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5/28/20 10:02 AM

April 2020: Vermont Adopts The Revised Uniform Unclaimed Property Act

On April 29, 2020 Vermont joined the growing group of states that has adopted RUUPA, when the governor signed HB 550, an act relating to unclaimed property (“Act”) into law.  The Act is effective January 1, 2021.

The Act updates Vermont’s current unclaimed property law, and it is largely based on the revised model act produced by the Uniform Law Commission (ULC) in 2016. This act repeals Title 27, chapter 14 (Vermont’s current unclaimed property law) and replaces it with a new chapter 18.

The highlights of the new legislation include expanding record retention requirements, adjusting due diligence requirements, allowing use of extrapolation and statistical sampling for the failure to retain records and providing a transitional provision.

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Topics: Compliance, ULC, Reporting, Best Practices, Vermont

5/5/20 10:22 AM

Recovering Unclaimed Property During Covid-19

Each year in the United States, billions of dollars are escheated to state governments as unclaimed property.  The total value of escheated properties in state unclaimed property custody may well exceed $50 billion, with less than 50% likely ever to be reunited with the rightful owner. Even more unclaimed property sits dormant at other government agencies, counties, and municipalities.

There are many factors that can contribute to the possibility that amounts owed to your organization are lost. Examples include: a company may have moved locations, changed their process or contact point for payment receipt, have a history of mergers/acquisitions, name changes, extensive business-to-business dealings, or a check could have been 'lost' in the mail.

It is important to note that unclaimed property can be funds held by a state/jurisdiction resulting from statutory escheat requirements or they can be outstanding balances held by a government entity that will never be escheated.

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Topics: Best Practices, Corporate Asset Recovery

1/28/20 9:55 AM

Unclaimed Property Negative Reports

In any given year, it is not uncommon for a holder to have no unclaimed property to report to one or more states.  Does this mean you have no reporting obligation?  Not necessarily.  Some states still require that you file a “negative” report.  This negative report indicates to the state that the holder has no property to report for the given report year, while demonstrating ongoing compliance with the state’s unclaimed property requirements.

The states are split on the matter of negative reports, so it is important to check with the state(s) in question before filing.  Approximately half the states require negative reports to be submitted.  In these states, failing to submit even a negative report will cause the holder to be considered out of compliance.  Other states do not require negative reports but will accept them if they are filed., and a handful of states do not accept negative reports at all. 

A few examples can illustrate the variation in negative reporting requirements across the states:

  • Nevada requires negative reporting for three years after the submission of a positive report. After that, negative reports are not accepted.
  • In California, if a notice report is negative, a negative remittance report should not be filed. However, if the notice report is positive, a negative remittance report should be filed.
  • Connecticut requires a negative report only if the holder is domiciled in Connecticut.
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Topics: Compliance, Reporting, Best Practices

11/21/19 9:20 AM

Unclaimed Property Inactivity Mailing

Customer relationships are the foundation of a company’s success, but if customer assets are escheated to the states as unclaimed property, those relationships could be at risk.  Studies by Bain & Company show that acquiring a new customer can cost five times more than retaining an existing customer and increasing customer retention by 5% can significantly increase a company’s profits.

Millions of dollars are escheated annually. This results in angry customers and lost profits, especially when it is their retirement or savings account. It is therefore important to understand the steps a company can take to reduce the risk of escheatment and increase its’ customer retention rate.

Escheatment occurs when accounts are deemed dormant, which occurs when there has been no “owner-generated” activity on the account for a specified period of time (the dormancy period). If the account owner does not affirmatively act to remove the dormant status of an account, by law, the account must be escheated to the state of the owner’s address once the dormancy period for that type of property has expired. Generally speaking, dormancy periods range from 3 to 5 years.

A 3-year dormancy period may seem like sufficient time in which to reestablish contact with an account owner. However, the time-frame for action is actually shorter, as companies generally do not begin to initiate proactive communication with dormant account owners until the account has been inactive for at least 24 months. Leaving the account inactive until the performance of statutory due diligence (which occurs between 2 and 12 months before escheatment), generally results in up to 80% of those accounts being escheated.

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Topics: Due Diligence, Best Practices

11/12/19 9:35 AM

Consolidated Unclaimed Property Reporting

As a holder advocate, one of the most frequent questions we receive is whether a company with multiple subsidiaries and entities under its corporate umbrella can file consolidated unclaimed property reports.  The unclaimed property compliance environment is complex, frustrating, and demanding for corporate America, and complex organizational structures don’t make it any easier to navigate.  Conducting unclaimed property filings on a consolidated basis can create efficiencies for many holders.  However, a number of factors should be considered when determining the right approach for your particular organization. 

Consolidated unclaimed property filings are similar to other consolidated financial filings such as income tax filings and financial statements.  Consolidated unclaimed property filings consist of one report sent to each state or filing jurisdiction, usually by a parent company, on behalf of multiple subsidiaries.  This single report contains all property that would have been reported if separate reports had been prepared for each individual entity.

 

Consolidated reporting simplifies and streamlines the reporting process and tends to be more cost effective regardless of whether the filing process is managed internally or outsourced.   It is particularly beneficial for companies with a substantial number of subsidiaries that would otherwise consistently file zero or negative reports due to limited or no unclaimed property activity.  It may also be the simplest approach for companies who already consolidate financials or are running a common paymaster across its various entities. 

While there are  benefits of a simplified process, there are several factors to consider before deciding to file consolidated unclaimed property reports.

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Topics: Compliance, Reporting, Best Practices

10/8/19 8:23 AM

Unclaimed Property Audit - Are You At Risk?

This blog was originally created at the request of the Association for Financial Professionals (AFP) organization and posted to their website in August 2019 in a series dedicated to the education of its’ members and attendees of the 2019 AFP Annual Conference in Boston, Oct, 20-23.

The likelihood of an unclaimed property audit has increased in recent years due to several factors, including the proliferation of third-party auditors, realization by states that significant amounts are involved, and the escalation of unclaimed property litigation. Escheat compliance is no longer optional and being audited is not a matter of if, but when.

Situations and events that may bring an auditor to your door include:

  • Failure to file or filing late
  • Filing negative reports year after year
  • Filing incomplete reports or reports that don’t match remittance
  • Not filing in the state’s required format
  • Not reporting property types that are standard for your industry
  • Reporting much less than similar organizations
  • Filing to the incorrect state
  • Mergers and acquisitions
  • Claiming property without being compliant
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Topics: Compliance, Reporting, Audit, Best Practices

9/19/19 8:27 AM

Electronic Payments and Unclaimed Property

In today’s business world, companies are using more and more electronic payments to pay what they owe instead of using paper checks.  The widespread use of direct deposits, wires and ACH’s came about because they are quicker, easier, and have a much lower chance of becoming an unresolved liability (than an uncashed check), because the amounts are being deposited directly into accounts provided by the payees.

Using electronic payments lessens the possibility for the creation of unclaimed property as these payments types rarely fail.  However, when they do fail, it is important that the payor identify and research the reason for the failure and correct any errors to ensure the obligation is paid and does not go unresolved.

As electronic payments rarely fail, they are not high on the list of potential unclaimed property types that companies might focus on.  Unfortunately, unclaimed property auditors are beginning to highlight these payment types focusing on rejections and bounce backs to see how the related obligations are satisfied.

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Topics: Compliance, Audit, Best Practices

8/30/19 7:56 AM

Cryptocurrency & Digital Assets: Unclaimed Property Challenges and Implications

Over the last several years the use of block-chain technologies and their associated cryptocurrencies have grown tremendously. As with many new areas of commerce, growth is usually followed by an onslaught of challenges brought on as governments and regulatory agencies try to decide how to adapt to or fit this new square peg into the round hole of already established laws and regulations.

In the world of unclaimed property, cryptocurrency is just now being recognized in various new statutes and proposed legislation.  Many states, including IL, KY, NV, TN and UT, have adopted some form of the 2016 Revised Uniform Unclaimed Property Act, which includes “virtual currency” in the legislative definition of “property”.  In addition, NY has recently introduced legislation calling for unclaimed cryptocurrency to be escheated to the state upon abandonment.

Whether you are a company that has emerged as a part of the support system to the cryptocurrency world (e.g., coin exchanges) or simply a company that has begun to accept Bitcoin or other similar cryptocurrencies as payment, it will be important that you are prepared for these challenges and are proactively addressing potential issues that can emerge. One often overlooked area for consideration, is the impact of the various states’ unclaimed property laws and regulations.

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Topics: Compliance, Reporting, Best Practices, U.P. Law

8/7/19 9:24 AM

Is Your Company In Danger of Forfeiting Unclaimed Funds?

Unclaimed property compliance is a year-round activity.  But so is unclaimed property recovery. 

Amounts owed to you (unclaimed property) can go unclaimed for a myriad of reasons.  A company could have moved locations.  They may have changed their process or contact point for payment receipt.  A check could literally be lost in the mail.  Once those items are lost and go unreconciled, they turn into unclaimed property. Unclaimed property can be funds held by a state/jurisdiction resulting from statutory escheat requirements or they can be outstanding balances held by a government entity (that may never be escheated) until you or your organization come forward. 

State unclaimed property departments are holding billions of dollars, some of which can be found by going to state websites.  Other government entities, from municipalities to federal agencies, are also holding significant amounts owed to companies. However, this information is often not made available via public websites and can be difficult to obtain.

Deadlines Could Be Imposed for Recovery
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Topics: Best Practices, Corporate Asset Recovery

6/20/19 9:14 AM

Are You Over-Escheating Your Unclaimed Property?

State enforcement of unclaimed property compliance continues to rise.  States are auditing more companies than ever in order to validate that unclaimed property is being reported accurately and completely.  To prevent an audit, many holders over-report property, escheating items that are not actually unclaimed property, or may not be reportable to the states. However, this practice could cause red flags.

The two most common transaction types that are not considered to be unclaimed property are accounting errors and exclusions/exemptions.

Accounting Errors

Accounting errors are not unclaimed property.  Unfortunately, errors in accounting systems do occur that cause items to appear to be outstanding or unresolved, when in fact they are not. This leads to the potential for over-reporting.  Examples of accounting errors include:

  • duplicate payments
  • voids that were never processed
  • misapplied payments.

Prior to reporting, research should be performed to identify and correct accounting errors and avoid over-reporting.   

Exclusions/Exemptions

Many state statutes include provisions that exclude certain transactions from the definition of unclaimed property, or specifically exempt the property from reporting.  An example of a state exclusion appears in the Kansas unclaimed property law, whereby:

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Topics: Compliance, California, Reporting, Recordkeeping, Best Practices