Gift Cards/Certificates: Complex Unclaimed Property  Obligations

January 16, 2022   |   Heather Gabell

Note that while this post uses the terms gift certificates and gift cards interchangeably, states generally define these terms either in their unclaimed property or general business law.

New York State Comptroller Thomas P. DiNapoli recently encouraged gift certificate owners in the state to spend their holiday gift certificates before they become lost, subject to inactivity fees or dormant.[1] Under New York’s unclaimed property law, gift certificates have a 5-year dormancy period, after which they must be reported as unclaimed property. Under state unclaimed property laws, businesses must report unclaimed funds to the states in accordance with the priority rules set forth by the U.S. Supreme Court in Texas v. New Jersey. [2] Under the first priority rule, property is reported to, or escheats, to the state of the owner’s last known address, according to the books and records of the company (a.k.a., holder). If the last known address is unknown, the property escheats to the holder’s state of incorporation (corporate domicile).

Gift cards were popular items over the holiday period, given the continuing inventory and supply shortages. According to a December 2021 survey conducted by RetailMeNot, 63% of consumers planned on giving gift cards as presents.[3] However, as DiNapoli cautioned, gift cards often go unused because they can expire, become lost, or can even become invalid if a business goes out of business. Many recipients also hold onto them thinking they will be used “eventually.” According to a recent poll, more than half of U.S. adults hold unredeemed gift cards to the tune of $15.3 billion.[4]

State Unclaimed Property Laws

While gift certificates and gift cards are revenue-drivers for businesses and can extend the holiday season, they can present unique challenges for retailers and other issuers of these instruments. Because the unclaimed property laws vary by state and by property type, a state-by-state analysis is required to determine whether the unredeemed portion of a gift certificate, or similar property type, is reportable as unclaimed property. Equally important to review are the provisions in the law that relate to the type of instrument issued by the business – a gift certificate, merchandise credit, stored value card or loyalty card. While some states offer exemptions for certain property types, others offer a partial exemption, such that a portion of the unredeemed funds will be reported. In some states, the exemptions are available only if certain requirements are met, such as if the gift certificate does not expire, is redeemable solely for merchandise, goods or services, and is not associated with post-sale fees.

Here are a few provisions that illustrate the varying treatment of gift certificates and related property under the unclaimed property laws:

• Arizona exempts gift certificates, stored value cards and merchandise credits (by specifically excluding them from the definition of “property’ subject to reporting as unclaimed property. [5]

• North Carolina exempts merchandise credits and exempts gift certificates if they conspicuously state that they do not expire; bear no expiration date; or state on the card that the expiration date is not applicable in North Carolina. If a gift certificate contains an expiration date, however, has a 3-year dormancy period and holders must report 60% of the unredeemed portion of the face value. [6]

• Pennsylvania requires unredeemed gift certificates to be reported 2 years after the expiration date or 3 years after the date of issuance if there is no expiration date listed. However, ‘qualified gift certificates’ are exempted from reporting, which are defined as gift certificates without expiration dates or any post-sale charges or fees. [7]

RUUPA: More Definitions, Less Uniformity

To add to this complexity, the 2016 Model Revised Uniform Unclaimed Property Act (RUUPA), a model unclaimed property law now available for the states to use as a basis to update and modernize their laws, introduces new definitions for gift cards, stored value cards, and loyalty cards. RUUPA does not include a specific exemption for gift cards or in-store credits for returned merchandise, leaving the decision to exempt up to the state. As a result, we see variations in the treatment of such property types, even where the states have adopted a RUUPA-like law.

RUUPA defines a gift card as a stored value card that does not expire, is redeemable for merchandise, goods, or services only, and, unless required by law, is not redeemable for cash or otherwise monetized by the issuer. Gift cards are presumed abandoned 5 years after the later of the issue date or the card’s most recent use. A stored value cards is defined as a record containing or consisting of a microprocessor chip, magnetic strip or any other means to store information, that is prefunded. Stored value cards are presumed abandoned 3 years after the latest of three dates: December 31st of the year issued or funds are added, the most recent indication of interest, and a verification of the balance by the owner. The amount presumed abandoned for gift cards and stored value cards is the net card value, defined as the original value of the card, plus any amounts added and less any amounts used, and any permitted service charge or fee. [8]

Recommendations for Retailers

As a gift card issuer, it is crucial to understand the ins and outs of your gift card program, including the structure and management of the program. If a third-party processor administers the gift card program, it is equally important to determine which entity has the obligation to report any unclaimed property. Also carefully consider the types of instruments offered, whether your business retains customer information (e.g., name and address), whether expiration dates are included on the cards, and whether there are any associated post-sale fees.

Maintaining compliance with the unclaimed property laws, whether for gift certificates or for any other property type that may be reportable to the states also means monitoring the ever-changing legislative landscape for updates and ensuring that any changes to your systems are performed in a timely manner.

We recommend a review of your gift card population to determine whether your business has an outstanding unclaimed property liability. If such a liability exists, consider reaching out to an unclaimed property expert who can further assist you. Experts can determine whether a voluntary disclosure program (available in some states with a potential for waiver of penalties and interest) is the best next step for your business. In addition, experts can assist in reviewing your processes, policies and procedures surrounding your gift card program to help you come into compliance and stay in compliance and help you mitigate future risk.

[1] Office of the New York State Comptroller, DiNapoli Urges New Yorkers to Spend Holiday Gift Cards (Jan. 7, 2022), DiNapoli Urges New Yorkers to Spend Holiday Gift Cards | Office of the New York State Comptroller.

[2] Texas v. New Jersey, 379 US 674 (1965).

[3] PRNewswire, RetailMeNot Announces First-Ever “Holiday Hangover” Five Day Shopping Event Starting Today (Jan. 5, 2022), RetailMeNot Announces First-Ever “Holiday Hangover” Five Day Shopping Event Starting Today (

[4] Barrie Segal, Poll: Americans are Sitting on $15 billion in Unused Gift Cards and Credits (July 26, 2001), Poll: Americans Have $15B in Unused Gift Cards | Bankrate.

[5] AZ Rev. Stat. § 44-301(15) (2020)

[6] NC Gen Stat § 116B-53(c)(8), (g) (2020)

[7] PA Stat. 72 P.S. §1301.1, 1301.6 (2020)

[8] Uniform Law Commission, 2016 Revised uniform Unclaimed Property Act, (last visited 1/19/2022) Unclaimed Property Act, Revised – Uniform Law Commission ( 

*Content contained in this article is considered accurate as of the publish date.

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