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7/11/16 11:12 AM

No Coasting through California Bifurcated Reporting

by Greg VerMulm

california-unclaimed-property-law-updates.pngFilers of abandoned and unclaimed property in the state of California have to manage an extra influx of responses from owners as a result of due diligence efforts of both holder companies and the State of California. This task is thought to be a bit more robust and demanding in California than in other states, because California is the only state that still has a dual or bifurcated reporting process—and double due diligence.

As late as the 1980s, many states required this type of double reporting of abandoned and unclaimed property. Holders had to report their unclaimed property, then complete due diligence. Any properties returned to their rightful owners were deducted from the unclaimed property report and a final report was filed, along with appropriate remittances.

Most states moved away from the dual reporting process due to the administrative burden it put on unclaimed property holders. However, after class action lawsuits claimed the California unclaimed property program was being operated unconstitutionally, the state controller put new procedures in place, returning to the bifurcated reporting of previous years.

Unclaimed property holders don’t like it any more than they did before! The system doubles the amount of work they must do to meet statutory rules for unclaimed property reporting, and the extra measure of due diligence done by the state between the two reports can open a holder organization to fraud.

On the other hand, some might say a two-report system improves chances that property owners will be found and reunited with their property.

How does unclaimed property bifurcated reporting work?

California publishes two documents that holders reporting in the state should refer to for rules on dual reporting. One is the actual statute. The other is the state’s Unclaimed Property Holder’s Handbook.

According to these documents, these are the main facts regarding unclaimed property bifurcated reporting in California:

  • Holders must complete their own due diligence steps, according to the California statute, between 180 and 365 days before remitting the Holder Notice Report.
  • The Holder Notice Report (the first of the two required reports) is due each year on October 31 for most holders and by April 30 for life insurance companies.
  • The Holder Notice Report is just as official as the Holder Remit Report and should be accurate and complete, reflecting exactly the holder’s unclaimed property at the time of filing of this report.
  • The first report should contain no remittance of property.
  • The filing of the first report triggers the sending of a reminder letter from the state to holders telling them exactly when their second report is due with remittance. The letter contains a Report ID which is important for communicating with the state about the Holder Notice Report or filing the Holder Remit Report.
  • The state uses the owner contact information and property descriptions in the Holder Notice Report to attempt contact with owners of property valued at $50 or more through the state’s own due diligence efforts. Owners are instructed by the state to contact holders to retrieve their property. Learn more about California due diligence and other processes in this MarketSphere White Paper.
  • Holders can remove from their unclaimed property totals any returned property or amounts represented by re-established relationships with owners.

    Please note: The due diligence requirement (see first bullet) for the next year’s reporting cycle is required to go out before completion of the current cycle’s final remittance. Accounts that were on the Holder Notice Report need to be removed before sending out the next year’s due diligence mailings. This overlap is typically the most challenging aspect of the bifurcated reporting process.

  • The second report, called the Holder Remit Report, is due between June 1 and June 15 for most holders and December 1 and December 15 for life insurance companies.
  • The Holder Remit Report must be accompanied by the proper remittance of all amounts remaining unclaimed at the time of the report.

You can coast through California bifurcated reporting by simply taking the advice above, making sure your unclaimed property staff calendars the dates along with other reporting deadlines, then establishing a process to follow each cycle.

Topics: California