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6/9/16 10:00 AM

Why Some Unclaimed Property Legislation Doesn’t Pass

by Greg VerMulm

why-some-unclaimed-property-laws-dont-pass.pngRegardless of the landscape-changing unclaimed property legislation that has been passed in the last couple of years in many states, certain legislative bills related to unclaimed property are not passing, which is a bit of a surprise. What exactly is going on?

Are legislatures pushing too far with enforcement? Are the courts getting involved? Are technicalities getting in the way? Most importantly, is this situation a reflection of the overall state of unclaimed property in any way?

What Types of Unclaimed Property Bills ARE Passing?

Before we examine what’s not passing, it’s important to understand what IS passing. Recently validated unclaimed property legislation includes bills related to:

  • Changes in dormancy periods
  • Inclusion of new property types
  • New statutes focused on life insurance and annuities
  • New statutes related to savings bonds
  • Creation of Voluntary Disclosure Agreement (VDA) protocols
  • Removal of contingency fee auditors

It could be said that much of this new legislation involves changes that benefit the states (and the constituents they represent). However, some new abandoned and unclaimed property laws favor holders.

It is becoming increasingly difficult for states to pass laws solely benefiting them. Abandoned and unclaimed property has moved into the limelight, and consumers and businesses are becoming educated about their rights and the way property moves to the custody of the states.

Why Some Unclaimed Property Laws Aren’t Passing

Although MarketSphere is not currently directly involved in lobbying for or against bills in any jurisdiction, it wouldn’t surprise us to learn that many of the non-passing bills are rejected by legislatures because of increased involvement by holders. Initially, increased holder involvement might simply have been due to an associated increase in the volume of unclaimed property audits.

As audit issues arose—in part, maybe due to the fact that third-party contingent auditors became more aggressive—holders had to educate themselves about unclaimed property in general and some decided to fight back by making their wishes known and lobbying for legislation to protect them, as well as lobbying against legislation they believed allowed unfair assessments.

Holders are fighting statutes they believe are imposing an unfair burden on them to provide an inordinate number of owner records, for example, or follow detailed protocols that require a disproportionate amount of time to manage, cost too much, or potentially cause the rejection of reports based on technicalities. The battle is being waged both through lobbying…and through lawsuits when holders believe a state or third-party auditor has crossed a line.

When proposed legislation is pro-holder, failure of a bill could be related to issues not really part of the unclaimed property elements of a bill: for example, political circumstances or potentially unfavorable monetary impacts upon the state in which the legislation is being proposed.

Going Forward: Advice for Unclaimed Property Holders on Legislation

In some cases, proposed legislation is good for holders. In other cases, it’s not good for holders. In addition to hinging on potential advantages or burdens on holders, the success of any unclaimed property legislation and holders’ interest in it can depend on the type of property within a specific industry or a company’s current state of compliance.

To continue honing legislation that is fair to holders as well as states and the property owners they represent, it’s advisable for holders to stay abreast of legislative changes, assess potential impact to specific properties, and then communicate opinions and ideas to legislators. This is often done through industry and trade groups who lobby on behalf of holders as a group.

Keeping up with legislation and understanding impact can be time consuming and complicated. Ask the unclaimed property specialists at MarketSphere about compliance services that include monitoring statutes applicable to your business.

Topics: U.P. Law