Gift Cards Rewards and Incentives Program

With the increased scrutiny in the regulatory environment, there is no better time to undertake a thorough review of your gift card rewards and incentive program.

Based on recent developments, all organizations that issue, or are considering issuing or expanding their gift, reward and/or loyalty programs, should review the structure and operations of these offerings.  In order to aid organizations in addressing the tax, financial reporting, unclaimed property and legal* implications of gift card, reward and loyalty program offerings in today’s changing landscape, Duff & Phelps has developed the Gift card Rewards and Incentive Program ("GRIP") to assist organizations, with reviewing their existing or planned arrangements.

Benefits of the program include:

  • Preserve the “breakage” on unredeemed cards as income for financial reporting purposes
  • Minimize risk in event of challenge by the state(s)
  • Integrate gift, rewards and loyalty programs to minimize unclaimed property and sales tax exposure
  • Capitalize on federal and state income tax benefits of various plan offerings
  • Ensure compliance with consumer protection requirements

GRIP Overview

During the course of the review, a seasoned group of professionals (including tax, unclaimed property, transfer pricing and attorneys from our law firm alliance partners) will conduct a comprehensive review. The purpose of this review is to help assess where there may be opportunities to ensure that maximum savings are being achieved. Moreover, the review will put you in the best position to withstand scrutiny by not only federal, state and local tax and unclaimed property administrators, but also by any internal and external financial auditors who may be reviewing the financial accounting implications.

The outcome of this independent review will include:

  • An overall assessment of the strengths and areas for potential improvement in the structure and operation of your company’s gift card/reward service offerings
  • Sharing of best practices based on a series of recent developments, financial, tax and practical experience of major gift card/rewards issuers

Specific areas considered within the review will include:

  • Optimum entity structure and State of Domicile
  • Gift card Management Activities
  • Gift card Appearance (suggested language to satisfy regulatory and consumer protection requirements)
  • Legal implications of gift card/reward program offerings through law firm alliance partners
  • Gift card issuance and redemption policies and practices
  • Accounting treatment
  • Sales/Use tax implications of gift card/loyalty and rewards offerings
  • Treasury/Cash Issues
  • Economic substance, statistical and transfer pricing requirements
  • Treatment of merchandise credit and returns
  • Required legal documentation to support inter-company arrangements
  • Initial and ongoing reporting requirements

*Legal services to be provided through our law firm alliance partners.

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