New Jersey Wants To Balance Budget With Your Gift Cards

What would be even worse than losing the entire stored value of your gift cards after a few years? Having the state seize it as unclaimed property and use your money to pay its bills.

Yet a law was enacted back in July in New Jersey that would have done just that. Changes to the state’s Uniform Unclaimed Property Act meant that the state could seize the value of gift cards and traveler’s checks after they were dormant for two years. Worse still: the law is retroactive.

One key problem for retailers is that not all systems track purchasers’ ZIP codes, which is key information when determining which gift card balances the state is allowed to take.

Prominent gift card and traveler’s check purveyors (that is, the New Jersey Retail Merchants Association, New Jersey Food Council, and American Express) filed suit to block the law in federal court. They won. The state plans to appeal, which shows that there must be a lot of money at stake here to risk annoying voters that much.

N.J. pressing fight to seize gift card funds [Bergen Record] (Thanks, Kevin!)


Edit Your Comment

  1. Mr. Fix-It says: "Canadian Bacon is best bacon!" says:

    Cool. So the state of New Jersey can have all my gift cards with the 9 cents left on them that I can’t use. ;)

    • Marlin says:

      You can use it. I got a weird look once whenI said charge 32 cents on this. Just tell the person to charge X amount and it will work as long as it has X amount.

      I hate that card makers know most will not use it and I go out of my way to get EVERY penney off a card.

      • leprechaunshawn says:

        You don’t even have to tell them how much to charge to it. Just hand them the gift card, they’ll swipe it and tell you how much you still owe.

        • RandomHookup says:

          That only works if it’s the retailer’s gift card. You have to know the balance remaining on a Visa/MC/Amex or the system tries to charge the whole amount to the card and it’s denied. It’s a pain if the cashier doesn’t understand how to do a split payment.

          • gerald.saul says:

            I work for Starbucks and we recently upgraded our POS systems. Now, when I swipe a Visa, MC, etc. gift card, it tells me if we’ve run the balance down to zero and how much the customer still owes. Also, on some of these cards, if I print a receipt the balance is shown at the bottom.

    • teke367 says:

      “It worked in Superman 3”

  2. George4478 says:

    A government wants to take money that’s not theirs and use it? Say it ain’t so!

  3. axhandler1 says:

    As someone who doesn’t use gift cards or traveler’s checks, but pays NJ taxes, I’m completely in favor of this.

    • Murph1908 says:

      Sure! As long as it’s not your money, draconian tax policies are fine, right?

      I propose a tax on Futurama fans!

      • Blueskylaw says:

        As someone who doesn’t watch Futurama or live in New Jersey, I’m completely in favor of this.

      • cynical_reincarnation says:

        Maybe a three cent tax on titanium?

        Or is that going too far?

      • Cosmo_Kramer says:

        I propose a tax on hyperbole.

        Seriously, draconian? Do you have any idea what that word means? Do you understand the origin? Obviously not, or you wouldn’t have used it in this context.

        • coren says:

          What the word means and how it’s used today are just a bit removed from it’s origins.

          • Cosmo_Kramer says:

            Forget I mentioned the origins. It the way it is being used here is incorrect based on what the word means, regardless of origins.

            That word is used waaaay too often to mean something that it doesn’t mean.

            • Difdi says:

              Much like the word decimate. Annoys the hell out of me when writers use it as a synonym for “complete destruction”. Anything that has been decimated is still 90% intact.

      • ARP says:

        Yes, from what I understand from conservative political views on economics, it’s survival of the fittest- you need to do what’s best for you and f*ck everyone else. Well, its best for me financially to support progressive tax laws and NJ taking unused gift card amounts, instead of charging more for tolls, trains, hotels, cars, when I’m there.

      • pythonspam says:

        I propose a tax on cigarettes…. Those that use them should have to pay higher insurance premiums too.

    • regis-s says:

      I don’t live in New Jersey and I see your point. The government is going to have to get that money from somewhere. I’m not sure why governments taking money that isn’t theirs is worse than businesses keeping money that isn’t theirs.

    • zibby says:

      Unfortunately, if you use “accounts” for anything you’d best watch your money in New Jersey because this is indicitive of their revenue philosphy. Note the absurdly short dormancy period (3 years, SRSLY?) before they escheat the hell of your funds. Should be in the very act that this law modified.

  4. Cosmo_Kramer says:

    “What would be even worse than losing the entire stored value of your gift cards after a few years? Having the state seize it as unclaimed property and use your money to pay its bills.”

    How exactly is that worse? Either way I lose the money. In one case it goes to a retailer who provided me with nothing. In the other case it goes to the state and covers expenses that would otherwise have to be covered by taxes that I would pay.

    At worst it’s equally bad.

    • RandomHookup says:

      I wonder if you will have the right to claim the money back from the state as long as the gift card is associated with you name (just like closed bank accounts)?

  5. daemonaquila says:

    The retroactivity and problematic tracking are huge flaws. However, if such a law were enacted that gave 2 years from the date of purchase for new cards and required the purchase date to be put on all the cards along with a notice that it would turn into a pumpkin 2 years from that date, I think it would be fine. If you don’t use a card after 2 years, you’re probably never going to use it again… and it probably just has a few cents sitting on it. Might as well have those few cents help pay someone’s medical bills or a salary, than just disappear into the issuer’s pocket.

    • Greely says:

      Convoluted AND ambiguous? Jackpot.

    • Bativac says:

      But how much would it cost the state to collect the, say, fifty seven cents I have left on a Target gift card? I’m assuming the state has some experts who have done the math on all this but it seems like the majority of the unused money on these gift cards amounts to pennies on the dollar. Sure, it might add up to a couple million, but again, how expensive is it to collect the money?

      • Blueskylaw says:

        I’m sure the state will somehow (law) pass the cost of transfer onto the corporation. It’s easy for a corporation to screw a customer and it will be just as easy for a state to screw a corporation.

  6. cspschofield says:

    I’m of mixed mind on this. On the one hand, I’m generally against giving The State money. The various levels of government don’t keep track of what they get now, and most of it gets pounded down assorted rat-holes.

    On the other hand, I’m sick to the teeth of the whole Gift Card scam. I’m against passing laws against it, but I’m not completely sure I’m against seeing the government grab the Corporations’ incentive to push it so hard.

    I live in PA, right across the river from NJ. I’ve been watching the NJ Governor fight the good fight against the Unions and the general slop that’s pushing his state to bankruptcy. It isn’t like screwball ways to raise fees and taxes are all he’s doing.

    I guess what I’ll want to watch is how much of any “Consumer Outrage” about this can be shown to be manufactured by PR firms hired by the Corporations that benefit from the Gift Card scam.

  7. GrantGannon says:


    That is all.

    • Cosmo_Kramer says:

      I have a lot of money in savings and investments. Not millions or anything like that, but a lot of money by my standards. I’ve already paid income tax on all of that money. The FairTax would replace the income tax with a sales tax. So all of that money that I paid income tax on would be taxed again when I spend it. Right? Or does the FairTax have a FAIR way to handle my situation? I ask this every time someone suggests the FairTax, but no one ever has a good answer.

      And please don’t give me other examples of my money being taxed twice, because in this specific case the second tax is intended to REPLACE the first tax, not add to it.

    • NeverLetMeDown says:

      FairTax is great if you make a LOT of money, or very very little (like under $20k). If you’re between $15-24k (depending on the analysis) and ~$200k in income, you’d be paying a larger share of federal taxes than you are now.

    • ARP says:

      Which doesn’t address the state income or sales tax issue. Unless, you’re proposing the Federal Goverment be in the only taxing entity. Or are you proposing a fair tax rate at all levels. If that’s the case, why would I want to pay MORE in taxes than I do now, just so some really rich people can pay less?

  8. nbs2 says:

    Gift cards after five years? I’d have been fine with that. But traveler’s checks, however archaic, are bearer financial instruments that have a notated value. Or are they talking about they fancy traveler’s “checks” that are just AmEx prepaid cards?

  9. fortugem6 says:

    What about cases where the Gift Cards function as reward cards and don’t expire? Examples of these include Starbucks, Cosi, Subways Gift Cards to name a few. Most of those cards don’t “expire” per say.

    I suppose a longer expiration date would fix that, like 5 years or something. In any case though, this almost makes Gift Cards completely useless. Not only are they generally purchased for the same price as cash, now they even have an expiration date.

    • Julia789 says:

      In Connecticut, it’s against the law for gift cards and gift certificates to expire.

      Also against the law to charge fees on them. Love our CT gift card laws. I can find a misplaced gift card a year later in an old coat pocket, and go out to dinner with it!

  10. johnrhoward says:

    If I’ve had a gift card for two years, then whoever wants what’s on it can have it, because I’m obviously not going to use it.

    • George4478 says:

      Big difference between you giving your property away because YOU decided don’t want it and the state seizing your property because THEY decided you don’t want it.

  11. Blueskylaw says:

    And people want to get rid of cash?

  12. kaykordeath says:

    For general “visa” (type) gift cards, I’d not mind, but for store specific cards, i think 2 years is too short. For certain stores (Home Depot, higher end department stores, etc) sometimes I’ve found myself holding onto the cards until I had a need for a specific item…even amassing other cards in the interim.

  13. Southern says:

    The only issue I would have would be travelers checks. They don’t expire, so the state just coming in and TAKING them is akin to theft in my book.

  14. Overheal says:

    In the United States, the federal government is prohibited from passing ex post facto laws by clause 3 of Article I, section 9 of the U.S. Constitution and the states are prohibited from the same by clause 1 of Article I, section 10. This is one of the very few restrictions that the United States Constitution made to both the power of the federal and state governments prior to the Fourteenth Amendment. Over the years, when deciding ex post facto cases, the United States Supreme Court has referred repeatedly to its ruling in the Calder v. Bull, 3 U.S. 386 (1798), in which Justice Samuel Chase established four categories of unconstitutional ex post facto laws. The case dealt with Article I, section 10, since it dealt with a Connecticut state law.

    However, not all laws with ex post facto effects have been found to be unconstitutional. One current U.S. law that has an ex post facto effect is the Adam Walsh Child Protection and Safety Act of 2006. This law, which imposes new registration requirements on convicted sex offenders, also applies to offenders whose crimes were committed before the law was enacted.[9] The U.S. Supreme Court ruled in Smith v. Doe (2003) that forcing sex offenders to register their whereabouts at regular intervals and the posting of personal information about them on the Internet does not violate the constitutional prohibition against ex post facto laws, because this does not constitute any kind of punishment.[10]

    Another example is the Domestic Violence Offender Gun Ban, where firearms prohibitions were imposed on those convicted of misdemeanor domestic violence offenses and subjects of restraining orders (which do not require a criminal conviction). These individuals can now be sentenced to up to 10 years in a federal prison for possession of a firearm, regardless of whether or not the weapon was legally possessed at the time the law was passed. Among those that it is claimed the law has affected is a father who was convicted of a misdemeanor of child abuse for spanking his child, since anyone convicted of child abuse now faces a lifetime firearms prohibition. The law has been legally upheld because it is considered regulatory, not punitive—it is a status offense.

    Finally, Calder v. Bull expressly stated that a law that “mollifies” a criminal act was merely retrospective and not an ex post facto law.

    A large “exception” to the ex post facto prohibition can be found in administrative law, as federal agencies may apply their rules retroactively if Congress has authorized them to do so. Retroactive application is disfavored by the courts for a number of reasons,[11] but Congress may grant agencies this authority through express statutory provision. Furthermore, when an agency engages in adjudication, it may apply its own policy goals and interpretation of statutes retroactively, even if it has not formally promulgated a rule on a subject.

    Retroactive taxes are not ex post facto laws. Calder v. Bull, 3 U.S. 386, 390-91 (1798). Substantive due process challenges to retroactive tax laws are given rational basis review. United States v. Carlton.
    See also: Fourteenth Amendment to the United States Constitution, Bouie v. City of Columbia, Rogers v. Tennessee, and Stogner v. California

    I don’t rank yoinking people’s gift card money in the same league as violent gun owners and sex offenders.

    • Fubish says: I don't know anything about it, but it seems to me... says:


    • Cosmo_Kramer says:

      “I don’t rank yoinking people’s gift card money in the same league as violent gun owners and sex offenders.”

      But those laws weren’t upheld specifically because they deal with violent gun owners or sex offenders. To judge a law based on that would be wrong. To judge this law because it deals with gift cards would be wrong.

    • stormbird says:

      Very good and knowledgeable post about the issue! +1.5

  15. roben.anderson says:

    What would stop someone from stating a false zip code, like 10108 for New York (thanks Stick Stickly for getting that stuck in my head), or from another state? Probably nothing. Bad idea for the state to do that.

    • Difdi says:

      I can just see it now… Someone deliberately misstates their zip code to keep NJ from stealing their money, and shortly thereafter they find themselves facing state charges for both credit fraud and tax evasion…

    • kc-guy says:

      Scruff McGruff, Chicago Illinois, 60652

  16. Bort says:

    its a pretty clever idea, i’d rather have a law saying no expiry allowed, or refund upon request, but baring those i have no objections to this

  17. u1itn0w2day says:

    This is bull crap on so many levels. First NJ would be taking money out of the stores that those gifts cards are for. If I’m not mistaken those stores can’t count the gift cards as revenue until they are actually used. And last but not least they are taking your money away simply because you didn’t spend it right away.

    You know what if NJ is that desperate put a bullcrap 1% tax on the gift card itself when bought. But to declare unspent money theirs??? What’s next, your life savings?

    Oh,great, this will put alot of stores into panic mode putting shorter expiration dates on gifts cards.

    • haggis for the soul says:

      What happens when a gift card goes unused or expires? The company can’t count it as revenue until it is spent, but does it get to keep anything on a card that has expired? What happens to that money?

    • coren says:

      Yes, they’d be taking money from those stores, but those stores owe the equivalent of that money as merchandise anyway so it’s not like they’re being unfairly treated – and if the gift card can expire then they’d be getting free money that they did nothing to deserve, so it’s not like they’re really out anything over this (plus they get two years of interest on that money)

      • u1itn0w2day says:

        A customer, an actual person purchased a GIFT card for another person and not the state(charity case or not) or any other entity for that matter. And the stores do owe money on those GIFT cards; to the customer who bought the card AND the card recipient/holder. Just because the money is in limbo on a balance sheet it does not entitle the state classify it as unused “wasted” money.

        • coren says:

          Why not, they do it for other unclaimed assets.

          • u1itn0w2day says:

            Setting aside should the state be allowed to confiscate gift cards/money or not who’s to say it’s “unclaimed” rather than not used yet? There’s a difference between unclaimed estate money and an unused gift card. Where’s the actual law saying that unused anything shall be declared state property after 2 years-not pending the actual law. Same for travelers checks.

            Traveler’s Checks are closer to cash than a gift.card. Both of which I’ve sat on for years and eventually used. Raise taxes, hold a telethon, shake a cup I don’t care keep personal property out of it.

  18. Damocles57 says:

    Many states – not all – have some type of laws that address the escheatment of unclaimed or abandoned property.

    From Wikipedia:
    “In some jurisdictions, escheat can also occur when an entity, typically a bank, credit union or other financial institution, holds money or property, and the property goes unclaimed, for instance, by lack of deposits, withdrawals or any other transactions for a lengthy time in a liquid account. In many jurisdictions, if the owner cannot be located, such property can be revocably escheated to the government.

    In business, it is the process of turning over unclaimed or abandoned payroll checks, or stocks and shares whose owners cannot be traced, to a state authority (in the United States). A company is required to file unclaimed property reports with state annually and, in some jurisdictions, to make a good-faith effort to find the owners of their dormant accounts. The escheating criteria are driven by individual state regulations.”

    So, escheatment is not a new concept, but is only being extended to include a new form of storing or using cash that had not been in existence or in wide-spread use at the time the original laws were enacted.

    In practice, there are many cards that are lost and so the purchaser/owner cannot use them. There are many cards that have pennies stored and won’t be used. There are cards with restrictions that make it difficult to redeem.

    In reality, the original business that collected the money and is keeping the balance has been given an interest-free loan. Or, depending on the fees charged, they are earned interest on the balance. It seems New Jersey’s law change is aimed at extracting money from the large corporations holding the balances, not your grandmother, son or niece who lost their cards.

    There is an easy answer to this dilemma: At the time of purchase, have the purchaser designate what happens to cards that go dormant after a designated period of time. The purchaser can designate a time-frame or choose a default time that would fall short of being escheated by their state after which the remaining balance would be donated to a charity of their choice or returned to them.

    • zibby says:

      “…a lengthy time…”

      3 Years in New Jersey. Down from an already sketchy 5 years as of a few years ago. And that’s for real money, not spare change on gift cards. I’m sure they’d make it 90 days if they could get away with it.

  19. samonela says:

    Should NJ residents should start buying gift cards from out of state sources? If your ZIP is in NJ and you buy a gift card from CA can the state of NJ still take ownership of the balance? I only use CA because I know that they have very consumer-friendly laws regarding gift cards…

    • Mpowered says:

      No. And actually, many companies issue all their gift cards out of subsidiaries based in states where the gift cards do not escheat to the State at all. It’s an easy way around this.

  20. samonela says:

    Should NJ residents should start buying gift cards from out of state sources? If your ZIP is in NJ and you buy a gift card from CA can the state of NJ still take ownership of the balance? I only use CA because I know that they have very consumer-friendly laws regarding gift cards…

  21. horns says:

    Hey NJ start taxing your gas and get rid of fire, police and ambulance services by city and pool them together by placing them at the county level. You’ll make/save billions you buffoons.

  22. headhot says:

    Hey, better then Best Buy getting it.

  23. David Ciani says:

    If they are gonna be handling these like normal unclaimed property, gift card holders aren’t gonna be loosing anything. They will just have to file a claim with the state to get their money back. Plus, its normally in a form of a check. Try getting that from the retailer… The state gets to use the unclaimed property to “improve its cash flow”. The businesses shouldn’t be complaining because accounting rules already prohibit them from “recognizing the revenue” from the gift cards until they are used. They probably would be thrilled to dump the liability off of their books.

    • RandomHookup says:

      Except the unused balance is pure profit. It shows up as a liability until recognized as revenue (when it expires or some other measure), but it still in the pocket of the retailer. If the state takes it away, they lose that money.

      • Cosmo_Kramer says:

        It’s not profit if they haven’t recognized the revenue.

        • RandomHookup says:

          That’s only from an accounting standpoint. They have the money in their pockets, holding it until you claim it. That’s profit and they don’t want to give that up.

    • AllanG54 says:

      You’re wrong….gift cards do not have names associated with them in most cases. Therefore, there’s no way to prove that there was money left in your gift card and no way to positive identify that it’s yours.

  24. smartmuffin says:

    And yet, this is still less of a moral outrage than the progressive income tax.

  25. simonr27 says:

    Are they going to start racking your address when you buy the card and who you plan on giving it to. If you pay cash for a card there is no record of who purchased the card and who you are giving it to. How the hell are they going to enforce this. I purchased a number of cards for people over the holiday and was asked at no point for any contact information.

  26. coren says:

    Laura, gotta disagree – if my gc balance is gonna get taken from me either way, I’d rather that money go to the state than some retailer who’s provided me with nothing. Not that I like either option, but the state getting it at least could benefit me in some fashion.

  27. rambo76098 says:

    What happens when it was purchased in NJ but gifted to someone out of state (beyond NJ’s authority)?

  28. islandgirl says:

    I’m kind of for this… if stores know that unused gift card money might disappear from their accounts in 2 years, then they might make it easier for customers to use their gift cards. Some stores make using gift cards easy, but I’m looking right now at a gift card for a local restaurant which stipulates that it cannot be used on weekends, holidays, or to pay for alcoholic beverages. Sigh.

  29. Duke_Newcombe-Making children and adults as fat as pigs says:

    Cue sound of crickets from the tea partiers that Gov. Christie (R) supported this in 3…2…1…

  30. The Twilight Clone says:

    These politicians will come up with the most elaborate, convoluted, f**ked-up ways of generating revenue EXCEPT the one thing that is fair — raising taxes on rich people.

    The sheer evil is staggering.

  31. ealexand says:

    But really, if you haven’t used your $10 GC to Bed Bath & Beyond by now, you’re just not going to

  32. Awesome McAwesomeness says:

    Next they’ll be taking the quarter’s from my kid’s piggy bank that have been sitting there for 3 years. It must be unclaimed property if it hasn’t been used. What’s next, bank accounts that haven’t had withdrawls made in 2 years??

  33. ElleAnn says:

    What if you are holding on to the gift card AND still intend to use it? We have several cards left from our wedding a year and a half ago that we plan to use next fall when we move into our new house. If I lived in NJ, I would be furious if the state took my gift cards’ value.

    • stevied says:

      Your long term rention of the card is not typical of card holders.

      But your usage is quite appropriate.

  34. gman863 says:

    Why do the trees in Pennsylvania all lean to the East?

    Because New Jersey sucks.

  35. akt4pay says:

    You have this partly wrong.

    The state does not “seize” the value of gift cards. It (ostensibly) holds the funds until the consumer steps forward to claim them. Every state has an unclaimed property program and every state allows the owners of the property to reclaim it from the state.

    This statutory scheme was designed to prevent corporations writing the value of the cards (or other types of unclaimed property) off into income after a period of time. Too many companies were e.g. issuing gift cards and then claiming that they had “expired” after a time and simply taking the money, which I think any reasonable person will agree is unreasonable at best and robbery at its worst.

    Now the dirty little secret about unclaimed property programs is that despite the efforts of states to reunite owners with their property, generally no more than 30% is, and the rest sits in state coffers in perpetuity gaining interest and funding state operations in the meantime.

    The problem with New Jersey’s gift card grab is complicated, but follow me here:

    Most states follow a priority rule of Unclaimed property first set down by the Uniform Unclaimed Propery Act (UUPA), a set of guideline statutes formulated by an advisory group in response to several Supreme Court cases. The UUPA was never passed into law, though many states borrowed its language for their own statutes.

    Under the UUPA, companies must first try to give property back to the owner directly. If they do not know the owner’s address they must report the property to the last known state of residence of the owner. If they cannot determine that they must report it to the state of incorporation of the company issuing the property and finally (and this is the important part) if they cannot determine that to the state where the transaction issuing the property took place.

    So e.g. Xcorp issues a gift card to Bob and Bob never uses it. After (state specific) amount of years Xcorp must try to contact Bob and reissue the value of the card to him. If they cannot do so, Xcorp must report the property to the state of Bob’s last known residence. If they don’t know that they must report it to the state where Xcorp is incorporated (usually Delaware) and if they for some odd reason don’t know that, to the state where Bob bought the gift card. That ususally settles it.

    What New Jersey did (besides shortening the time before gifts cards must be reported) with gift cards is turn the priority rule scheme on its head and say that FIRST the company must report the property to the state where the transaction occurred. No other state does this and it means that companies that have stores in NJ must now take special measures to determine the zip codes of each of their NJ gift cards which is very expensive.

    So yes New Jersey is in fact being greedy -and moreso than any other state in the union in this regard, but not simply because they are taking hold of unclaimed funds.