PUBLIC HEARING SB 840, SB 845, SB 899

 

TAPES 57 A-B, 58 A

 

SENATE REVENUE COMMITTEE

MARCH 7, 2005† †8:30 AM ††STATE CAPITOL BUILDING

 

Members Present:††††††††††††††††† Senator Ryan Deckert, Chair

††††††††††††††††††††††††††††††††††††††††††††††† Senator Gary George

††††††††††††††††††††††††††††††††††††††††††††††† Senator Rick Metsger

††††††††††††††††††††††††††††††††††††††††††††††† Senator Floyd Prozanski

††††††††††††††††††††††††††††††††††††††††††††††† Senator Charles Starr, Vice Chair

†††††††††††††††††††††††

Witnesses Present:††††††††††††††† Gary Conkling, Oregon Winegrowers Association

††††††††††††††††††††††††††††††††††††††††††††††† Sen. Ben Westlund, District 27

††††††††††††††††††††††††††††††††††††††††††††††† Laurie Wimmer Whelan, OEA Government Relations Consultant

††††††††††††††††††††††††††††††††††††††††††††††† Otto Schell, Oregon PTA

††††††††††††††††††††††††††††††††††††††††††††††† Tricia Smith, Oregon School Employees Association

††††††††††††††††††††††††††††††††††††††††††††††† Julie Brandis, Associated Oregon Industries

††††††††††††††††††††††††††††††††††††††††††††††† John Marhsall, Oregon School Boards Association

††††††††††††††††††††††††††††††††††††††††††††††† Chuck Bennett, Confederation of Oregon School Administrators

††††††††††††††††††††††††††††††††††††††††††††††† Jeannette Holman, Dept. of State Lands

††††††††††††††††††††††††††††††††††††††††††††††† Cyndi Wickham, DSL-Unclaimed Property Manager

††††††††††††††††††††††††††††††††††††††††††††††† Kate Richardson, Oregon State Treasurerís Office

†††††††††††††††††††††††††††††††††††††††††††††††

Staff Present:††††††††††††††††††††††††† Paul Warner, Legislative Revenue Officer

††††††††††††††††††††††††††††††††††††††††††††††† Mazen Malik, Economist

††††††††††††††††††††††††††††††††††††††††††††††† Steve Meyer, Economist

††††††††††††††††††††††††††††††††††††††††††††††† Mary Ayala, Economist

††††††††††††††††††††††††††††††††††††††††††††††† Barbara Guardino, Committee Assistant

 

 

TAPE 57, SIDE A

005

Vice Chair C. Starr

Calls meeting to order at 8:38 a.m.

 

PUBLIC HEARING, SB 899

012

Mary Ayala

Gives overview, background of SB 899. Expands from 500,000 to 600,000 the population level above which a county must create a tax supervising and conservation commission if it does not have a county clerk (EXHIBIT 1).

 

PUBLIC HEARING, SB 840

038

Mazen Malik

Gives overview of SB 840. Allows wine manufacturers that do not expect to owe wine privilege tax to file annual statements instead of monthly (EXHIBIT 2). Counsel is drafting an amendment to make this occur during an annual year rather than a fiscal year. No revenue impact.

 

 

 

080

Gary Conkling

See Testimony by the Oregon Winegrowers Association In Support of Senate Bill 840 (EXHIBIT 3) verbatim.

 

095

Vice Chair C. Starr

Committee will wait for amendments before passing this bill out.

 

 

 

PUBLIC HEARING, SB 845

111

Steve Meyer

Gives overview of SB 845. Designates unused value of gift cards to be abandoned property after 3 years from date of purchase or last transaction (EXHIBIT 4). Prohibits issuing cards with an expiration date or fees. Excludes prepaid phone cards. Takes effect January 1, 2006.

 

131

Sen. Ben Westlund

 

Testifies on behalf of SB 845. Abandoned amounts on cards would be held in trust in perpetuity so citizens could reclaim their value at any time. Bill is a subtle but necessary shift. Up to 40% of the value is not cashed, and this money is not claimed. In Oregon alone $13.6 million issued just last Christmas season will go unclaimed. This money would be better spent in the common school fund.

 

192

Sen. Westlund

Question is, what happens to value of unclaimed cards after a time when they are no longer being used. Bill suggests two changes:

1)      expiration date on card

2)      expired card reverts to common school fund

 

205

Sen. Metsger

Questions and discussion concerning Section 4 (2) line 36. Makes correction Ė bill will not include an expiration date, it will delete it. Also fees would be eliminated.

 

240

Sen. Metsger

Uses example of McDonalds gift card, wonders how gift cards can be traced to a particular state.

 

247

Sen. Westlund

Responds, the Division of State Lands says the information collected at the time of sale would be adequate. It would be easy to identify that the purchaser was from Oregon.

 

270

Sen. Metsger

Follow-up questions on tracing the state where the gift card was sold.

 

275

Sen. Prozanski

It would seem that organizations like McDonalds would have it built into their computers how many gift cards have been sold.

 

297

Sen. Westlund

This is an exceptional bill. Asks the committee for support.

 

335

Laurie Wimmer Whelan

Testifies in support of SB 845. See written testimony, Oregon Education Association RE: SB 845 Gift Card Bill (EXHIBIT 5).

 

355

Whelan

Directs membersí attention to Fact Sheet on SB 845 (EXHIBIT 6). Specifies the bill deals with gift cards and not gift certificates.

 

373

Whelan

Explains what happens with unclaimed property now in regard to the Division of State Lands. It is held in trust in perpetuity. The same thing would happen with gift cards, and the consumer can make a claim at any time. Also, because common school fund receives interest, it is also an education fund. Everyone wins.

 

383

Whelan

ďWe need some common sense consumer protection.Ē State Lands and State Treasurersí office support this bill. Many other states have passed similar bills. Recommends passage of bill.

 

418

Otto Schell

Testifies in favor of SB 845. Oregon PTA supports bill. These cards are wildly popular as a way of raising money for schools. He has a Barnes and Nobel card worth $10 and the account fee is $1.50 a month. Makes sense to roll this money over to common school fund.

 

TAPE 58, SIDE A

024

Tricia Smith

Oregon School Employees Association supports SB 845. Fits well in OSEAís efforts to look at every funding source for schools and try to maximize them. Schools will receive $42 million in next biennium from interest earned on the common school fund. SB 845 will help to double this double this.

 

 

 

044

Smith

Gives example of her teen-age son who has several gift cards with little value so he does not bother to use them. He thinks itís a cool idea to be able to go to the Internet and recover this money. OSEA supports amendments for effective date and to clarify how the point of sale would be determined.

 

071

Chair Deckert

Question concerning face 40% of values cashed.

 

075

Whelan

Responds, she has seen numbers that range from 10% to 40%.

 

079

Sen. Metsger

Asks for clarification of the difference between gift card and gift certificate.

 

083

Whelan

Responds, there is a very explicit difference. Small businesses tend to issue gift certificates and she doesnít want to go after them. Sheís interested in the larger businesses that issue gift cards. Will get the statutory definition.

 

102

Julie Brandis

Associated Oregon Industries opposes this bill. Gift card belongs to the owner. There is no way for a store to track who the owner is. 23 states exempt gift cards from unclaimed property. Increase has been in prohibition on expiration dates. Bill has a conflict in that gift cards donít have expiration date, but the state can place one. Purpose of unclaimed property statute is to reunite the owner and the property. Since the owner is unknown, thereís no way to do this. Bill gives the state more rights than the owner. Believes it is unconstitutional.

 

149

Brandis

If a gift card is purchased in Portland it is supposed to be a gift to the owner but thereís no way to tell what state the owner is in.

 

165

Sen. Prozanski

Since 23 states exclude this, so does that mean 27 states include it?

 

169

Brandis

Yes, but more states are deciding to do this based on court cases.

 

175

Sen. Prozanski

Follow-up questions concerning finding the owner.

 

184

Brandis

Responds.

 

191

Sen. Prozanski

Why should a merchant benefit from an owner not taking advantage of a gift card?

 

210

Brandis

Owner can use a gift card any time she wants to. Retailer might realize benefits from uncashed gift cards but that is the ownerís choice, not the retailerís choice.

 

218

Sen. Prozanski

Re-words question.

 

231

Brandis

Committee will have a struggle defining what is unclaimed and what just hasnít been used.

 

244

Sen. Prozanski

Should retailers have a disclaimer to the purchasers that they will keep the money if itís not used?

 

251

Brandis

†Responds, that would probably be in the best interest of the state.

 

261

Chair Deckert

How did Tennessee court rule?

 

267

Brandis

They ruled it did deem a contract between the purchaser and the store. Card could be redeemed at any point since there was no expiration date.

 

282

Sen. Metsger

Asks, what is AOIís position on portion of bill that does not allow issuance of a gift card with an expiration date?

 

299

Brandis

AOI has no problem with that.

 

303

Sen. Prozanski

Asks questions concerning amendments. Assumes they would allow the state to realize money earlier. Suggests, the state should make it clear that it would no longer allow this type of contract.

 

344

John Marshall

Testifies in favor of SB 845. OSBA is looking for opportunities to enhance the size of the common school fund. Principal of fund stays, and itís the interest thatís used. Earnings will accrue for school districts in perpetuity. OSBA will look at variety of bills to enhance the common school fund. Hopefully the money held in perpetuity will fall into hands of its rightful owners.

 

386

Marshall

Unclaimed property is held in trust for the beneficiaries forever. Itís not as though the gift cards would be sold, they would be held for the rightful owners.

 

413

Chuck Bennett

Testifies in favor of SB 845 representing the Confederation of Oregon School Administrators. Refers to a copy of 1997 fiscal impact statement, from HB 2591 which removed gift certificates from unclaimed property program. Times have changed and the issue now is gift cards. They are computerized. In Delaware 10% of its general fund comes from unclaimed property from other states. This must be discontinued. With this bill unclaimed property is held in perpetuity rather than an expiration date imposed by a retailer. This is a very important change.

 

TAPE 57, SIDE B

040

Bennett

Responds to Sen. Metsgerís earlier question about whether this bill affects cards or gift certificates. Urges committee to support SB 845 with any needed amendments.

 

063

Sen. George

Questions concerning page 2, line 27, section 3. Value is abandoned if itís not redeemed after three years. How do you maintain ownership on something thatís been abandoned?

 

070

Bennett

Responds, State Lands could answer that question.

 

091

Jeannette Holman

Testifies in favor of SB 845 (EXHIBIT 7). Gives an overview of unclaimed property in general. Clarifies, as currently worded the bill would include paper gift certificates. Dept. of State Lands will present amendments to exclude these.

 

123

Holman

Cites a U.S. Supreme Court case, turn unclaimed property over to the state of last known residence of the owner. Thatís the state that gets the property. If the owner is not known, holder turns it over to the state of their incorporation. This is like the Delaware situation.

 

138

Holman

Third is a transaction test Ė where the transaction occurred.

 

161

Holman

Points to page 1, line 17: State Lands would read that to exclude gift cards issued as a charitable donation to a school.

 

170

Holman

Unclaimed property serves 2 purposes in Oregon:

1)      Owner has a place to go to look for it

2)      It benefits the general public. Income is distributed annually to schools.

 

190

Holman

Suggests a methodology be put in place to determine residence.

 

201

Sen. George

Comments, people canít get cash back when thereís a balance on the card, only product. Why can State Lands get cash?

Follow-up questions.

 

211

Holman

After 3-4 years, State Lands can get cash. Owner can get remaining cash on the Web site. State Lands takes the remaining cash value. The company is no longer liable to the outstanding balance to the owner.

 

255

Sen. George

If law says it can be converted to cash, the owner could cash the entire amount without purchasing anything. That could cause a backlash.

 

275

Sen. Prozanski

Some stores already give customers a choice of cash back after purchase.

 

280

Kate Richardson

Testifies in support of SB 845 on behalf of State Treasurerís Office. Program exists for the benefit of the public while the state seeks the rightful owner. Gives the state motivation to find the rightful owner. Also the bill would protect a gift card in the event a business closes or goes into bankruptcy. Asks committee to support bill.

 

326

Sen. George

Comments on transaction costs for tracking so many small balances. Can the state make this pay?

Follow-up questions.

 

347

Cyndi Wickham

Yes. There is a provision in the law that says any property under $50 does not have to include an ownersí name and address. These would be reported in the aggregate.

 

360

Richardson

This would be similar arrangement that stores have with credit balances that are reportable.

 

429

Chair Deckert

If this law passes, the owner could find unclaimed property and redeem cash value. If bill doesnít pass, she cannot redeem it.

 

481

Chair Deckert

Adjourns meeting at 10:00 a.m.

 

 

 

Tape Log Submitted by,

 

 

 

Barbara Guardino, Committee Assistant††††††††††††††††††††††††††††††††††††††††††††††††††††††

 

Exhibit Summary:

1.      SB 899, Staff Measure Summary, Ayala, 3/7/05, 1 pp.

2.      SB 840, Staff Measure Summary, Malik, 2/7/05, 1 pp.

3.      SB 840, Testimony by the Oregon Winegrowers Association In Support of Senate Bill 840, March 7, 2005, Conkling, 1 pp.

4.      SB 845, Revenue Impact of Proposed Legislation, 3/4/05, Meyer, 1 pp.

5.      SB 845, Oregon Education Association, March 7, 2005, RE: SB 845 [Gift Card Bill], Whelan, 1 pp.

6.      SB 845, Fact Sheet on SB 845, Whelan, 2 pp.

7.      SB 845, Testimony of Jeannette Holman, Assistant Director, Department of State Lands, Holman, 2 pp.