Legislature(2007 - 2008)

03/25/2008 02:40 PM House FIN


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HOUSE BILL NO. 49                                                                                                             
                                                                                                                                
     An  Act relating  to credit  memos, gift  certificates,                                                                    
     and gift  cards, and to unclaimed  property; and making                                                                    
     a  violation  of  certain  gift  card  prohibitions  an                                                                    
     unlawful trade practice.                                                                                                   
                                                                                                                                
[RECORDING  EQUIPMENT   FAILURE     MUCH  OF   RECORDING  IS                                                                    
INAUDIBLE]                                                                                                                      
                                                                                                                                
Vice-Chair Stoltze  MOVED to  ADOPT work  draft 25-LS0263\L,                                                                    
Bannister, 3/19/08,  as the version  of the bill  before the                                                                    
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
REPRESENTATIVE  CARL   GATTO,  SPONSOR,  pointed   out  that                                                                    
retailers  and banks  have  been  offering electronic  "gift                                                                    
cards"  in response  to growing  consumer demand  for easier                                                                    
and  more convenient  gift options.   He  added that  27% of                                                                    
those receiving gift cards never  use them.  The question is                                                                    
what happens to  those un-used gift cards &  HB 49 addresses                                                                    
that question.  He provided an overview of each section:                                                                        
                                                                                                                                
       Section 1, amends AS 34.45.240 to replace the                                                                         
        original reference to "gift certificate" with "gift                                                                     
        card" and  provides  conforming  amendments  to  the                                                                    
        original statutes structure based on the change.                                                                        
       Section 2, amends AS 34.45.760(8) to provide a                                                                        
        definitional reference  for  the  new definition  of                                                                    
        "gift card" as found in AS 45.45.940.                                                                                   
       Section 3, amends AS 34.45.760(11) to add "gift                                                                       
        cards" as  "intangible  property"  and provides  the                                                                    
        statutory definitional reference for gift cards.                                                                        
       Section 4, creates a new subsection under AS 45.45                                                                    
        to  properly  define   "gift  cards"  and   the  new                                                                    
        definition  covers  previous  references   to  "gift                                                                    
        certificate".    The  new  section  also  identifies                                                                    
        exclusions to the applicability of the new gift card                                                                    
        provisions.                                                                                                             
       Section 5, adds a reference to "gift cards" to                                                                        
        unlawful acts and practices under AS 45.50.471.                                                                         
                                                                                                                                
3:23:20 PM                                                                                                                    
                                                                                                                                
Vice-Chair Stoltze  noted last  year's movement on  the bill                                                                    
and  questioned if  the slow-down  resulted from  associated                                                                    
legal  issues.   Representative  Gatto replied  it became  a                                                                    
political  rather  than  legal  issue.   He  had  personally                                                                    
requested that the bill be held.                                                                                                
                                                                                                                                
3:24:12 PM                                                                                                                    
                                                                                                                                
Representative Gatto introduced his staff, Sandra Wilson.                                                                       
                                                                                                                                
Vice-Chair  Stoltze mentioned  a  concern  indicated in  his                                                                    
district with  small business people  that donate  cards and                                                                    
not  differentiating those  from  the ones  they  sell.   He                                                                    
wanted to  guarantee the unused  donations could  be removed                                                                    
from their books after a couple  years.  He did not want any                                                                    
small  business  penalized  because   they  do  not  have  a                                                                    
sophisticated accounting system.                                                                                                
                                                                                                                                
Representative   Gatto   advised   that  often   there   are                                                                    
expiration dates  added to  the donation  cards.   There are                                                                    
exceptions.                                                                                                                     
                                                                                                                                
3:25:57 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Stoltze reiterated  that  some smaller  business                                                                    
provide the  same type of card  that they also sell  as gift                                                                    
certificates.   He reiterated the  concern that they  not be                                                                    
penalized.  He  did not want to discourage  donations to the                                                                    
charities.   Representative Gatto recommended they  enter an                                                                    
expiration date on  the card if they want  to donate without                                                                    
risk.                                                                                                                           
                                                                                                                                
Vice-Chair  Stoltze assessed  that would  create extra  work                                                                    
for  the  small  business  person;   he  worried  about  the                                                                    
consumer issues and  thought that they might not  want to go                                                                    
through the  extra step.   He did not  want to see  the bill                                                                    
discouraging  charitable  donations.   Representative  Gatto                                                                    
pointed out that  each business creates their  own cards and                                                                    
he imagined  it would not  be that big of  a step to  add an                                                                    
expiration date to those cards.                                                                                                 
                                                                                                                                
In  response to  Representative  Gara, Representative  Gatto                                                                    
clarified  that  most gift  cards  expire,  especially if  a                                                                    
promotional item.  [Inaudible]                                                                                                  
                                                                                                                                
Representative Gara  commented on  the non profit  status of                                                                    
the donation.                                                                                                                   
                                                                                                                                
3:29:51 PM                                                                                                                    
                                                                                                                                
RACHEL  LEWIS,   PROJECT  COORDINATOR,   UNCLAIMED  PROPERTY                                                                    
SECTION,  TAX DIVISION,  DEPARTMENT OF  REVENUE, offered  to                                                                    
answer questions of  the Committee.  In  response to queries                                                                    
from  Representative Stoltze,  regarding organizations  that                                                                    
donate  for charities,  the gift  cards  do not  have to  be                                                                    
recorded and are a one  time property.  Expiration dates are                                                                    
not  required  and  that  most   business  owners  each  day                                                                    
indicate  more items  gone than  dollars collected.   Often,                                                                    
they  have  a  reconciliation donation  indication  section.                                                                    
The  State of  Alaska  does not  spend  time monitoring  how                                                                    
individual business keeps their books.                                                                                          
                                                                                                                                
Ms. Lewis pointed  out that gift cards do  not have specific                                                                    
correct   accounting   procedures.     She   mentioned   the                                                                    
designation  of  when  a  gift  card is  donated  &  how  to                                                                    
determine if  it had  matured.   She suggested  many options                                                                    
such as  adding stickers or  highlighting them with  a magic                                                                    
marker.   Most  businesses  want  the information  regarding                                                                    
what  comes  back  to  them  as a  result  of  a  charitable                                                                    
donation.   Questions and concerns  can be addressed  by the                                                                    
Tax Division at the Department of Revenue.                                                                                      
                                                                                                                                
3:32:25 PM                                                                                                                    
                                                                                                                                
Co-Chair   Chenault  referenced   tax  deductable   donation                                                                    
received  from a  hotel to  a  non profit,  and asked  about                                                                    
taking that tax deduction.  [Inaudible]                                                                                         
                                                                                                                                
Ms.  Lewis  responded  that  when   a  gift  certificate  is                                                                    
purchased,  there   usually  is  an  expiration   date;  the                                                                    
business  of the  hotel has  the gift  certificate on  their                                                                    
books including the  date.  Most companies  do not fluctuate                                                                    
on  that policy.   With  the example  submitted by  Co-Chair                                                                    
Chenault, the hotel not including  an expiration date, would                                                                    
most  likely honor  it indefinitely.   Usually,  there is  a                                                                    
three  year  deadline,  unless otherwise  disclosed  by  the                                                                    
seller.                                                                                                                         
                                                                                                                                
Co-Chair  Chenault  assumed that  the  hotel,  being a  non-                                                                    
profit, would understand the rules.   He assumed that before                                                                    
a  purchase is  made, it  should be  determined how  long it                                                                    
would be  good for.   He asked  about deducting the  tax for                                                                    
gift certificates.   He thought  that there was  no recourse                                                                    
if the gift  cards were not used except in  a tax deduction.                                                                    
Ms. Lewis commented she was not that familiar with tax law.                                                                     
                                                                                                                                
3:37:17 PM                                                                                                                    
                                                                                                                                
Vice-Chair Stoltze reiterated concerns  for the charity gift                                                                    
cards.  He  asked if there was an out-reach  in place to let                                                                    
small business  know that they have  protection, noting that                                                                    
gift  cards are  such  a common  donation  mechanism and  he                                                                    
wanted  to   make  sure  that  the   accounting  system  was                                                                    
understandable.                                                                                                                 
                                                                                                                                
Ms. Lewis  pointed out  that the Division  does have  a bill                                                                    
for  unclaimed property,  which  clarifies  that every  gift                                                                    
card has to  be used within three years.   The proposed bill                                                                    
better defines  current statute.   She did not  imagine this                                                                    
would hugely impact any business.                                                                                               
                                                                                                                                
3:41:54 PM                                                                                                                    
                                                                                                                                
PUBLIC TESTIMONY CLOSED                                                                                                         
                                                                                                                                
                                                                                                                                
AT EASE:       3:42:23 PM                                                                                                     
RECONVENE:          3:45:40 PM                                                                                                
                                                                                                                                
                                                                                                                                
3:45:51 PM                                                                                                                    
                                                                                                                                
Vice-Chair Stoltze  MOVED to  REPORT CS HB  49 (FIN)  out of                                                                    
Committee  with  individual  recommendations  and  with  the                                                                    
accompanying  fiscal notes.   There  being NO  OBJECTION, it                                                                    
was so ordered.                                                                                                                 
                                                                                                                                
CS HB  49 (FIN)  was reported  out of  Committee with  a "no                                                                    
recommendation" and  with new zero  notes by  the Department                                                                    
of Revenue and the Department of Law.                                                                                           
                                                                                                                                

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