KeepUP™ Blog

Unclaimed property professional David Phipps joins MarketSphere Unclaimed Property Specialists as senior manager of corporate asset recovery, bringing with him over 20+ years of experience working on both sides of the table, and now focusing on reuniting corporations with unclaimed funds owed to them.

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.

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

Each year in the United States, billions of dollars are escheated to the states. Nationwide, the total value of escheated properties in state custody may well exceed $40- $50 billion. However, even more unclaimed property sits dormant at government agencies, counties, municipalities, courts and other local agencies that will never be reported to the states as unclaimed property. 

Before an item is reported to the states as unclaimed property, outreach in the form of statutorily mandated due diligence letters must be mailed to the last known address of the owner.  However, property held by counties, municipalities, or courts may not be subject to state unclaimed property laws. In these instances, no communication to the owner is required. However, companies may receive letters indicating they are the owners of funds being held by these entities (an “Asset Recovery” letter.) Asset Recovery letters are typically sent by third party firms attempting to help your organization recover monies you did not know you were owed.   

So how does an organization distinguish between a statutorily required due diligence letter and an asset recovery letter?

Amounts owed to you (unclaimed property) can go unclaimed for a myriad of reasons.  Your company could have moved locations.  They could 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 in to 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 will never be escheated) until you or your organization come forward. 

Whether your unclaimed property is held by a state unclaimed property department or government entity, it is important to know there are two ways to get your property; search and claim it yourself or utilize a Third-Party Recovery Firm.

A Third-Party Recovery Firm is a company who assists owners in the identification and recovery of unclaimed property.  For the most part, Third-Party Recovery Firms will contact your organization about funds they have located.  If you or your organization has decided to utilize a third-party to recover unclaimed property it is important to consider the following checklist:

Unclaimed property holders know the importance of staying up to date on legislative changes, keeping apprised of issues that could impact their compliance process and learning tips that can help them improve and maintain a successful escheat program. Every month we strive to deliver information that can help holders achieve their goals. In case you missed them, here is a rundown of articles we posted in Q2 2018.

• Corporate Asset Recovery – Tax Refunds. Government agencies of all sizes, from municipalities to even the federal level, are holding significant refunds owed to companies. Learn why these funds may be available and how to recover them.
• Financial Services: Unclaimed Property Compliance Beyond Securities. There are additional unique challenges facing the financial services industry beyond securities. The impact of unclaimed property issues on the financial services industry difficult to assess. Get started by answering two basic questions: how well do you know your organization, and how well do you know your clients?
• Modern Communication in Unclaimed Property Due Diligence. Guidelines for both contact and due diligence were primarily created before modern communication formats like email and online accounts became prevalent, making it somewhat difficult to discern whether an owner has met the statutory requirements for indicating an interest in the property.  Learn how these definitions are beginning to evolve.

It is not well known, but government agencies of all sizes, from municipalities to even the federal level, are holding significant refunds owed to companies. These are not escheated funds held in a state unclaimed property database, but rather financial liabilities owed directly to companies by a government agency. This information is often not made available via public websites and can be difficult to obtain.

Most of these unclaimed funds relate to outstanding tax refunds caused by duplicate payments, over-payments, and reassessments. By our estimate, there are billions of dollars of outstanding tax refunds being held by government agencies.

Why Is This a Problem?

A common reason these refunds go unclaimed is due to relationships with third parties. While companies trust third parties to ensure complete, timely, and accurate tax filings, any related refunds that could be obtained are often just an afterthought. Below are three common scenarios which lead to tax refunds going unclaimed:

1. You may not believe you are owed a refund because it never was sent to your company. Often tax refunds are mailed to the third party that assisted with the filing. They may not have been expecting the refund, did not know what it related to, or simply forgot to forward it along to the company that was rightfully owed the funds.