In the News September 14, 2015

Inside Counsel Quotes Kendall Houghton on Uniform Unclaimed Property Act

There has been significant changes to the statutory provisions of the Uniform Unclaimed Property Act and how states address unclaimed property, including gift cards.

Kendall L. Houghton, partner and co-leader of Alston & Bird’s Unclaimed Property Group, noted that the lack of uniformity in states’ treatment of gift cards and similar products means that an issuer must consult state-specific rules if it collects and maintains owner address data, or it must engage in structural planning, in which case the issuing entity would be subject only to its domicile state’s jurisdiction.

As explained by Houghton, however, this type of planning will only be successful if the formation, documentation and operation of the gift card issuing entity are proper, and many states review these structures carefully on audit.

“The draft revised act attempts to impose controls over the manner in which states contractually delegate their audit authority to private firms; however, the draft act allows each state to promulgate its own regulations concerning example procedures and standards, which may vary among the states,” she said. “The adoption of this act will, it is hoped, influence states’ behavior in audits with regard to certain controversial audit methods – estimations of liability included.

“Just as the prior version of the uniform act has required modernization to address online transactions, consumers’ reliance on new technologies to manage their property and an explosion of new property types. Still, holders are reminding the drafters of this modern act that certain bedrock principles will continue to apply,” Houghton added.

Delaware state benefits from its implementation of unclaimed rules and is the domicile state for most business entities and enjoys the windfall of most estimates of liability, Houghton pointed out.

“Holders are now litigating Delaware’s right to estimate liability and its estimation methodology, under the Constitution, which could be a game-changer,” she said.
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