Menu

KeepUP™ Blog

11/12/19 9:35 AM

Consolidated Unclaimed Property Reporting

As a holder advocate, one of the most frequent questions we receive is whether a company with multiple subsidiaries and entities under its corporate umbrella can file consolidated unclaimed property reports.  The unclaimed property compliance environment is complex, frustrating, and demanding for corporate America, and complex organizational structures don’t make it any easier to navigate.  Conducting unclaimed property filings on a consolidated basis can create efficiencies for many holders.  However, a number of factors should be considered when determining the right approach for your particular organization. 

Consolidated unclaimed property filings are similar to other consolidated financial filings such as income tax filings and financial statements.  Consolidated unclaimed property filings consist of one report sent to each state or filing jurisdiction, usually by a parent company, on behalf of multiple subsidiaries.  This single report contains all property that would have been reported if separate reports had been prepared for each individual entity.

 

Consolidated reporting simplifies and streamlines the reporting process and tends to be more cost effective regardless of whether the filing process is managed internally or outsourced.   It is particularly beneficial for companies with a substantial number of subsidiaries that would otherwise consistently file zero or negative reports due to limited or no unclaimed property activity.  It may also be the simplest approach for companies who already consolidate financials or are running a common paymaster across its various entities. 

While there are  benefits of a simplified process, there are several factors to consider before deciding to file consolidated unclaimed property reports.

[More]

Topics: Compliance, Reporting, Best Practices

10/8/19 8:23 AM

Unclaimed Property Audit - Are You At Risk?

This blog was originally created at the request of the Association for Financial Professionals (AFP) organization and posted to their website in August 2019 in a series dedicated to the education of its’ members and attendees of the 2019 AFP Annual Conference in Boston, Oct, 20-23.

The likelihood of an unclaimed property audit has increased in recent years due to several factors, including the proliferation of third-party auditors, realization by states that significant amounts are involved, and the escalation of unclaimed property litigation. Escheat compliance is no longer optional and being audited is not a matter of if, but when.

Situations and events that may bring an auditor to your door include:

  • Failure to file or filing late
  • Filing negative reports year after year
  • Filing incomplete reports or reports that don’t match remittance
  • Not filing in the state’s required format
  • Not reporting property types that are standard for your industry
  • Reporting much less than similar organizations
  • Filing to the incorrect state
  • Mergers and acquisitions
  • Claiming property without being compliant
[More]

Topics: Compliance, Reporting, Audit, Best Practices

10/1/19 8:23 AM

Notices Continue for Delaware Unclaimed Property Voluntary Disclosure Agreement Program

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations and continues this practice on an on-going basis. 

Based on correspondence that MarketSphere received on September 24, 2019 from the office of Delaware’s Secretary of State, the latest round of VDA invitations have recently been mailed to a number of Delaware incorporated companies.  Targeted companies now include middle market companies with annual revenues of $50M and above. Click here to see a sample correspondence from September 2019.   

The correspondence notes: 

Pursuant to 12 Del. C. §1173(b), the Delaware Secretary of State (SOS) recently sent out letters inviting companies to enter the Voluntary Disclosure Agreement (VDA) Program. Any company that receives a letter is encouraged to enroll in the SOS VDA Program to facilitate compliance with Delaware’s Abandoned or Unclaimed Property Law.

Invitees have 60 days from the date of the invitation to enroll in the SOS VDA Program by completing, executing and submitting Form VDA-1 Disclosure and Notice of Intent to Voluntarily Comply to the Secretary of State.  If an invitee does not enroll in the SOS VDA Program within 60 days of the invitation mailing, the company will be referred to the State Escheator for examination.

[More]

Topics: Delaware, Compliance, Audit, Voluntary Disclosure Agreements

9/19/19 8:27 AM

Electronic Payments and Unclaimed Property

In today’s business world, companies are using more and more electronic payments to pay what they owe instead of using paper checks.  The widespread use of direct deposits, wires and ACH’s came about because they are quicker, easier, and have a much lower chance of becoming an unresolved liability (than an uncashed check), because the amounts are being deposited directly into accounts provided by the payees.

Using electronic payments lessens the possibility for the creation of unclaimed property as these payments types rarely fail.  However, when they do fail, it is important that the payor identify and research the reason for the failure and correct any errors to ensure the obligation is paid and does not go unresolved.

As electronic payments rarely fail, they are not high on the list of potential unclaimed property types that companies might focus on.  Unfortunately, unclaimed property auditors are beginning to highlight these payment types focusing on rejections and bounce backs to see how the related obligations are satisfied.

[More]

Topics: Compliance, Audit, Best Practices

8/30/19 7:56 AM

Cryptocurrency & Digital Assets: Unclaimed Property Challenges and Implications

Over the last several years the use of block-chain technologies and their associated cryptocurrencies have grown tremendously. As with many new areas of commerce, growth is usually followed by an onslaught of challenges brought on as governments and regulatory agencies try to decide how to adapt to or fit this new square peg into the round hole of already established laws and regulations.

In the world of unclaimed property, cryptocurrency is just now being recognized in various new statutes and proposed legislation.  Many states, including IL, KY, NV, TN and UT, have adopted some form of the 2016 Revised Uniform Unclaimed Property Act, which includes “virtual currency” in the legislative definition of “property”.  In addition, NY has recently introduced legislation calling for unclaimed cryptocurrency to be escheated to the state upon abandonment.

Whether you are a company that has emerged as a part of the support system to the cryptocurrency world (e.g., coin exchanges) or simply a company that has begun to accept Bitcoin or other similar cryptocurrencies as payment, it will be important that you are prepared for these challenges and are proactively addressing potential issues that can emerge. One often overlooked area for consideration, is the impact of the various states’ unclaimed property laws and regulations.

[More]

Topics: Compliance, Reporting, Best Practices, U.P. Law

8/7/19 9:24 AM

Is Your Company In Danger of Forfeiting Unclaimed Funds?

Unclaimed property compliance is a year-round activity.  But so is unclaimed property recovery. 

Amounts owed to you (unclaimed property) can go unclaimed for a myriad of reasons.  A company could have moved locations.  They may have changed their process or contact point for payment receipt.  A check could literally be lost in the mail.  Once those items are lost and go unreconciled, they turn into unclaimed property. Unclaimed property can be funds held by a state/jurisdiction resulting from statutory escheat requirements or they can be outstanding balances held by a government entity (that may never be escheated) until you or your organization come forward. 

State unclaimed property departments are holding billions of dollars, some of which can be found by going to state websites.  Other government entities, from municipalities to federal agencies, are also holding significant amounts owed to companies. However, this information is often not made available via public websites and can be difficult to obtain.

Deadlines Could Be Imposed for Recovery
[More]

Topics: Best Practices, Corporate Asset Recovery

7/25/19 9:09 AM

Delaware Correspondence - Am I Under Audit or Not?

Pursuant to 12 Del. C. § 1172(a), the State of Delaware cannot initiate a new abandoned or unclaimed property examination unless the company has first been notified in writing by the Secretary of State (SOS) that it may enter into the DE VDA program.  The VDA program allows a company to come into compliance by utilizing the DE VDA guidelines to conduct a self-audit of their books and records.

Since the latter part of 2018, Delaware’s SOS has been consistently mailing VDA invitations, and our information is that Delaware will continue this practice on an on-going basis. The SOS correspondence notes that recipient companies must respond to these notices within 60 days or they will be referred to the Delaware Department of Finance (DOF), which would then have the option to commence an unclaimed property audit.  

What Should A Company Do If It Receives Correspondence From Delaware?

[More]

Topics: Delaware, Audit, Voluntary Disclosure Agreements

6/20/19 9:14 AM

Are You Over-Escheating Your Unclaimed Property?

State enforcement of unclaimed property compliance continues to rise.  States are auditing more companies than ever in order to validate that unclaimed property is being reported accurately and completely.  To prevent an audit, many holders over-report property, escheating items that are not actually unclaimed property, or may not be reportable to the states. However, this practice could cause red flags.

The two most common transaction types that are not considered to be unclaimed property are accounting errors and exclusions/exemptions.

Accounting Errors

Accounting errors are not unclaimed property.  Unfortunately, errors in accounting systems do occur that cause items to appear to be outstanding or unresolved, when in fact they are not. This leads to the potential for over-reporting.  Examples of accounting errors include:

  • duplicate payments
  • voids that were never processed
  • misapplied payments.

Prior to reporting, research should be performed to identify and correct accounting errors and avoid over-reporting.   

Exclusions/Exemptions

Many state statutes include provisions that exclude certain transactions from the definition of unclaimed property, or specifically exempt the property from reporting.  An example of a state exclusion appears in the Kansas unclaimed property law, whereby:

[More]

Topics: Compliance, California, Reporting, Recordkeeping, Best Practices

6/4/19 9:50 AM

Unclaimed Property Effective Due Diligence

Annual unclaimed property reporting has many distinct steps.  These include, maintaining up-to-date compliance rules, compilation of potentially reportable transactions, identification of exemptions and deductions, mailing of due diligence notification letters, and reporting and remitting funds to the various jurisdictions.     

Once a holder has analyzed its’ data to determine potentially reportable items, the next step is the performance of due diligence, which includes determining which accounts require a statutory due diligence mailing, when the states require the mailing of the letters and the content of the letter.

States generally require a notice to be sent to the last known address of the owner of the funds as indicated in the holder’s records before the property can be escheated to the states. This gives the owner one last opportunity to claim their funds before they are turned over to the state. Over the years, states have placed greater emphasis on due diligence and various components of the process, including:

[More]

Topics: Compliance, Due Diligence, Best Practices

5/22/19 8:44 AM

Notices Continue for Delaware Unclaimed Property Voluntary Disclosure Agreement Program

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations, and our information is that Delaware will continue this practice on an on-going basis. 

Based on correspondence that MarketSphere has received on May 20, 2019 from the office of Delaware’s Secretary of State, the latest round of VDA invitations will be mailed to a number of Delaware incorporated companies in the very near future.    

The correspondence notes: 

Pursuant to 12 Del. C. §1173(b), the Delaware Secretary of State (SOS) soon will distribute letters inviting companies to enter the Voluntary Disclosure Agreement (VDA) Program. Any company that receives a letter is encouraged to enroll in the SOS VDA Program to facilitate compliance with Delaware’s Abandoned or Unclaimed Property Law.

Invitees have 60 days from the date of the invitation to enroll in the SOS VDA Program by completing, executing and submitting Form VDA-1 Disclosure and Notice of Intent to Voluntarily Comply to the Secretary of State.  If an invitee does not enroll in the SOS VDA Program within 60 days of the invitation mailing, the company will be referred to the State Escheator for examination.

[More]

Topics: Delaware, Compliance, Audit