California AB 466, effective on January 1, 2022, provides the authority for the Franchise Tax Board (FTB) to share information with the State Controller’s Office (SCO) pertaining to a taxpayer’s compliance with California’s unclaimed property laws. To accomplish this, the FTB has added various questions to business tax returns for 2021, including:
• Whether the business entity previously filed an unclaimed property Holder Remit Report with the SCO.
• If so, the date of the most recent report.
• The amount last remitted.
Business entities must include this information on various business tax forms including Form 100 (Corporate Franchise or Income Tax Return), Form 100S (S Corporation Franchise or Income Tax Return), Form 100W (Corporation Franchise or Income Tax Return – Water’s Edge Filers, Form 565 (Partnership Return of Income) and Form 568 (Limited Liability Company Return of Income).
Sharing taxpayers’ unclaimed property filing histories with the SCO will likely lead to an increase in both holder outreach and in enforcement efforts, which includes audits. As a reminder, California does not have a voluntary disclosure program and assesses interest at 12% for late-reported property. Also note the lengthy lookback period in California, which is 10 years plus dormancy (typically 3 years, but 1 year for payroll property).
As states continue to update their unclaimed property laws and to actively enforce them, we recommend a proactive and comprehensive approach to your unclaimed property reporting and compliance. If you need assistance in performing an internal risk assessment, or with preparing or reviewing your company’s policies and procedures surrounding unclaimed property, contact MarketSphere for expert guidance.
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*Content contained in this article is considered accurate as of the publish date.