Unclaimed Property News and Discussion Blog
Here's a quick jolt to put a kink into your Spring Unclaimed Property Filing Schedule! REALLY Holder UNFRIENDLY MOVE!
Due to March 31st being on Sunday and Friday, March 29th being a State Holiday, Connecticut State Treasurer Denise Nappier has moved the 2013 unclaimed property reporting date to Thursday, March 28th. Most reasonable states would give holders an extra day to file.... If you have property due to owners with a last known address in Connecticut and you need help filing, we'd be happy to help! You can email me directly at email@example.com or call 614.804.8486.
If you are a "diy" kind of holder, you can find complete information, forms and instructions at the following link:
A reader contacted me recently with a question about a "finder" that had contacted them and whether I thought it was worth it to work with a service like this. This service was offering to find them money that would never be escheated through the typical state websites because the unclaimed property rules applied to them differently, so it was unlikely that the reader could find the property on their own. For example, some municipal governments and co-op utilities are exempt from state unclaimed property reporting, but they have to report outstanding amounts in local newspapers or at the courthouse before it transfers to some particular fund permanently. It is an incredibly tedious process to track these exempted entity unclaimed property holdings. These "finding" companies do perform a valid service to larger companies that probably DO have a lot of unclaimed property scattered throughout the smaller municipal and government divisions that are exempt from traditional unclaimed property reporting, but DO NOT have resources to search for these funds. I suggest to my clients that they enter into a short term contract (preferably, 3 months) to determine if they are worth the risk of association, especially if they want a limited power of attorney to collect on your behalf. You might get a significant return, even after their commission, that you would not otherwise reap if you were looking for these items for only your company. The common business functionality is that the "finders" collect all of the funds, on your behalf, and then take their cut (not uncommonly upwards of 50% or more), before sending the net proceeds to you. If the funds they send are enough to pay a dedicated/part-time researcher in your own company to do the same work, you will know that you can make more by doing it yourself, but if the amount is minimal, it will be more than you would have gotten, otherwise, without wasting the time of an internal resource. If you do go with them, would you drop me a line at some point and tell me if your working relationship with them has been positive? I like to recommend companies that get good feedback. Thanks and Happy Holidays and Best Wishes to you and your family!
It is REPORTING TIME AGAIN! If you are like me, you are busy creating, proof-reading and getting Unclaimed Property reports signed for the upcoming Fall filing deadlines. As you sort through all of those unclaimed items this fall, it can be frustrating to think you have to file a report for every little check or credit on your books, especially if you only have 1 item to report to any particular state. I got a question today from someone with just such a dilemma and I know it is not a unique problem, so I thought I would share
QUESTION: We have a lot of really small checks ($1.00 or less) that are due to several different states. It's such a hassle! Is there a minimum that should be reported? If there is, is each state a different amount?
No, there is no minimum amount that must be reported as unclaimed property. There are some administrative quirks that might help you with the administrative burden of filing multiple reports, though!
First, every state has an "aggregation" minimum, which allows you to lump all of the small sums of money that are equal to or less than their aggregation amount (usually between $25 and $50) into line item on the report. There are a few states with $100 aggregate amounts, but there are also a couple of states (i.e., Puerto Rico with $1.00 and New York with $20.00) that are smaller, so check each state of last known address to be sure. They also do not require due diligence letters to be sent out for items worth less than their aggregation amount.
Second, some states will accept de minimus amount of property that are technically reportable to other states, and agree to forward the amounts to the correct states through their super-secret intra-state network, if you report the small dollar amount items on your regular report (Pennsylvania has always done this, for example).
Third, some state, like South Carolina, do not want you to file a report until you have a minimum amount due to them (SC'S amount is $250). They still expect you to maintain the unclaimed property and to report it when you reach a minimum amount, but you don't have to send in a report for very small dollars, unless you want to. You are not forbidden from filing small dollar reports....you are just discouraged.
I hope this helps! Now, back to the grindstone....
Recently, a potential client asked me why they should be in any kind of hurry to get into Unclaimed Property compliance if they weren’t under audit. They seemed willing to continue their non-compliance since the laws are so obscure and they are SURE that no one is going to come looking for them…..My answer was, “Noone has to come looking for you…..You just downsized and let your entire AP department go to India. Do you think that one of your former employees is not going to JUMP at the chance to rat you out to Unclaimed Property Offices all over the country and get a little payback?” They seemed stunned! I figured, from their reaction, they had no idea that states had whistleblower laws to incentivize folks to turn in companies for audit. One glaring example is from everyone’s favorite incorporation state: Delaware. Delaware's False Claims and Reporting Act (DFCRA) permits any private citizen to bring civil law suits on behalf of the government to allege that a business owned an amount of money to the government (i.e., unclaimed property) and that the business knowingly made use or used a false record or statement (LIKE FILING A “ZERO” UNCLAIMED PROPERTY REPORT OR NO REPORT AT ALL) to avoid or conceal their obligation to the state. The law then allows the government to intervene and join the suit. A recent case played the scene out in glorious detail: Higgins v. SourceGas LLC et al. In the SourceGas case, the defendant company was incorporated in Delaware. The plaintiff, Mr. Higgins was a SourceGas employee that discovered a large number of unclaimed or uncashed utility deposits and customer credits that should have been reported as unclaimed funds. The Court found that SourceGas renamed its Unclaimed Property Account , calling it “Converted Balance from December 2004” in an attempt to conceal their obligation to the state. Mr. Higgins got a tidy sum for Whistling (to the tune of 12% of the funds recovered by the State of Delaware) and SourceGas got a hefty fine, court costs, interest on the amounts past due and all of the bad publicity that comes from being publicly found guilty of bilking the public.
In conclusion: The government doesn’t have to find the non-compliant companies—the laws incentivize regular citizens to do the dirty work for them! If your company is unsure about whether or not they are truly in compliance with their Unclaimed Property Reporting obligations, PLEASE give me a call! I will be happy to discuss the matter with you for up to one hour at no cost. I have helped many, many companies gain peace of mind about their unclaimed property obligations and minimize their costs, including public damage to their reputations. My direct dial number is (614) 804-8486.
MICHGAN HOUSE BILL 4563 - B2B EXEMPTION, WITH LIMITATIONS: signed into law on 5/24/2012, MI H.B. 4563 says that state's unclaimed property law "does not apply to any credit balances, overpayments, deposits, refunds, discounts, rebates, credit memos, or unidentified remittances created on or after April 1, 2009 and issued, held, due, or owing in any transactions between 2 or more associations. This exemption does not apply to outstanding checks, drafts, or other similar instruments.” Great for businesses, but don't forget that CHECKS are EXCLUDED! Michigan joins Florida in limiting their B2B unclaimed property exemption to credit memos and the like, while still claiming that checks that are issued to represent those balances are escheatable. There are a dozen other states, including: AZ, IL, IN, IA, KS, MA, MD, NC, OH, TN, WI & VA, with more generous Business to Business exemptions, but every little bit helps! For the complete history of the bill click on : http://legislature.mi.gov/doc.aspx?2011-HB-4563
Delaware has issued 2 proposed Regulations this week, one dealing with new Due Diligence Requirements for Securities & Related Property and the second addressing Unclaimed Property Audit Appeal Procedures.
The first proposed rule, Regulation 965, “Regulation on Practice and Procedure for Establishing Running of the Full Period of Dormancy for Certain Securities and Related Property,” creates an obligation for holders to perform due diligence on specifically listed items. This may seem like something you would already do, but Delaware has NEVER required due diligence in the past (so that they could hoard all of the unclaimed property they collected without having to return any to the true owners). The list of property that would be included in this new due diligence requirement, if the property is valued at $250 or more, includes:
1. Intangible ownership interests in corporations, whether or not represented by a stock certificate, bonds and other securities
2. Dividends, cash, stock and other distributions made (or attempted to be made) by issuers of securities in respect of the securities issued
3. Certificates of membership in a corporation or association
4. Funds deposited by a Holder with fiscal agents or fiduciaries for payment to Owners of dividends, coupon interest and liquidation value of stocks and bonds and
5. Funds to redeem stocks and bonds
The regulations propose requiring the typical first class letter be sent no more than 120 days and no less than 60 days before reporting the property, for all items where the Holder has a good postal address and has not sent other similar mailings in the past 90 days (as might be required for some types of securities/related property under federal law). The state does appear to be throwing Holders a bone in allowing a deduction of up to $5.00 per mailing, against the value of the property, to over “reasonable” administrative costs.
The other proposed regulation, Regulation 959, lays out the guidelines for appeals of any determination by the Unclaimed Property Audit Manager. These appear to be intended to clarify and add meat to the July, 2010, Delaware legislature amendment to §1156 that allowed, for the first time, appeals of unclaimed property audit findings to the Secretary of Finance. The proposed talk about deadlines, designation of an independent reviewer, the form of submissions, hearings and evidence, the issuance of proposed Findings of Fact and Conclusions of Law, post-hearing briefs and appeals to the Delaware Court of Chancery. The entire proposed appellate procedure can be found at: http://regulations.delaware.gov/register/january2012/proposed/15%20DE%20Reg%20959%2001-01-12.htm
Now is your chance to have your voice as a Holder heard! The state is requesting “Comments” on both proposed regulations. If you have such, you can submit your Comments, in writing, to Mark Udinski at the Department of Finance, Escheator of the State of Delaware, Carvel State Building, 820 North French Street, P.O. Box 8763, Wilmington, Delaware 19899-8763. Comments must be received on or before January 31, 2012.
Speak now or forever hold your peace.....
I came across a GREAT article today on the hidden and often unforeseen pitfalls of Unclaimed Property in Mergers & Acquisitions. Click on the link above if you are interested. I highly recommend that you read it! It talks about all of the potential risks associated with unclaimed property when you are merging with or acquiring another company, including transfer of liability for unclaimed property, issues with re-incorporation or changing the state of incorporation, record availability and shareholder issues. This is great information to have in advance if you are in an acquisition mode. BUT, WHAT DO YOU DO IF YOU ALREADY BOUGHT AN UNCLAIMED PROPERTY PROBLEM? Some of the information in the article will help, but if you are in compliance and have been filing for years, your options for dealing with the past due property of an acquired company can be limited, since many states limit Voluntary Disclosure Agreements to first-time filers! You can still bring the old property to the attention of the states, and often get penalty and interest waived, even if your existing company has a filing history. It just takes a little more effort and negotiation! I am working on a couple of unclaimed property acquisition non-compliance issues right now. If you need some help of your own, drop us a line and I will share my experiences! In the meantime, get busy with your due diligence! There are only 45 days until those Fall Reports need to be mailed!
August 8, 2012, the Governor of Illinois signed Illinois H.B. 1560
which amends their Uniform Disposition of Unclaimed Property Act to give ALL unclaimed wages, payroll, and salary in any form, will be reportable after 1 YEAR. This is a deep reduction from the former 5 year dormancy for this property type. There has been some confusion that this bill ONLY affected financial institutions because of the bill's language, but the final law affects ALL types of wages and wage-like property issued by ALL types of businesses! While the bill is effective immediately, you won't feel the impact until next Spring, unless, of course, you are an insurance company and file this Fall. You insurance companies out there need to get all of your due diligence letters in the mail ASAP! 5 years worth will certainly take longer to do than the typical one year we deal with each reporting season! If you have any questions, let us know! We'd be happy to help! Now, back to stuffing envelopes......
The state legislatures across the country are wrapping up for the summer by passing some significant Unclaimed Property legislation. The State of Texas clarified some of the changes to be wrought by TX HB 257, making it clear that the effective date to report items that meet the new dormancy period is NOT required until 2012. Holders will not be required to report these fast-forwarded dormancy items for the report that is due on November 1, 2011, so they have enough time to make system modifications. Last, but not least, the effective date to report under the "new reporting deadline" won’t be until July 1, 2013. That gives all of us a little breathing room for this fall filing season!
Missouri lawmakers have also been busy in the unclaimed property arena. The Missouri Governor signed SB 366, making some changes regarding cooperative associations and how they deal with unclaimed property into law. See the link below for the entire bill: Missouri SB 366
The NC Governor signed H.B. 692 into law on June 23, 2011, making a few changes to that state's unclaimed property law that affect Fall reporting. Effective October 1, 2011, Holders are REQUIRED to send in the following information for EACH item of unclaimed property they report:
- Last Known Address
- Social Security Number or Taxpayer Identification Number AND DATE OF BIRTH
- Driver's License or State Identification Number
- E-mail address of each person who, from the records of the holder of the property, appears to be the apparent owner of the property.
One provision that should alleviate some of your filing burden allows holders with $250 or less in unclaimed property to report in a single year to hold it and then report it in a future year when value of the property that the holder has to report is $250 or more. This may seem small, but it could be one less report you have to file this fall, even if you DO have to collect A LOT more information for your unclaimed items.