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After nearly a decade of litigation and a landmark 2023 U.S. Supreme Court ruling in favor of 30 states against Delaware over the escheatment of MoneyGram instruments (teller’s checks and agent checks), the parties have finally reached a settlement.

This resolution marks the end of a significant legal battle and sets a precedent for the handling of unclaimed financial instruments, ensuring that such funds are returned to the states where they were purchased as opposed to the holder’s state of incorporation. This decision could also impact future unclaimed property laws for similar items that lack an owner’s address but have a place of purchase, such as gift cards and store value cards.

The coalition of 30 states argued that these money instruments should be treated as money orders, which fall under the Federal Disposition Act (FDA) and are reported to the state of purchase, while Delaware used the 1965 U.S. Supreme Court decision as a precedent that held that these funds are to be turned over to the state of incorporation.

Ultimately, the U.S. Supreme Court sided with the coalition of states leading to the August 2024 settlement. Delaware is set to transfer $102 million of escheated MoneyGram funds to the other 30 states involved in the suit and an additional $89 million will be distributed among all 50 states based on the place of purchase.

Implications for businesses and corporate compliance

The ripple effects of this settlement may extend far beyond the courtroom. Businesses nationwide, particularly those dealing with financial instruments, might soon be faced with a new compliance landscape.

What can change for corporations?

1. Reporting requirements: Companies may need to overhaul their reporting systems to track the place of purchase for various financial instruments.
2. Compliance costs: Updating systems and processes to comply with the new precedent could result in increased costs.
3. Risk management: Businesses must reassess their risk exposure related to unclaimed property.

Beyond MoneyGram: The broader impact

The implications of this ruling extend far beyond MoneyGram and could affect a wide range of financial instruments and industries.

Potential areas of impact:

• Gift cards: Could the place of purchase now determine where unclaimed gift card balances are reported?
• Store value cards: Similar to gift cards, these might see a shift in how unclaimed balances are handled.
• Digital currencies: How will unclaimed property laws adapt as cryptocurrencies and other digital assets grow in popularity?

This ruling marks a major step in ensuring the fair distribution of unclaimed financial instruments and could serve as a catalyst for future laws that use the place of purchase as a critical factor in determining the rightful state for escheatment.

How Wipfli can help

Wipfli continues to stay abreast of the latest legal changes to help ensure compliance in all areas of unclaimed property. If your business may be affected by this recent ruling, we’re ready to advise you on how best to proceed. The legal landscape for unclaimed property is evolving, and our team of dedicated professionals is keeping up with the changes to help position your business for success. Contact a state and local tax advisor today to learn more.