At a Glance…
The New Jersey Appellate Division recently ordered New Jersey to refund more than $1 million to Bed Bath & Beyond for over-reporting store credits redeemable for merchandise to the state’s Unclaimed Property Administration (UPA). The court clarified that credits redeemable for merchandise only were not reportable at all to the UPA to the extent issued before July 1, 2010. Further, any such credits issued after that date were to be remitted at 60% of their face value. If your business made retail sales and reported any unclaimed store credits to the UPA at 100% value, it may be entitled to a refund, with interest.
New Jersey’s Uniform Unclaimed Property Act requires holders of unclaimed property to file an annual report with the UPA and remit the unclaimed property to the state.1 “Property” under the Act is presumed abandoned after three years.2 Before the 2010 Amendments, “property” included “credit memoranda.”3
After the 2010 Amendments, “property” now also includes “stored value cards.”4 Such property is presumed abandoned after five years and only “60% of the value of the card” is presumed abandoned.5
Bed Bath & Beyond (Bed Bath) claimed a refund from the UPA for unclaimed store credits that it issued before and after the 2010 Amendments. As the store credits were not redeemable for cash, Bed Bath argued that the credits were not reportable under the New Jersey authority in effect before the 2010 Amendments, and that it was entitled to a full refund for the unclaimed store credits issued before the 2010 Amendments that it had remitted to the state. (By contrast, the New Jersey Treasurer, acting on behalf of the UPA, argued that these unclaimed store credits were properly remitted to the state as “credit memoranda.”)
Bed Bath also claimed a refund for unclaimed store credits that it issued after the 2010 Amendments. It had initially reported this property to the state as “credit memoranda,” and thus reported the full value of the unclaimed store credits to the state. The company claimed a refund on the basis that the “unclaimed store credits” qualified as “stored value cards,” and as a result, it should have only remitted 60% of the value of the cards to the UPA.
The Appellate Division reversed the UPA’s denial of Bed Bath’s refund claim, agreeing with the company’s interpretation of the New Jersey statute. First, the court determined that the “unclaimed store credits” were not within the purview of the UPA prior to the 2010 Amendments. The decision clarifies that the Act’s definition of “property” covered “claims for the payment of money.”6 Bed Bath’s claim for refund concerned only store credits that it issued as redeemable for other merchandise or services, but not for cash. As a result, Bed Bath was entitled to a refund of the full value of the credits it had remitted, plus interest.
The Appellate Division also determined that the company was entitled to a refund of 40% of the value of escheated unclaimed store credits that it issued after the 2010 Amendments. The court relied on the broad definition of “stored value cards,” which is not limited to traditional plastic gift cards, but includes “a promise, made for monetary or other consideration.”7 In determining that Bed Bath’s unclaimed store credits were “stored value cards,” the court noted how the inclusion of the property type within the law in the 2010 Amendments expanded the Act to property issued for non-monetary consideration. Because Bed Bath’s refund did not concern store credits redeemable for cash, the Appellate Division concluded that those credits were properly characterized as “stored value cards.”
Holders have two takeaways from the Appellate Division’s decision:
- Store credits issued before July 1, 2010: store credits that are not redeemable for cash and that were issued before this date are not within the scope of the UPA. As a result, if holders remitted such property to the state, they should consider filing for a refund.
- Store credits issued after July 1, 2010: store credits that are not redeemable for cash and that were issued after this date are “stored value cards.” Such property is only considered abandoned after five years, and is reportable only at 60% of the value of the card. If your business remitted the full value of the card, then you should consider filing for a refund.