Legislature(2009 - 2010)HOUSE FINANCE 519
04/07/2009 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB214 | |
| HB64 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 214 | TELECONFERENCED | |
| + | HB 64 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 64
"An Act relating to gift certificates and gift cards,
and to unclaimed property; and making a violation of
certain gift card prohibitions an unlawful trade
practice."
REPRESENTATIVE CARL GATTO, read from House Bill 64, Page 4,
Section 4, lines 8-12 (copy on file). The bill defines a
gift card as:
a device that is useable up to its face amount instead
of cash in exchange for goods or services, except
telephone services, supplied by a seller; in this
subsection, "device" includes an electronic card, but
does not mean an access number or authorization code,
whether manually or electronically dialed, to make
calls.
The purpose of the bill is to protect gift card purchasers
from access or dormancy fees attached to the card. The bill
requires gift cards to retain their full value for the life
of the card, which the state has defined as 3 years. At the
end of the 3 year period, the card would be turned over to
the state as unclaimed property.
RACHEL LEWIS, UNCLAIMED PROPERTY SECTION MANAGER, TAX
DIVISION, DEPARTMENT OF REVENUE, reported that currently
unclaimed property is turned over to the state for gift
certificates. This bill clarifies that the term gift cards
and gift certificates are used interchangeably.
Approximately $100,000 in unclaimed gift cards has been
turned over to the department in the last 5 years, by
approximately 1900 people within the state of Alaska.
2:49:02 PM
Representative Austerman asked how this legislation would
affect stores that currently issue paper gift certificates.
Ms. Lewis remarked that it would depend on how the gift
certificate is issued. As she interpreted the language of
the bill, individual retailer's gift certificates are still
included as unclaimed property. Representative Austerman
asked if it is under definition in this bill that gift card
and gift certificate are to be used interchangeably.
Representative Gatto referred to page 1, line 5 of the bill,
which substitutes the word cards and deletes certificate.
Representative Austerman maintained his concern that gift
certificates be protected by the bill. Representative Gatto
replied that Legislative Legal Services has advised that
gift cards and gift certificates are interchangeable terms.
2:50:30 PM
Co-Chair Stoltze pointed out that the title of the bill
refers to both gift cards and gift certificates.
Representative Gatto maintained that the terms are to be
used interchangeably. He noted that some promotional gifts
are called gift cards. He cited coffee cards, which are
donated by the vendor, and have a definite expiration date.
2:51:48 PM
Representative Austerman felt that the language of the bill
was open to misinterpretation.
Representative Kelly echoed Representative Austerman's
concerns. He read from page 4, line 8. He wondered whether
traditional paper gift certificates purchased as gifts would
be protected under the bill.
2:53:45 PM
SANDRA WILSON, STAFF, REPRESENTATIVE GATTO, replied that
when the bill was drafted the names were meant to be used
interchangeably. She stated that the more commonly used term
is gift card.
Representative Kelly wondered if expiration dates for gift
certificates would become obsolete under the bill.
2:54:56 PM
Ms. Wilson replied that expiration dates would no longer be
allowed, but issuance dates would be required.
Co-Chair Stoltze queried how the unclaimed property
department would handle paper certificates.
Ms. Lewis explained that when gift cards and gift
certificates are sold, a liability is created on the issuing
business' account. She detailed the variety of ways that
businesses track card balances.
2:56:37 PM
Co-Chair Stoltze wondered about cards that are donated to
charities and non-profits. He asked if an accounting system
would need to be created to differentiate that the card had
been donated, in order to qualify for a tax exemption. Ms.
Lewis assumed that the business would recognize that the
card had been donated and that no income had been received.
She related methods businesses may use to differentiate
between donated and regularly purchased cards. She added
that the charity on the receiving end of the donation could
not report the card as unclaimed property because money had
not been exchanged. She continued that the same rules apply
to the person buying the donated card at a charitable
auction. Co-Chair Stoltze expressed confusion concerning
donated gift cards. Ms. Lewis explained that the donated
cards/certificates are exempt from the legislation because
they were not initially purchased at full face value.
Promotional items and charitable donations are not included
in the language of the bill.
2:59:55 PM
Representative Fairclough felt that excluding card fees in
perpetuity would cause businesses significant accounting
challenges. She expressed support for the bill's intent, but
felt the cards should have dates of expiration printed on
them.
Representative Joule commented that gift cards are seldom
used in small communities. He stated that smaller
communities use traditional gift certificates for
fundraising purposes, and he hoped that the language of the
bill would address the donated paper gift certificates.
3:02:19 PM
Ms. Wilson informed the committee that gift cards that are
donated are exempt from the legislation in the bill.
Co-Chair Hawker requested further clarification concerning
donated cards. Ms. Wilson referred to page 3, subsection
(c), which addresses donations to nonprofit or charitable
organizations for fundraising purposes. Co-Chair Hawker felt
that the chain of title could be broken without the vendor's
knowledge. He expressed concern that the vendor would be
mandated to maintain liability on their records in
perpetuity. He wondered if the person who purchases, then
donates the card, could be responsible for informing the
vendor of the break in the title chain.
3:05:16 PM
Ms. Wilson replied that as the law currently stands, the
unclaimed portion of the card must be turned over to
unclaimed property after 3 years. Co-Chair Hawker felt
that, regardless of the zero fiscal note, the forensic
accounting issues that would be created by the tracking of
the chain of title for turned in cards would be an
overwhelming financial challenge to the department.
3:07:03 PM
Ms. Lewis responded that the department already receives
unclaimed property for cards. The bill is meant to be a
consumer protection item from service fees, administrative
fees, and latency fees.
3:07:57 PM
Representative Crawford gave an example where a $100 gift
card is purchased at COSTCO for $79.00, as a special deal to
members. He wondered how the card would be treated under the
bill. Mr. Lewis replied that discounted cards were excluded
from the bill. Representative Crawford contended that the
discounted card should retain the value of the purchase
price.
3:09:44 PM
Ms. Wilson explained that if the gift card can be redeemed
at only one retailer, it is covered under the bill.
3:10:55 PM
Representative Gara referred to page 3, line 7, which
applies to gift card face value. He questioned if the law
applied to the face value of the card regardless of the
amount paid for the card. He wondered if the vendor would be
allowed to deduct fees from the stored value of the card
once it had been used and was less than face value. He felt
that there should be language in the bill that would address
the issue.
3:12:27 PM
Representative Gatto replied that the intent of the bill is
to speak to the residual value of the card. He explained
that the cards expire at the end of 3 years. While their
value does exist in perpetuity, after 3 years, it exists in
the management of unclaimed property.
3:13:47 PM
Representative Gara understood that the issuing of cards can
be an accounting strain for businesses. He expressed support
for the intent of the bill.
3:15:11 PM
Representative Austerman understood that the unclaimed
balance on a card must be turned over, by the vendor, after
3 years from the issuance date. Ms. Lewis agreed.
3:15:41 PM
Representative Fairclough asked if the unclaimed card
balances are turned in annually. Ms. Lewis replied yes.
Co-Chair Stoltze asked if the account information is turned
in directly to the department. Ms. Lewis answered in the
affirmative.
Representative Fairclough asked if the department could
provide a list of businesses that annually turn over revenue
to the department. Ms. Lewis replied that this could be
done.
3:16:39 PM
Ms. Lewis shared that there are over 3,000 companies that
report unclaimed property. She said that currently the
department has 1,900 unclaimed cards totaling $100,000.
3:17:24 PM
Representative Fairclough asked if the department had an
auditing system for the accounts. She wondered if the cards
that she has personally gifted or received, and that have
expired, are on the departmental list of unclaimed property.
Ms. Lewis replied that any unclaimed property over $25 is
listed on www.missingmoney.com.
3:18:12 PM
Vice-Chair Thomas asked what happens to the unclaimed money
on the cards. Ms. Lewis replied that it should go to the
state's unclaimed property fund, although that may not
always be the case. Vice-Chair Thomas wondered why that was
not always the case. Ms. Lewis replied that the departmental
resources to enforce compliance are limited.
3:19:11 PM
Co-Chair Stoltze asked if the issuance of gift cards is a
stable, growing aspect of the retail economy. Representative
Gatto believed that it is growing substantially. He stated
that gift cards are an excellent system for banks and
lending institutions to enhance revenue.
3:20:20 PM
Co-Chair Hawker questioned Representative Gatto's statement
that banks are using the cards to enhance revenue.
Representative Gatto clarified that revenue is generated by
attaching dormancy and access fees to the cards. Co-Chair
Hawker felt that generating revenue through fees was
contrary to the intent of the bill. Ms. Wilson added that
cards issued by financial institutions have more dormancy
and activation fees attached to them. Under state law,
because the cards are issued by a banking institution and
used for interstate commerce, they are not included in the
bill.
3:21:49 PM
Co-Chair Hawker felt that financial institutions were
responsible for many of the card fees, and that it is
counterintuitive to exclude banks form the bill. He wondered
if a mandatory disclosure bill would be better, as the terms
of the card use would be adequately disclosed.
3:23:13 PM
Representative Gatto replied that the disclosure statements
that appear on gift cards are often difficult for the
average cardholder to read. He believed that most people are
surprised by the fees.
Representative Austerman voiced concern with the language in
the bill that requires the cards last in perpetuity.
3:24:48 PM
Co-Chair Stoltze felt that cards are purchased for
convenience. He hoped that disclosure requirements could be
accomplished in statute. He recognized that gift cards are a
large profit center for some institutions.
Representative Gatto maintained that the goal of the bill is
to protect the consumer from false or deceptive advertising
and hidden fees.
3:27:35 PM
Representative Fairclough voiced support for ensuring full
disclosure, but felt that the bill asks for more than that.
She asked how the state will manage the accounting for cards
sold by a third party.
3:29:15 PM
Ms. Lewis explained that the bill addresses non-profits and
charitable contributions where the current law does not.
Third party sellers are considered acting agents for the
cards they represent. She added a person receiving the card
as a gift is often not aware of all the conditions that
pertain to the card.
Representative Fairclough maintained concern as to how the
bill would affect businesses when accounting for
cards/certificates.
3:31:37 PM
Representative Crawford expressed that he was still not
clear as to the necessity of the bill requiring the cards
last in perpetuity. He understood that perpetuity would last
as long as unclaimed property could account for it with the
money turned in by the initial merchant. Ms. Lewis replied
that some businesses will honor cards after the 3 year
limit, and then request reimbursement from unclaimed
property. Representative Crawford perceived that after 3
years, the business can send the card balance to unclaimed
property, and no longer be compelled to honor the card. He
estimated that after sending the balance to unclaimed
property, the business would no longer need to keep it "on
the books". Ms. Lewis agreed. Representative Crawford felt
that this answered the question of perpetuity for the
merchandiser. Ms. Lewis explained that the liability to the
business is released.
3:33:26 PM
Representative Austerman asked for the effective date of the
bill. Ms. Wilson replied that it would take effect 90 days
after being signed by the governor. Representative Austerman
wondered if that would give businesses enough time to
comply.
Ms. Lewis stated that the law requires that all businesses
must review their books for outstanding liabilities by the
end of June. An unclaimed property report must be prepared
and sent to the department by November 1. She added that the
process may be more of a challenge for businesses that
issued cards with expiration dates.
3:35:20 PM
Co-Chair Hawker wondered about the importance of requiring
an issuance date on the card, if the card is viable in
perpetuity.
Representative Gatto replied that knowing the date of
issuance will aid in marking the 3 year time period, after
which the obligation no longer falls on the seller, but is
turned over to unclaimed property.
3:36:40 PM
Co-Chair Hawker believed that ultimately the seller must
have the date of issuance on record in order to determine
when the 3 year lifespan of the card begins and ends.
Representative Gatto explained that the merchant would be
required to maintain a record of sale and an ID number,
generated by payment with a credit card. Using the issuance
date on the card to determine that 3 years have passed, the
information would be transmitted to unclaimed property. Co-
Chair Hawker agreed that the date of issuance is important
to the seller of the card, but irrelevant to the buyer. He
stressed that mandating that the date of issuance be printed
on the card upon its sale is irrelevant to the mission being
undertaken in the bill.
3:39:06 PM
Representative Gatto felt that an issuance date should be
clearly printed on the card in order to enable the consumer
to keep track of the age of the card/certificate.
Co-Chair Hawker felt that what the department was attempting
to accomplish by putting an issuance date on the face of the
card, is complicated. He judged that the consumer would not
be aware of all the operations of law that affect the card,
and more information would be required to be printed on the
card.
3:40:45 PM
Representative Gatto replied that the bill is meant to
protect consumers under the law, regardless of whether or
not the consumer is aware of the law. He pointed out that
there is limited space for information to be printed on the
card.
3:41:29 PM
Representative Crawford wondered if it would speak to Co-
Chair Hawkwer's concerns if the date the card was to turn 3
years old was clearly printed on it. Co-Chair Hawker replied
yes.
Representative Gara did not think that the bill presents a
problem for non-profits. He felt that businesses with the
sophistication to issue gift cards would honor donated
cards, regardless of an expiration date.
3:44:22 PM
Representative Austerman asked if removing the words "in
perpetuity" from the bill would change the intent.
Representative Gatto replied yes. The words "in perpetuity"
are necessary to protect consumers with cards that are very
old, yet unredeemed. The unredeemed card still has value
until it is redeemed by the card holder, either through the
vendor or unclaimed property.
Representative Austerman asked how long unclaimed property
retains the unclaimed balance. Ms. Lewis replied that a
working balance of several million dollars is maintained by
the department for unclaimed property and that the money is
always available.
3:47:19 PM
Representative Austerman felt that if the money is always
available from unclaimed property, after the 3 year
expiration date of the card, the word perpetuity was
unnecessary in the language of the bill. Ms. Lewis argued
that the words "in perpetuity" are meant to ensure consumer
confidence.
3:48:11 PM
Representative Fairclough wondered how much gift cards
contribute to the multi-million dollar unclaimed property
fund. Ms. Lewis shared that gift cards are a small part of
the unclaimed property trust fund. Representative Fairclough
asked if the department had a principle value of unclaimed
property that is not distributed to the general fund. Ms.
Lewis replied that the department has a trust account that
is mandated by statute. The working balance is kept on an
active account. Some unclaimed funds are transferred to the
general fund. Representative Fairclough surmised that if the
state were to hold the funds in perpetuity, the fund should
grow. Ms. Lewis maintained that the funds would be available
for the consumer in perpetuity.
3:50:14 PM
Co-Chair Stoltze wanted more information about interstate
commerce conditions concerning gift cards/certificates. Ms.
Lewis explained that the laws of the state where the card is
purchased are applicable to the card.
Representative Austerman relayed that he would prepare a
motion to have the words "in perpetuity" removed from the
language of the bill.
3:52:13 PM
Representative Fairclough maintained her concern as to how
the bill would complicate donations for non-profits.
3:53:21 PM
Co-Chair Stoltze replied that if the process of donating to
non-profits grows more complicated, people will be less
inclined to get involved.
HB 64 was HEARD and HELD in Committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Article on Gift Cards.pdf |
HFIN 4/7/2009 1:30:00 PM |
HB 64 |
| HB214 Sponsor Statement.pdf |
HFIN 4/7/2009 1:30:00 PM |
HB 214 |
| Newspaper Artcle.pdf |
HFIN 4/7/2009 1:30:00 PM |
HB 64 |
| Legislative research report.pdf |
HFIN 4/7/2009 1:30:00 PM |
HB 64 |
| HB64 Sponsor Statement.PDF |
HFIN 4/7/2009 1:30:00 PM |
HB 64 |
| HB64 Sectional Analysis.PDF |
HFIN 4/7/2009 1:30:00 PM |
HB 64 |
| HB64 NFIB Letter to Rep Gatto.pdf |
HFIN 4/7/2009 1:30:00 PM |
HB 64 |
| HB214-DEC-AQ-4-3-09.pdf |
HFIN 4/7/2009 1:30:00 PM |
HB 214 |