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2/18/22 2:15 PM

CA AB 2280 (Re)Introduces an Unclaimed Property Voluntary Compliance Program

by Heather Gabell

Update hand writing with a blue mark on a transparent boardWe recently posted about CA AB 466, which became effective on January 1, 2022, authorized the Franchise Tax Board (FTB) to share information with the State Controller’s Office (SCO) related to compliance with California’s unclaimed property law. As a result, businesses must now provide the following information on business tax return forms:

• Has the entity previously filed an unclaimed property report with the SCO?
• If so, what was the date of the most recent report?
• What was the amount last remitted?

On February 16, 2022, a new bill was introduced in California, AB 2280, wherein the Legislature again references the FTB, estimating that since 2020, approximately 1.3 million business that have filed taxes with the FTB have failed to report unclaimed property to the state.

The Legislature notes that education and enforcement efforts notwithstanding, the current 12% mandatory interest assessment on past due property is ineffective in compelling holders to report past due property. Additionally, the threat of a potentially large interest assessment is a deterrent for both first time and regular filers of unclaimed property.

CA AB 2280 authorizes the Controller to establish a voluntary compliance program, and includes requirements for such a program, entitled the “California Voluntary Compliance Program.” If a holder successfully completes these requirements in the relatively short timeframe established therein, the 12% interest will be waived. Holders will request enrollment in the program via a form to be created by the Controller, and acceptance is at the Controller’s discretion.

Holders are ineligible to enroll in the voluntary compliance program if any of the following apply:

•The holder is under audit or has received notice of an audit at the time of the enrollment request.

At the time of the enrollment request, the holder is the subject of a civil or criminal prosecution involving compliance with California’s unclaimed property law.

• The holder was notified of an interest assessment by the Controller within the past 5 years, and such interest assessment remains unpaid at the time of the enrollment request.

• The Controller waived an interest assessment against the holder within the past 5 years.

To receive the waiver of interest, the holder must complete all of the following requirements:

• Participation in an unclaimed property educational training program, to be provide by the Controller, within 3 months of the date of the notice of enrollment.

• Review of the holder’s books and records for the past 10 years.

• Undertakes reasonable efforts to perform due diligence at least 30 days prior to submitting the unclaimed property report.

• Filing an initial report within 6 months of the date of the notice of enrollment.

• Submission of a final report and payment or delivery of the property no earlier than 7 months and no later than 7 months and 15 days after the Controller’s receipt of the final report.

If the holder fails to pay or deliver the property specified in the final report within the time period prescribed, the Controller may reinstate the 12% interest.

To reiterate, the Controller has the discretion to establish the voluntary compliance program, which also requires the Controller to create the enrollment form and educational training program. For funding, the establishment of the program is also contingent upon an appropriation by the Legislature in the annual Budget Act.

Aside from the Voluntary Compliance Program, CA AB 2280 bill also amends the fee locator provisions such that fee agreements are invalid if they require an owner to pay the fee before the claim is approved and payment to the owner is made. Finally, noting the need to protect personal information, from a privacy perspective and to protect against fraud and identify theft, the bill also amends the Government Code to exempt the disclosure of documentation containing personal information submitted by claimants and by holders under audit. Information related to the owner’s social security number and date of birth, and federal employer identification number, account number and check number (until the Controller has made payment to the owner in full) would be exempt from disclosure under the California Public Records Act.

We will continue to monitor CA AB 2280 as it works its way through the Legislature. Should you have any questions on this or any other unclaimed property matter, contact the specialists at MarketSphere for expert guidance and support.

*Content contained in this article is considered accurate as of the publish date.

 

Topics: California, Reporting, Voluntary Disclosure Agreements