Think You’re In Compliance? – Think Again –

How can a Holder/Company be reporting unclaimed property and still not be compliant?

– By disregarding or not performing the State mandated
annual due diligence/search letter mailing.
– By reporting all property to just one State or the State of
Incorporation.
– By reporting property using an incorrect holding/dormancy
period or ‘covered to/cut off” date.
– By assuming a third-party is reporting certain unclaimed
property on your behalf (benefits/payroll).
– By having a lapse in reporting history or consistency.
– By under or over reporting or failure to report all property.
dollar amounts or types.
– By not filing Negative or Nil Reports.
– By not understanding the customer/payee-generated contact
rules.

Unclaimed Property Audit Triggers

Ever wonder what may trigger an unclaimed property audit examination? Stay alert to the following audit triggers:

1) The company has never filed unclaimed property reports
in the past.

2) The company is not reporting all required property
types.

3) The company files back-to-back negative reports stating
they have no property to report.

4) The company is not reporting like a similar
company/competitor is.

5) The company has spikes and dips in their annual reports.

6) The company has been the the news recently.

7) The company has acquired or merged with another
company.

8) The property owners have repeatedly contacted the
State to claim funds.

9) The industry has randomly been selected for audit.

10) The company does not respond to an inquiry from a
State.




New To State Unclaimed Property Reporting Requirements?


Who Is Required To Report Unclaimed Property?

1) Corporations –
Retail
Manufacturing
Service/Hospitality Industry
Others (Utilities, Gov’t Jurisdictions,
Colleges/Universities, Hospitals, etc.)

2) Banks & Financial Institutions

3) Insurance –
Life Insurance
Non-Life Insurance

What Unclaimed Property Is Required To Be Reported?

Over 100 Different Property Types
Depending on the Industry

Main Property Types
Account Payables/Vendor Checks
Account Receivable/Credit Balances
Payroll Checks

Any Check or Obligation that Goes
Unclaimed/Uncashed/Dormant

When Are Reports Required To Be Submitted?

Depending on the State and Property Type
Normally 3 or 5 Years After
Property Has Been Unclaimed/Uncashed
Check Issue Date
Account Opened Date
No Activity
Payroll Checks
1 Year in Most States

After Due Diligence/Search Letter Mailing is Done
Normally 60 or 90 – 120 Days Prior to Report Due Date

State Reports Are Due Every Year/Annually
Corporations and Banks/Financial Institutions/Other
Normally by October 31.November 1
About 6 States Due in Spring/Summer
Insurance Industry
Normally by April 30/May 1

Where Are Reports Required to Be Submitted?

Report to the State of the Owner/Payee Last Known
Address as Reflected on the Company/Holder’s Books
and Records. –
-OR-
If Property is Unknown, Foreign or no State Law
addresses It,, Property Defaults to Company/Holder’s
State of Incorporation.

Why Is Unclaimed Property Required To Be Reported?

1965 U.S. Supreme Court Decision Texas v. New Jersey
Unclaimed Intangible Property is Required to be
Reported to the State of the Owner’s Last Known
Address – OR-
If address is Unknown, Foreign or State Law
Exempts it, Property Defaults to Holder’s State of
Incorporation

States May Assess Fines and Interest Penalties on Past
Due or Unreported Property
Fines and Penalties May Be Assessed For
Failure to Report/Remit Property
Failure to Comply with State Statutes
Interest Generally Ranges From 4%-25% of
Property Value
Criminal/Civil Penalties for Failure to
Report/Remit/Deliver Property

Filing a Fraudulent Report May Include
$100 – $200 per Day ($10000 Maximum)
Varies From $1000 – $25000 Fine Plus Some States
Assess An Additional 25% of the Property Value
Some States Include Class B Misdemeanor in Their Laws

How To Report Unclaimed Property?
Do it yourself
Various Software Solutions Available on Market
Manually using State’s websites
Co-Source/Outsource to a Service Provider
Either Partial or Full
State requirements
Via State Websites
In Required NAUPA II Electronic Format
Paper Reports Accepted if Less Than State
Threshold
Reports on CD’s if State Accepts It
Remittance/Payment Requirements
Via Check
Online Payments Via State Website
Via EFT/Wire Transfer if Over Certain Threshold

For further information or questions, please contact PEACC at 410.303.5510 or email info@peacc.com


Key Points from Delaware’s February 2020 VDA Invitation –

• Delaware’s Secretary Of State Voluntary Disclosure Agreement (“VDA”) invitations mailed out in February 2020 have been granted a response extention.
• Responses are now required by July 18, 2020.
• These extension only apply to companies that received the VDA invitation in February 2020.
• Recipients of this letter may include the CFO, General Counsel, Accounting Manager or others.
• It is important to inform all persons and departments of what action they should take if they have received this February 2020 DE VDE invitation letter.
• If recipients do not respond to the invitation by the July 18, 2020 due date, they may/will be referred for an unclaimed property audit.
If you firm is contemplating participating in the Delaware VDA invitation, please feel free to contact us at 410.303.5510 for a free discussion as to whether or not it may be right for you.

California Decides Against Amnesty

The California State Controller’s Office (“SCO”) has been researching options for increasing Holder compliance to their unclaimed property reporting requirements for about a year. One of the options was to offer Holders an Amnesty Period that would waive any interest or penalties on any property reported past due. Numerous years ago the State offered the same type of Amnesty Period and it produced a major windfall of property revenue for the State.

However, upon completion of their research, and for some strange reason, the State decided NOT to offer an Amnesty Period because it was deemed “an ineffective solution to address noncompliance”. Additionally, the SCO also decided that implementing an Amnesty Program would “perpetuate inconsistent compliance” by the Holders which would lead to additional costs for the State due the number of unclaimed property reports that would potentially be received and processed.

The SCO’s reporting laws and guidelines do allow for Holders to report property late and, for any penalties and/or interest assessed, the Holders can request these penalties be abated if they can prove “reasonable cause”. This process essentially acts as a one-time amnesty program for the Holder.

Keep in mind the “reasonable cause” claimed by the Holder must be accepted by the State in order for any penalties to be waived. This acceptance process may take up to 9 months for the State to decide.

This SCO’s decision not to offer a Amnesty Period is a definite set back for the Holder Community. For further information on this recent decision and the best way to report unclaimed property to California or any other State(s), please feel free to contact PEACC to discuss all the options.



California Amnesty Update II – stayed tuned…..

California’s Governor recently signed the Budget Act of 2019 (SB 109). Within the Act, there is a provision which requires the Controller to provide the Joint Legislative Budget Committee and the chairpersons of the fiscal committees in each house of the legislature with a report on plans to provide for a one-time unclaimed property amnesty, or other options to increase compliance with the unclaimed property law in lieu of an amnesty program. The Controller must also provide options for increasing the return of unclaimed property to rightful owners. The due date for report is March 1, 2020. The State did offer an Amnesty Program about 20 years ago, for a year. Many Holders took advantage of it It was so successful and brought in so much unclaimed property penalty and interest free, the State extended the Program for a year.

What Constitutes Intangible Unclaimed Property Reportable Under the Law?

Generally intangible personal property for which there has been no owner generated activity for a specified period of time called “dormancy period” or “holding period”, is considered dormant or unclaimed.

Examples of intangible unclaimed property include:
-Uncashed payroll or commission checks
-Uncashed accounts payable/vendor checks
-Accounts receivable credit balances
-Gift certificates/gift cards
-Customer merchandise credits, layaways, deposits, refunds or rebates
-Overpayments/unidentified remittances
-Suspense accounts -Unused/outstanding benefits (non-ERISA)
-Goods received but not invoiced
-Miscellaneous income/bad debt expense accounts

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.

Your Total Source for Unclaimed Property Compliance

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