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.
As with all things in the unclaimed property world, the best advice is to check with the states regarding the need to file negative reports, and to understand the nuances of each state’s requirements.
Furthermore, Delaware has additional factors that should be considered with respect to negative reporting:
- We have noted an additional focus by the Delaware Department of Finance to confirm the validity of negative reports filed by companies that have completed the Delaware Secretary of State’s Voluntary Disclosure Agreement (SOS VDA) program. While Delaware does not require negative reports, many companies submit negative reports to demonstrate their ongoing compliance and to conform with provisions of the SOS VDA program.
- In addition, Delaware statute now allows the state to perform a compliance review of any holder that it believes may have filed an “inaccurate, incomplete or false report”. For those holders that file negative reports with Delaware, ensuring that a negative report is accurate is paramount as additional state scrutiny may occur.
States that require negative reporting generally have specific forms or procedures that must be completed to meet the negative filing requirements, and these can vary substantially by state. For example, states may require holders to submit a paper report indicating that there are no properties to file, or it may be as simple as checking a box on an online submission form. Regardless, follow the instructions of each individual state.
As a best practice, holders should have a consistent filing protocol. If you regularly report to a particular jurisdiction and have no property due in a given year, it is best to submit a negative report where it is either required or accepted.
If you have questions about negative reporting or unclaimed property compliance in general, contact a professional advisor who can provide expert guidance for all of your escheat needs.
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