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02.01.17

Delaware Unclaimed Gift Card and Property Law Comes under Renewed Fire

Retailers would face less pressure from state authorities seeking to account for prepaid gift cards and other unclaimed or abandoned property under a bill from a Delaware state senator. The proposed law comes as the National Retail Federation is backing Marathon Petroleum’s ongoing challenge to that state’s business auditing procedure for such property.

The bill, SB 13, comes from State Sen. Bryan Townsend, a Democrat, who said it would bring Delaware into closer conformity with how other states manage unclaimed property. The bill sets a 10-year limit for the state to seek payment for those goods, and reduces to 10 years the time in which the state can audit businesses for unclaimed property. Such audits have reached back as long as 22 years.

In the Marathon case, the company is appealing the dismissal of its challenge to the law, in part by claiming that it violates the Fourth Amendment prohibition against unreasonable searches and seizures. The case involves an audit that lasted nine years and focused on unused prepaid cards issued by Marathon. Chief U.S. District Judge Leonard P. Stark in September rejected Marathon’s challenge, saying that an audit does not amount to a search. Now the National Retail Federation has said the state auditing process “twisted and ignored” common law that is relevant to unclaimed property.

With more than 1 million businesses headquartered in Delaware, the state collects some $500 million a year—about 15 percent of its general fund—from unclaimed property, including gift cards. The state is facing several other legal challenges to its unclaimed property collection programs, including a lawsuit from 23 other states seeking $175 million in uncashed money orders collected by Delaware.

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