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Current Application of Unclaimed Property Law
What Types of Unclaimed Property Must Be Remitted to the State?
Traditionally, states only concentrated their unclaimed property enforcement efforts on abandoned inheritances, bank deposits, royalties, securities and dividends. Recently, with states facing huge budget deficits and eroding tax bases, states have expanded their enforcement efforts against intangible property, including liabilities for uncashed payroll checks, uncashed refund or vendor checks, unclaimed credit balances, and, in many states, uncashed gift certificates and gift cards, as well as rebates.
Why Should A Business Be Concerned about Unclaimed Property?
States are increasing their enforcement of unclaimed property statutes at a record pace. Any company, partnership or other entity that issues a substantial number of checks, maintains substantial ongoing credit balances or employs a transient workforce may have significant unclaimed property liabilities. Companies that offer gift certificate, gift cards or rebates have traditionally underestimated the extent of their unclaimed property liabilities and states are choosing audit targets bases on such factors. States are profiling certain industries and issuing assessments that may be millions of dollars higher than a company's actual liability because of the lack of records maintained by these audit targets or due to recordkeeping errors.
What Are Businesses Required To Do With Unclaimed Property?
Unclaimed property must be transferred to the appropriate state after it becomes dormant. State statutes vary as to the particular dormancy periods for different categories of property and filing requirements. Holders owing property to individuals or other businesses in other states must file separate reports for each state, often involving different types of property and different time periods. It can be both burdensome and confusing.
A company's organizational structure, including the location and functions of its subsidiaries and related entities, can also directly affect its unclaimed property liability. Because of the lack of uniformity of state laws, companies can be subjected to conflicting state claims and compliance requirements.