Gift Cards and Financial Reporting

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FEBRUARY 2008 - In the article “Gift Cards and Financial Reporting” (November 2007), the discussion of escheat law on page 30, at the top of the second column, is incorrect. The paragraph which begins “In New York State” actually describes the law in Pennsylvania. The CPA Journal regrets the error.

The escheat law of New York regarding unclaimed property—or “abandoned property,” as the state now refers to it —is somewhat vague when referring to “gift cards.” There is mention only of “gift certificates” (see the definition below). The Laws of New York, Abandoned Property, Article 13, Subsection 1315 – Miscellaneous Unclaimed Property, includes the following provisions regarding gift certificates:

[A]ny unclaimed amount representing unredeemed gift certificates sold after December thirty-first, nineteen hundred eighty-three, including gift certificates for merchandise only in which case the face value of such certificate shall be deemed the amount deemed abandoned, and owing in this state, or held by any corporation (other than a public corporation), joint stock company, individual, association of two or more individuals, committee or business trust in this state, and which has remained unclaimed by the owner of such amount for five years, shall be deemed abandoned property.

The definition of “gift certificates” in Laws of New York, Abandoned Property, Article 1, Section 103 – Definitions, subsection (g) reads as follows:

“Gift certificate” shall mean a written promise or electronic payment device that: (i) is usable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo, or is usable at multiple, unaffiliated merchants or service providers; and (ii) is issued in a specified amount; and (iii) may or may not be increased in value or reloaded; and (iv) is purchased and/or loaded on a prepaid basis for the future purchase or delivery of any goods or services; and (v) is honored upon presentation. Gift certificate shall not include an electronic payment device linked to a deposit account, or prepaid telephone calling cards regulated under section ninety-two-f of the public service law. Gift certificate also shall not include flexible spending arrangements as defined in Section 106(c)(2) of the Internal Revenue Code, 26 U.S.C. § 106(c)(2); flexible spending accounts subject to Section 125 of the Internal Revenue Code, 26 U.S.C. § 125; Archer MSAs as defined in Section 220(d) of the Internal Revenue Code, 26 U.S.C. § 220(d); dependent care reimbursement accounts subject to Section 129 of the Internal Revenue Code, 26 U.S.C. § 129; health savings accounts subject to Section 223(d) of the Internal Revenue Code, 26 U.S.C. § 223(d), as amended by Section 1201 of the Medicare prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173; or similar accounts from which, under the Internal Revenue Code and its implementing regulations, individuals may pay medical expenses, health care expenses, dependent care expenses, or similar expenses on a pretax basis. Gift certificate also shall not include a prepaid discount card or program used to purchase identified goods or services at a price or percentage below the normal and customary price; provided that the expiration date of the prepaid discount card or program is clearly and conspicuously disclosed. Gift certificate also shall not include payroll cards or other electronic payment devices which are linked to a deposit account and which are given in exchange for goods or services rendered.

The full text of the relevant laws can be found online by starting at MENU-09435583 and following the links for the “Laws of New York” and “ABP–Abandoned Property.”




















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