Unclaimed Property Fines & Penalties for Non-Compliance

A Holder (Company) can be assessed Fines and/or Interest Penalties for Not Complying with State Unclaimed Property Laws.

1) Failure to Report and Remit Unclaimed Property.
2) Failure to Comply with the Entire State Unclaimed Property Statute.

– Interest penalty generally assessed at 10%–25% of property value
– Civil/Criminal penalties for failure to report/remit/deliver
OR filing a fraudulent report may include:
^ $100 – $200 per day ($10,000 maximum)
^ Varies from $1000 – $25,000 fine plus some States access an additional 25% of the value of the property
^ Some State laws include non-compliance as a Class B misdemeanor and/or jail term

Where Do I Report My Unclaimed Property?

STATE PRIORITY RULES FOR REPORTING UNCLAIMED PROPERTY –

In 1965, The United States Supreme Court, in Texas v. New Jersey, established these unclaimed property State priority reporting rules:

1) Unclaimed intangible property is required to be reported to the State of the property Owner’s last known address as reflected on the Holder’s books and records;
2) Unclaimed intangible property is required to be reported to the Holder’s State of Incorporation if the Owner’s address is unknown, in a foreign Country, or in a State that exempts the property type.

Main Benefits of a Self Unclaimed Property Audit or a Voluntary Disclosure Agreement (“VDA”)

– Waiver of interest and penalties on property reported late or past due.
– Reduced look-back period. Normally 10 years plus the dormancy period.
– The company has more control of the audit/review process.
– The opportunity is there to correct any issues or discrepancies.
– If estimation is used, the company has more of a say in the process.
– The company’s specific facts and circumstances are applied throughout the self- audit/VDA process.

Unclaimed Property Audit Triggers –

With more and more States jumping on the audit bandwagon, below are issues that could trigger the dreaded unclaimed property audit:

1) Non-reporting – A company has not been reporting their unclaimed property and has never reported in the past.

2) Property owners contacting the state to claim their funds.

3) Submitting negative reports (a report saying this is no unclaimed property to report) or submitting negative reports in back to back years.

4) Not reporting all property types required. Submitting reports with only vendor checks and no accounts receivables, miscellaneous type property or payroll checks.

5) Not reporting the type of property or value of property comparable type companies are reporting.

6) Spikes and dips in reporting.  Is company reporting consistent?

7) Has company been in the news.  Has one company acquired another? Is a company making a big yearly profit?

8) Industry under audit.  Are state audits concentrating on the retail, hospitability, manufacturing, insurance, real estate industry, etc.

9) State unclaimed property employees talk amongst themselves informally at industry trade shows/seminars/conferences.

Delaware VDA Opportunity Notification Letters

Based on recent correspondence with the State of Delaware and the Holder community, it has come to PEACC’s attention that Delaware’s Secretary of State has recently mailed opportunity letters to participate in the State’s Voluntary Disclosure Agreement (“VDA”) program. These notices were mailed to hundreds of companies throughout the United States who are incorporated in Delaware. As stated in the State’s recently revised laws and regulations, companies receiving the VDA letter have 60 days to respond. Companies not responding to the letter will be referred to the Delaware Department of Finance for an unclaimed property audit. Historically, the State turns to aggressive third-party, contingency fee paid auditors to perform these audits.

With this new letter notification initiative in mind, it is a best practice for any companies incorporated in Delaware, not fully compliant with the State’s unclaimed property rules and regulations, to keep an eye out for these VDA notices so they do not miss this opportunity to participate in the State’s VDA program.  PEACC advises all companies incorporated in Delaware (not just the ones receiving the letter) ensure they are in full compliance with the unclaimed property State laws and requirements as they may again begin to aggressively enforce their reporting requirements through State and State sponsored audits.

PEACC is advising companies to let their mailrooms and other appropriate personnel know to keep an eye out for any correspondence letters from the State of Delaware so this opportunity to report through a VDA does not pass them by. Missing this opportunity will lead to an unclaimed property audit.

For further information about this Delaware VDA letter writing campaign or the State’s VDA program and its benefits, please contact PEACC at 410.303.5510 for a free confidential consultation.

California Anmesty Bill (A.B. 2773) Update

California VDA Program Update –
California A.B. 2773, a bill to establish an unclaimed property voluntary disclosure program in the state has recently been pulled. The California State Controller’s Office has expressed some concerns with the bill’s language. The bill’s author, Assemblyman Dante Acosta, has since decided to pull the bill from consideration.

However, there is hope that the the bill will be reintroduction during the next California legislative session.

California Introduces Bill for Voluntary Compliance

The State of California recently introduced Bill (AB 2773) that, if passed, would create a Holder friendly Voluntary Compliance Program. This Program would allow Holders to report and remit past due property to the State without the threat of interest and penalties being assessed. If the Bill is passed, Holders not fully compliant with California’s unclaimed property regulations would have the opportunity to get compliant with a reduced look-back period and without the threat of interest or penalties being charged for past due property,

It has been almost twenty years (2001) since California last offer a similar amnesty reporting program. This Program was initially offered for one year, but it was so lucrative for the State, they extended it another year through 2002. The State took in millions of dollars as Holders chose to take advantage of it.

As an incentive for Holder compliance, most States currently offer either a formal or informal voluntary compliance program, normally known as a VDA (“Voluntary Disclosure Agreement”).

However, California currently is one State that will automatically assess at 12% per annum interest penalty on all past due property from the date it should have been reported. A Holder may request to appeal this 12% interest penalty, but it must be requested individually after the assessment. However, this request for abatement must be for good cause.

If AB 2773 is passed, it would allow the State to waive interest and penalties for Holders accepted into the Program and participating in good faith. The Program would be open to all Holders who aren’t currently under audit or have been selected for audit by the State or one of their agents. Once accepted into the Program, another benefit is a shortened look-back period of ten previous report years from the date the Holder is accepted into the Program. Currently, audits may go back to the Holder’s inception.

Bill AB 2773 was referred to California’s Judiciary Committee on March 20, 2018. If passed, a Holder would have through January 1, 2024, to enter and participate in this formal VDA amnesty program.

If enacted, this Bill would benefit any Holder conducting business in California, incorporated there, has a large amount of property due to the State or has historically under-reported. The Bill has gained major support from the Holder community and organizations throughout the Country.

PEACC will continue to monitor the progress of AB 2773 and hopefully the passing of it.

Expediting a Delaware Audit Into a Voluntary Disclosure

For Holder/Companies currently under a Delaware unclaimed property audit, below is a link to the form required to be completed and submitted in order to convert the audit into a Voluntary Disclosure Agreement (“VDA”):

(Please cut and paste link into your browser)

https://finance.delaware.gov/unprop/Notice%20of%20Intent%20to%20Convert%2010-3-2017.pdf

Please note: there are time constraints for converting a Delaware audit into a VDA.

Update on Puerto Rico 2017 Fall/Winter Reporting

With all the devastation and destruction that has taken place as a result of the hurricane that hit Puerto Rico {‘PR”) recently, there has been some question as to whether or not PR will be able to accept unclaimed property reports in the near term. Salva Doris Valentin, PR’s Unclaimed Property Supervisor, recently announced that their Office will continue to accept unclaimed property reposts and remittances as usual. No disruption has occurred.  If you have any questions or need further information please email Salva Doris Valentin at SALVAD@ocif.pr.gov

Important Update to Delaware Unclaimed Property Reporting

On September 29, 2017, the Delaware Secretary of State (“SOS”) announced an important update regarding the State’s Voluntary Disclosure Agreement (“VDA”) Program.

In two weeks (mid-October), the Delaware Secretary of State office will begin mailing notices to companies who have been identified as likely being out of compliance with Delaware law as it relates to reporting dormant, abandoned or unclaimed property. Companies that do not enroll in the Delaware SOS VDA Program within 60 days of the mailing of this notice WILL BE referred to the Delaware State Escheator for an unclaimed property examination.  If an audit notice is issued, the Department of State will have no legal ability to accept a company into the SOS VDA Program.

The SOS VDA Program was put in place to respond to concerns about
Delaware’s ongoing audit program, and to encourage more companies to
come into compliance with their legal responsibilities as they relate to
abandoned and unclaimed property property.  Through recent changes in the law, Delaware is providing every company with an opportunity to voluntarily comply prior to being issued an examination notice.  Delaware’s SOS is urging all companies to take advantage of this opportunity to enroll in the SOS VDA Program.

For further information or questions on this new initiative Delaware is offering, along with the benefits that accompany it, please contact PEACC at 410.303.5510.

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