KeepUP™ Blog

Unclaimed property reporting is a complex task with varying state requirements and protocols. One of the biggest fears and concerns for holders is running afoul of this complexity and creating the potential for a penalty and interest (P&I) assessment. States have the statutory authority to assess these fees and may impose them for:

• Reporting late property

• Filing late reports

• Filing inaccurate reports

• Submitting improper funding

• Reports filed in an improper or incorrect format 

Most jurisdictions have some mechanism to assess penalties or interest. Below are a few examples of several high-profile states.

Updates to the Delaware VDA Program and to Audits in Delaware per

DE SB 104

Delaware Senate Bill 104, effective on August 1, 2021 (though some provisions will apply retroactively) significantly modifies the enforcement scheme in Delaware.

• VDA invitation response time increased. The timing for holders to respond to a VDA invitation is increased from 60 to 90 days. Holders who receive an invitation may choose to either enter the VDA program or request to enter the expedited audit program (see below). As a reminder, a holder who does not enter the VDA program or the expedited audit program will be referred to the State Escheator for a full audit.
• Permanent expedited audit program.   Entry into the expedited audit program may be granted or denied at the discretion of the State Escheator, who must respond to a holder’s request to enter the expedited audit program within 60 days.
   
  • Holders are eligible to request an expedited audit for:
    
    
    • New audits authorized after August 1, 2021
    • Current audits authorized after February 2, 2017, and before August 1, 2021
    • VDA invitations received as of August 1, 2021
  • If the holder provides “sufficient responses” to the auditor’s requests, an audit report will be provided by Delaware to the holder within 2 years of the date of the acceptance into the expedited audit program.

As the use of blockchain technologies and cryptocurrencies continues to grow, and in the midst of regulators like the SEC and the IRS continued grappling with oversight and enforcement issues, the states are readying themselves to be able to take custody of unclaimed cryptocurrency in its native form. This new functionality, together with the growing popularity of cryptocurrency, merit further consideration, particularly noting the cryptocurrency market is projected to reach $1.5 billion by the end of 2025.

MarketSphere is hosting a Virtual Currency in Unclaimed Property Webinar on February 19 from 1pm - 2pm Central. This webinar will help you understand the basics and current legislative landscape of managing this type of property. Click here to register.  

Virtual currency was first addressed in the 2016 Revised Uniform Unclaimed Property Act (“RUUPA”), a model act promulgated by the Uniform Law Commission as a standard for states to follow when updating their laws. RUUPA defines virtual currency as a “digital representation of value used as a medium of exchange, unit of account, or store of value, which does not have legal tender status recognized by the United States.” Game-related digital content is excluded from this definition.

Several states that have enacted RUUPA-like laws, including Colorado, Illinois, Kentucky, Tennessee, Utah and Vermont, similarly define or adopt the RUUPA definition of virtual currency as a property type that is eligible for escheat. However, neither RUUPA nor any of these states address virtual currency apart from providing a definition. Maine’s law only defines game-related digital content and excludes it from the definition of “property” and thus from escheatment. Even if the state does not specifically provide for virtual currency in its law, each state has a “catchall” provision that includes other miscellaneous intangible property, and the state could argue that this provision encompasses virtual currency.

In today’s digital world, you no longer need to be physically present in a casino, at the poker table, or at the racetrack to place a bet.  In many states, you can now place those bets online or even play daily fantasy sports directly from your mobile device.  

In May 2018, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act, a federal law that had previously prohibited sports betting. Since then, half of the states have legalized or are in the process of legalizing sports betting.  According to the American Gaming Organization, sports betting revenue in 3Q 2020 totaled $352.3 million[1] .

Online gambling includes online casinos, online poker sites, daily fantasy sports (DFS), and sports betting.  Sports betting, in turn, includes online and mobile “sportsbooks.”  To place an online sports bet, you need an online account.  Most states that permit online sports betting allow you to do this on your mobile device, but in certain states, like Nevada, you need to create your account while physically at the casino (and often to make a deposit or withdrawal as well).

As of November 10, 2020, retail and/or online sports betting is permitted in: AR, CO, DC, DE, IA, IL, IN, MI, MS, NV, NH, NM, NJ, NY, MT, OR, PA, RI, and WV.  Sports betting is legal, but not operational in the following states: LA, MD, NC, SD, VA, and WA.  Pending legislation exists in OR and MA.  Sports betting is prohibited in the following states: ID, ND, OK, SC, TX, UT, and WI[2].

Record retention refers to how long important information must remain accessible for future use or reference. Most financial and accounting processes have standards that need to be met because agencies such as the Internal Revenue Service, the Federal Deposit and Insurance Corporation, and the Public Company Accounting Oversight Board all have requirements. You may be familiar with the obligations for these well-known agencies. Do you know what is required for unclaimed property compliance? 

Companies generally maintain a schedule or policy for their escheat records that help define what will need to be kept and for how long. This is a worthwhile practice to meet requirements and have supporting documents available if requested or needed in the event of an audit. 

Creating and maintaining a schedule for unclaimed property record retention isn’t always easy. Unclaimed property retention requirements vary by state and jurisdiction and cause holders confusion about what information must be maintained and how ling they need to archive records. Some holders might decide not to retain unclaimed property records and take their chances during an unclaimed property audit. We don’t want you to fall into this danger zone and have some practical advice that can simplify your escheat record retention policy.

A Few Facts:

◾ Most States’ unclaimed property laws require record retention periods longer than standard tax statutes.

◾ The 1981, 1995 & 2016 Uniform Acts require a record retention period of 10 years plus the dormancy period of the type of property (typically 3 or 5 years).

◾ Statutes are often silent on which records to keep.