and correct the definitions of "gift cards" and "stored value cards" for purposes of the Illinois Revised Uniform Unclaimed Property Act (IL-RUUPA). Background As part of its FY 2018 budget bill (Pub. Act 100-0022, Senate Bill 9) enacted this past summer, the Illinois legislature adopted the IL-RUUPA, significantly modifying the state's unclaimed property law. See Tax Alert 2017-1197 for a discussion of how IL-RUUPA differed from prior law and the effect the new law would have on holders of Illinois unclaimed property (holders). The new IL-RUUPA will become fully effective on January 1, 2018. Senate Bill 868 The bill would revise the definitions of "gift cards" and "stored value cards" to eliminate the hierarchical definitions laid out in IL-RUUPA. Instead, the bill would treat the two types of cards differently and as mutually exclusive (i.e., a "gift card" cannot be a "stored value card"). The revised definitions are modeled after the definitions used by the Federal Reserve in Regulation E. It is anticipated that the Governor will sign the bill into law by January 1, 2018. Under the revised definition of "gift card,"references to "affiliated group of merchants" would be eliminated, thereby clarifying that the definition of a "gift card" is meant to include not only traditional "closed loop" gift cards redeemable at a retail location or affiliated group of merchants, but also an "open loop" card such as a bank-issued card redeemable essentially anywhere. Additionally, the revised definition would use the broader term "record" instead of "card, code, or other device" as used in Regulation E to clarify that paper gift certificates are included within the definition of "gift card." This clarification is critical because "gift cards" are exempt from reporting under IL-RUUPA as enacted and this is consistent in the bill. In addition, the bill would require gift cards to have the following characteristics in order to be exempt from reporting: 1) The value does not expire. 2) The card is not subject to dormancy, inactivity or post-sale services fees. 3) Unless required by law, the card may not be redeemed for cash or otherwise monetized by the issuer. If any of the required characteristics of a gift card are absent, then under the updated definitions contained in the bill, the purported gift card by definition would become a "stored value card," which would be defined as a general purpose, reloadable card escheatable after five years. The definition of "stored value card" would specifically exclude a payroll card, gift card, loyalty card, or game-related digital content. Under the IL-RUUPA, gift cards, loyalty cards and game-related digital content are all exempt from Illinois unclaimed property reporting; however, payroll cards are not exempt from reporting and remission. Additionally, in response to the Seventh Circuit's decision in Kolton,1 the bill would add a provision for Illinois to pay interest to owners on interest-bearing accounts (enumerated as demand, savings, or time deposit accounts) delivered to the unclaimed property administrator on or after July 1, 2018. Interest would be paid at the lesser of the inflation rate or the rate the property earned while in the possession of the holder and reported to the administrator. Interest would begin to accrue when the property is delivered to the administrator and end on the earlier of 10 years after its delivery or the date on which payment is made to the owner. ———————————————
——————————————— 1 Kolton v. Frerichs, No. 16-3658 (7th Cir. Aug. 22, 2017). | |||||||||
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