KeepUP™ Blog

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.

If they haven’t already, holders of unclaimed property should be preparing to send due diligence mailings in advance of the Fall 2021 reporting cycle. Statutory due diligence takes the form of written outreach to the owner at the owner’s last known address, according to the holder’s books and records. The letter puts the owner on notice that his or her property will be reported (“escheated”) to the state as unclaimed property if the owner fails to respond within a specified timeframe, after which the holder will no longer be in possession of the property and the owner must file a claim with the state to reclaim his or her funds.

Due diligence value thresholds, the timing of the mailing, the language required in the notice, and even the method of delivery is determined by the states and vary widely, and in some cases even differ by property and/or holder type. In general, first-class mailings are required to be mailed 60 to 120 days before the filing of the report, but again timing and method of delivery vary.   Additionally, the requirements are ever-changing. The states that have recently enacted revised unclaimed property laws based on the 2016 Revised Uniform Unclaimed Property Act (RUUPA) have not uniformly adopted the 60–180 day timeframe or the requirement to send an email communication in addition to the first-class mailing, if the owner consented to electronic communications from the holder.

Accounts receivable credits (A/R credits) are often overlooked when it comes to unclaimed property compliance. This is problematic because A/R credits, if treated incorrectly, can create a substantial amount of unclaimed property, and can become a key focus in unclaimed property audits. Consequently, any effective escheat program should include formal policies and procedures for reviewing and including accounts receivable credits in the reporting process.

Businesses are required to report unclaimed property on an annual basis. States differ as to when particular property types are subject to escheat, the type and timing of the due diligence notices that holders must send to property owners before escheating the property, and how and when the property should be reported to the states. The risks of non-compliance can result in penalty and interest assessments and can subject a company to a lengthy unclaimed property audit. Businesses should conduct regular reviews of their unclaimed property processes to ensure compliance with all state unclaimed property laws.

A holder’s obligations during a typical unclaimed property reporting cycle can be summarized as follows, with each step discussed further below:

▪️ Identify dormant property; collect data and review records

▪️ Analyze and apply applicable state laws;

▪️ Perform state-mandated due diligence;

▪️ Report and remit unclaimed property to the states; and

▪️ Retain supporting documentation.

The following blog originally posted on March 3, 2021 on the UPPO website as part of their Membership Community Blog contribution. MarketSphere is sponsoring UPPO blogs published to their site during the month of March.

Unlike most of the property types in the unclaimed property world, safe deposit boxes are an anomaly because they contain physical, tangible items. As such, handling of safe deposit boxes has a unique set of rules, requirements, and concerns.

There are two scenarios for when a financial institution would likely drill open a safe deposit box: nonpayment and relocation. In either case, state bank laws and the rental agreement between the financial institution and the customer govern how the property should be handled.

Because most consumers are likely to return to the location where they left their physical property, the state where the safe deposit is located – rather than state where the owner lives – dictates the requirements for safe deposit box handling. Familiarity with the specific requirements of the applicable state is essential.

As we find ourselves preparing for Spring reporting (corporations must start the Spring season by submitting reports to Delaware by March 1^st), it is worth highlighting several aspects of the due diligence and reporting processes.

Due Diligence Notices. The due diligence letter is a state mandated requirement that the holder provide notice to the owner before the property is reported and remitted to the state as unclaimed property and is also the holder’s last attempt to establish contact with the owner of dormant property before escheatment.

Method, Timing and Content of the Notice. Typically, a first-class mailing must be sent to the owner 60 to 120 days prior to filing the report, though as is common in unclaimed property, time frames vary state to state. Moreover, certified mail may be required in lieu of, or in addition to, first-class mail (e.g., New York: certified mail for property valued at $1000 or more and for all dividend reinvestment plans). Publication is also required for certain holders in New York, where requirements vary by property type). Many states also provide an exception for mailing to a known bad address, but again, this varies by state.

In states that have adopted a law based on the 2016 Revised Uniform Property Act (“RUUPA”), the time frame for mailing is generally 60-180 days before filing the report, though there are outliers here as well (e.g., Illinois requires notice to be sent 60 days to 1 year prior to the report, and by certified mail for securities valued at $1000 or more, 60 days prior to filing the report). These states have also adopted specific header and language requirements for the notice.

Delaware’s Office of Unclaimed Property (OUP) has updated its payment instructions for wire and ACH payments, in advance of the upcoming March 1, 2021 Spring reporting deadline. 

Vermont recently provided clarification for holders reporting unclaimed property to the state in Spring 2021. Holders should follow the statute currently in effect (§1247 Chapter 14, V.S.A. Title 27), and should not apply the provisions of the Revised Uniform Unclaimed Property Law (House Bill 550, effective January 1, 2021), until the following reporting season.

The guidance provided by the Office of the State Treasurer states the following:

The new RUUPA guidelines will start for January 1, 2021 and next reporting year. That means the current statute applies to this reporting year and should be followed for all reports sent for the spring reporting season.

Reporting Unclaimed Property to Vermont

Per the state's current Unclaimed Property Reporting Manual, holder reports are due to the Treasurer's Office by May 1st of each year. If May 1st falls on a weekend or holiday, reports are due the next business day. As May 1, 2021 is a Saturday, reports for the year ended December 31, 2020 must be received by May 3, 2021.

As the use of blockchain technologies and cryptocurrencies continues to grow, and in the midst of regulators like the SEC and the IRS continued grappling with oversight and enforcement issues, the states are readying themselves to be able to take custody of unclaimed cryptocurrency in its native form. This new functionality, together with the growing popularity of cryptocurrency, merit further consideration, particularly noting the cryptocurrency market is projected to reach $1.5 billion by the end of 2025.

MarketSphere is hosting a Virtual Currency in Unclaimed Property Webinar on February 19 from 1pm - 2pm Central. This webinar will help you understand the basics and current legislative landscape of managing this type of property. Click here to register.  

Virtual currency was first addressed in the 2016 Revised Uniform Unclaimed Property Act (“RUUPA”), a model act promulgated by the Uniform Law Commission as a standard for states to follow when updating their laws. RUUPA defines virtual currency as a “digital representation of value used as a medium of exchange, unit of account, or store of value, which does not have legal tender status recognized by the United States.” Game-related digital content is excluded from this definition.

Several states that have enacted RUUPA-like laws, including Colorado, Illinois, Kentucky, Tennessee, Utah and Vermont, similarly define or adopt the RUUPA definition of virtual currency as a property type that is eligible for escheat. However, neither RUUPA nor any of these states address virtual currency apart from providing a definition. Maine’s law only defines game-related digital content and excludes it from the definition of “property” and thus from escheatment. Even if the state does not specifically provide for virtual currency in its law, each state has a “catchall” provision that includes other miscellaneous intangible property, and the state could argue that this provision encompasses virtual currency.

In today’s digital world, you no longer need to be physically present in a casino, at the poker table, or at the racetrack to place a bet.  In many states, you can now place those bets online or even play daily fantasy sports directly from your mobile device.  

In May 2018, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act, a federal law that had previously prohibited sports betting. Since then, half of the states have legalized or are in the process of legalizing sports betting.  According to the American Gaming Organization, sports betting revenue in 3Q 2020 totaled $352.3 million[1] .

Online gambling includes online casinos, online poker sites, daily fantasy sports (DFS), and sports betting.  Sports betting, in turn, includes online and mobile “sportsbooks.”  To place an online sports bet, you need an online account.  Most states that permit online sports betting allow you to do this on your mobile device, but in certain states, like Nevada, you need to create your account while physically at the casino (and often to make a deposit or withdrawal as well).

As of November 10, 2020, retail and/or online sports betting is permitted in: AR, CO, DC, DE, IA, IL, IN, MI, MS, NV, NH, NM, NJ, NY, MT, OR, PA, RI, and WV.  Sports betting is legal, but not operational in the following states: LA, MD, NC, SD, VA, and WA.  Pending legislation exists in OR and MA.  Sports betting is prohibited in the following states: ID, ND, OK, SC, TX, UT, and WI[2].