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KeepUP™ Blog

10/4/21 10:28 AM

Update: Unclaimed Property Record Retention - What, Why, & How

Record retention refers to how long important information must be retained for future use or reference. Most financial and accounting processes have standards that need to be met because agencies such as the Internal Revenue Service, the Federal Deposit and Insurance Corporation, and the Public Company Accounting Oversight Board all have requirements. You may be familiar with the obligations for these well-known agencies. Do you know what is required for escheat compliance?

Companies generally maintain a schedule or policy for their escheat records that help define what will need to be kept and for how long. This is a worthwhile practice to meet requirements and have supporting documents available if requested or needed in the event of an audit.

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Topics: Compliance, Reporting, Best Practices

9/29/21 8:18 AM

Unclaimed Property Non-Compliance: Penalty & Interest Assessments

Unclaimed 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.

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Topics: Risk, Compliance, Reporting, Best Practices

9/17/21 12:44 PM

Unclaimed Property Compliance: Negative Reports Could Be Required

In any given year, holders may find that they do not have any unclaimed property to report to one or more states.  Does this mean that the holder does not have a reporting obligation to the state(s)?  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, and demonstrates 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. Failure to submit a negative report if one is required by the state 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. 

The examples below help to illustrate the variation in negative reporting requirements across the states:

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Topics: Compliance, Reporting, Best Practices

9/9/21 10:19 AM

Preparing for Fall Unclaimed Property Reporting 2021

Fall unclaimed property reporting season is upon us, and most holders are gearing up to meet many of the states’ October 31/November 1 reporting deadline. It is essential that holders track and monitor state unclaimed property legislation to follow any new requirements, which often lead to changes to the states’ reporting instructions. State websites and holder manuals contain key information related to these changes, as well as the actual mechanics of reporting and remitting unclaimed property. Be sure to review these updates prior to each reporting cycle and refamiliarize yourself with state requirements as these vary from state to state. A high-level review of holders annual compliance reporting obligations are outlined below.

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Topics: Compliance, Reporting, Best Practices

8/24/21 9:13 AM

How to Merge Unclaimed Property with Other Duties

It can be difficult to smoothly add abandoned and unclaimed property management duties to primary business responsibilities. It’s not simply a matter of squeezing in extra work. Escheatment involves spikes of activity rather than steady work—often at inconvenient times of year when other responsibilities are also spiking (notably when tax returns are being prepared). It doesn’t help that personnel often do not have needed expertise. 

Some of the spikes in work can be managed by cross-training staff to pitch in when needed. Working with outside unclaimed property specialists can help, not only with the extra work of reporting cycles, but also by providing deeper expertise than it’s possible for in-house staff to acquire. This blog will define the challenges of merging unclaimed property work with other duties and provide advice for overcoming the challenges. 

Getting Perspective on Unclaimed Property Workflow Issues 

Year end, quarter end and month end are all peak times for accounting and finance staff in general. Most of the state’s unclaimed property reporting deadlines fall within the same timeframes. For tax professionals, half of the spring unclaimed property season falls exactly into peak tax season. 

On the other hand, unclaimed property management really has to be a year-round endeavor to ensure all supporting records are in place and a plan is followed for accurate reporting. You also need time to lay the groundwork for successfully meeting the challenges of unclaimed property audits. 

Here’s what often happens: Accounting or finance professionals find themselves busy with other duties, then unclaimed property hits their radar and they realize they haven’t completed due diligence requirements—maybe even haven’t done due diligence (pun intended) on what those requirements are! They have to scramble to meet the deadlines, often taking shortcuts resulting in under-reporting or over-reporting the unclaimed property they hold. 

The truth is, when peak reporting time rolls around for unclaimed property, it is an intense effort that leaves little time for other duties.

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Topics: Compliance, Due Diligence, Reporting, Best Practices, Staffing

8/16/21 9:29 AM

Unclaimed Property Due Diligence: The Move Toward Electronic Delivery

Statutory due diligence is required by most states as the final attempt by the holder to reunite the owner with his or her dormant funds before the holder is required by law to report such funds to the state as unclaimed property. Due diligence timeframes, dollar thresholds and methods of delivery vary by state and/or property type. The Revised Uniform Unclaimed Property Act (RUUPA) was introduced by the Uniform Law Commission in 2016 as a model act for the states to utilize when updating their unclaimed property laws. Section 501(b) of the RUUPA contains language that requires holder to send a due diligence notice to the owner via electronic mail as well as by first-class mail, 60 to 180 days before the report date, if the owner has consented to receive electronic mail delivery from the holder.

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Topics: Compliance, Due Diligence, Best Practices

7/30/21 9:36 AM

Unclaimed Property Enforcement Update: Delaware and Elsewhere

Updates to the Delaware VDA Program and to Audits in Delaware per

DE SB 104

Delaware Senate Bill 104, effective on August 1, 2021 (though some provisions will apply retroactively) significantly modifies the enforcement scheme in Delaware.

  • VDA invitation response time increased. The timing for holders to respond to a VDA invitation is increased from 60 to 90 days. Holders who receive an invitation may choose to either enter the VDA program or request to enter the expedited audit program (see below). As a reminder, a holder who does not enter the VDA program or the expedited audit program will be referred to the State Escheator for a full audit.
  • Permanent expedited audit program.   Entry into the expedited audit program may be granted or denied at the discretion of the State Escheator, who must respond to a holder’s request to enter the expedited audit program within 60 days.
     
    • Holders are eligible to request an expedited audit for:

      • New audits authorized after August 1, 2021
      • Current audits authorized after February 2, 2017, and before August 1, 2021
      • VDA invitations received as of August 1, 2021
    • If the holder provides “sufficient responses” to the auditor’s requests, an audit report will be provided by Delaware to the holder within 2 years of the date of the acceptance into the expedited audit program.
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Topics: Delaware, Best Practices, Voluntary Disclosure Agreements

7/14/21 8:48 AM

Unclaimed Property Legislative Alert: A Deep Dive Into DE SB 104

Delaware incorporated or domiciled entities should be cognizant of a newly enacted Delaware unclaimed property statute that may significantly impact their unclaimed property situations.

Delaware SB 104, enacted on June 30, 2021, has an effective date of August 1, 2021, though specific provisions related to claims, audits, and pending litigation as of the effective date will apply retroactively. Though the intent of the bill is to provide clarification for holders, confirm current examination practices, and address recent litigation, some of the provisions appear to expand the state’s enforcement capabilities, while others contract the protections afforded to holders under the current law.

A summary of the relevant changes made to the Delaware unclaimed property law as a result of DE S 104 follows:

  • Revised VDA and Audit Provisions
    • Response Time to VDA Invite Extended. The timing to respond to a VDA invitation is increased from 60 to 90 days. Holders who receive an invitation may enter the VDA program or request to enter the expedited audit program (see below).
    • Audit Records Scope. The State Escheator can examine the records of the holder or a subsidiary or affiliate of the holder to verify the completeness and accuracy of the records, even if the records may not identify property reportable to Delaware. The state is under no obligation to provide a reason or justification for the examination of records, other than that it relates to determining compliance.
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Topics: Delaware, Compliance, Audit, Best Practices

7/9/21 10:02 AM

Unclaimed Property Bills Related to Virtual Currency Continue To Pass

DE S 103, which was signed into law on June 30, 2021, and becomes effective on August 1, 2021, is the latest bill to define virtual currency and include it in the definition of “property” as a property type eligible for escheat. Virtual currency is presumed abandoned 5 years after the owner’s last indication of interest and holders must liquidate it within 90 days of filing an unclaimed property report and remit the proceeds to the administrator. As we have seen in similar bills pending in the unclaimed property space, owners have no recourse against the holder or the state for any gains in value post liquidation.

As the use and popularity of virtual currencies rise and become accepted, the states are similarly stepping up their legislation to bring virtual currency within the scope of escheatable property by introducing bills like DE S 103. States are also looking to the holder to liquidate the virtual currency as they are presently unable to take custody of cryptocurrencies in their native form.

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Topics: Delaware, Compliance, Reporting, Best Practices

6/28/21 9:23 AM

Mortality Searches - Worth It For All Holders In The Unclaimed Property Space

Successful unclaimed property compliance programs undertake multi-faceted approaches to find owners of unclaimed funds that may include proactive searches of life status along with other outreach programs. Insurance companies, financial institutions and other holders must follow not only industry specific laws and regulations (such as SEC Rule 17-Ad-17), but they must also actively monitor and comply with the ever-changing unclaimed property laws. A proactive search and review of the life status of owners and beneficiaries will preserve accounts from the escheatment process, thereby decreasing the reputational risk to the holder and the cost of escheatment, while increasing customer goodwill and potentially driving new business.

While there are no statutory requirements that force holders of banking or securities property to determine whether an owner is deceased, death can be a factor in triggering escheatment for some property types. For example, death is a trigger for ROTH IRAs in most states, and in some states, such as Illinois and Vermont, dormancy periods are accelerated for deceased owners of certain property types. In the states that have adopted a version of the 2016 Uniform Unclaimed Property Act (RUUPA), holders of IRAs, custodial accounts and securities must confirm death within 90 days from the receipt of notice or indication of death.

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Topics: Compliance, Due Diligence, Best Practices