Over the past two years the State of New Jersey and various gift card issuers and their representatives have been locked in battle over the controversial New Jersey legislation requiring the issuers of Stored Value Cards to remit the unredeemed value of the cards as unclaimed property. On January 5, 2012, the Third Circuit Court of Appeals affirmed the lower court on all of the initial determinations.
Duff & Phelps recently issued its Valuation Insights, Second Quarter 2011 newsletter. Robert Peters, Leader of the Unclaimed Property practice, authored the article Is Unclaimed Property Lurking in the Deal? With M&A activity on the rise it’s important to understand the unclaimed property liabilities hidden in the deal. Read this article to learn about the simple due diligence that can be conducted for acquisition targets to mitigate the risk of unforeseen unclaimed property liabilities.
Coming on the heels of strong 2010 retail results, the Internal Revenue Service (IRS) added a bit of New Year's cheer by issuing two favorable pronouncements on January 5 regarding the tax treatment of gift cards issued by retailers for returned merchandise.
As the holiday season swings into full gear this upcoming week, the Federal Courts issued retailers an early present in the form of a favorable decision enjoining the State of New Jersey from implementing legislation impacting the State's authority to collect unredeemed gift card balances as unclaimed property.
During this webcast presenters shared recent legislative, administrative and judicial developments that impact corporations across a broad range of industries. They also shared best practices to assist companies who are trying to adapt to the changing environment.
Based on the lobbying efforts of many multi-national companies Delaware has taken a major first step in liberalizing its unclaimed property provisions. The concern among the Delaware legislature was that many of the large corporations who might fall subject to a Delaware unclaimed property audit would re-incorporate outside of the state, and erode the tax base the state receives from its franchise taxes paid based on the number of issued shares issued by a Delaware incorporated entity. The franchise tax is the largest revenue base for the state, with unclaimed property collections comprising the second largest revenue source. On June 29, 2010, the Delaware legislature passed a bill reforming the state's unclaimed property provisions.
This article cautions that budget-strapped states have begun to eye uncashed rebate checks as a source of revenue under unclaimed property laws.
Over the past several years uncashed rebate checks, commonly referred to as "slippage", have become a growing concern for companies that offer rebates for their products as well as the companies that process and issue them. Although not technically a tax, states have embarked on an aggressive campaign, stepping up the collection of unclaimed property from all corporations. Uncashed rebate checks have become their most recent area of pursuit. When states collect this unclaimed property, there is technically no one to forward it to. These collections oftentimes go directly into the state coffers to fund general budget expenditures.
Duff & Phelps helped the major retailer to achieve over $3 million in savings as a result of planning to avoid unredeemed gift cards from constituting as unclaimed property in addition to securing a $300,000 refund of over remitted unclaimed property from a state.
Duff & Phelps helped the company realize $1.5 million in savings through the identification of potential items of unclaimed property that were exempt either because of statutory and administrative exemptions or because the items related to previously undocumented accounting mispostings and classifications.