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6/11/20 7:33 AM

Penalty and Interest Assessments for Unclaimed Property Non-Compliance

by Luke Sims

Blue DollarUnclaimed 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.

California Unclaimed Property Penalties and Interest

California automatically assesses interest on any late-reported property. The interest rate is 12% per annum starting from the date the property was required to be reported until the date the property is actually reported.

In addition, for holders that utilize the wrong payment mechanism for unclaimed property remittances over $20,000, California charges a 10% penalty.

Nevada Unclaimed Property Penalties and Interest

Nevada has one of the highest annual unclaimed property interest rates at 18% per annum. The state also charges a $200 per day late-filing penalty, capped at $5,000. 

Texas Unclaimed Property Penalties and Interest

Holders who report late to Texas pay interest at 10% per annum. The interest is assessed on the property from the date the property should have been remitted until the date the property is actually remitted.

Additionally, late-filing holders are assessed a penalty equal to 5% of the value of the property reported. If a holder pays or delivers property more than 30 days after the date the report is due, an additional penalty equal to 5% of the value of the property due is imposed.

Washington State Unclaimed Property Penalties and Interest

Washington State assesses interest on late reports at the Federal short-term interest rate plus 2%.

Washington assesses a penalty for past due property at 10% of the value of the late property.  In addition, Washington charges a 5% penalty for not filing and paying electronically when required.

Avoiding Unclaimed Property Fines and Penalties

The best way to avoid unclaimed property fines is to ensure that unclaimed property is reported and remitted to the appropriate jurisdiction no later than the statutory deadlines. MarketSphere can assist in ensuring reporting deadlines are met, and in some instances, work with state officials to reduce penalty and interest assessments if past due property is reported.

Another way is to use state voluntary compliance programs.  Many states, including Nevada and Texas, maintain a voluntary compliance initiative (e.g. a voluntary disclosure agreement program) that allow holders to come forward and report past-due property. These programs often include a complete or partial waiver of penalties and interest.

Contact Us to learn how we can partner with your organization and create your Just Right Compliance® solution.