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9/17/21 12:44 PM

Unclaimed Property Compliance: Negative Reports Could Be Required

by Jen Duran and Heather Gabell

challenges-of-unclaimed-property-softwareIn 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:

• Nevada requires negative reports for holders incorporated or licensed to conduct business there. Out of state holders who file a one-time only report in Nevada are no longer required to file three consecutive years of negative reports.

• 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.

• Idaho requires a negative report only if the holder is incorporated or domiciled in Idaho.

• In Illinois, effective August 2021, negative reports are required if the holder has: 1) annual sales over $1 million; 2) publicly traded securities; 3) a net worth of over $10 million; or 4) over 100 employees.

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 is permitted to perform an examination of the holder, or any of its subsidiaries or affiliates, for any reason, in order to determine compliance with the unclaimed property law. For those holders that file negative reports with Delaware, ensuring that a negative report is accurate is paramount as additional state scrutiny may occur.

It is important to follow each state's instructions where negative reports are required to ensure that all negative report requirements are met. Note that many states will only accept negative reports filed via their website.

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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*Content contained in this article is considered accurate as of the publish date.

Topics: Compliance, Reporting, Best Practices