The California Voluntary Compliance Program – Ready, Set…GO?

Signed into law on September 13, 2022, CA AB 2280 authorized the Controller to establish a Voluntary Compliance Program (VCP) and set forth specific conditions for holders to meet to obtain a waiver of the mandatory 12% interest (per year) assessed on past due unclaimed property. Holders eligible for the program will be enrolled at the Controller’s discretion.  The State Controller’s Office (SCO) has recently posted new information about the VCP.

We first posted the VCP requirements, as well as holder eligibility requirements in our previous blog post from Sept. 14, 2022.  As a reminder, holders that are enrolled in the VCP must complete the following to receive the interest waiver:

• Participate in an educational training program provided by the SCO.
• Review of the books and records for at least the past 10 report years.
• Make reasonable efforts to conduct due diligence by mail or electronic mail.
• Report past due property within 6 months of enrollment, unless extended by the SCO (and in any event, no later than 18 months from enrollment).
• Remit the property between 7 months and 7 months and 15 days after the report is received by the SCO.

If a holder fails to meet any of these requirements, the Controller may reinstate the 12% interest. Holders should also take note that there is no waiver of audit for the periods and property types covered under the VCP.

Holders are ineligible for the VCP if they are currently:

• Subject to an unclaimed property examination;
• Subject to civil or criminal investigation; or
• Have unpaid interest assessments from the past 5 years.

Holders interested in participating in the VCP must first complete a VCP Interest Form on the state’s website to receive an application form.  This form requests entity information, reporting history and contact information.

Per the website, once received, the application form (currently unavailable) should include the staff members that will attend the educational training program and submit reports, and the estimated value of the unclaimed property.

It is currently unknown how long it will take to receive an application form once the VCP Interest form is submitted.

Once approved for the VCP, the holder must adhere to the following deadlines (for the upcoming report year):

• July 31, 2023 – Required training completed.
• September 30, 2023 – Due diligence completed.
• Before November 1, 2023 – Notice Report submitted.
• June 1-15, 2024 – Remit Report and remittance submitted.

Holders that are interested in the program but cannot meet the deadlines for the upcoming report year may apply to the program on a rolling basis, with deadlines to be determined.

In addition to the VCP, the legislature also enacted CA AB 466, effective January 1, 2022, which authorizes the Franchise Tax Board (FTC) to share information related to holders’ unclaimed property filing history with the Controller’s Office.  The following questions are now listed on FTB business tax forms:

• Has the entity previously filed an unclaimed property report with the Controller’s Office?
• If so, what was the date of the most recent report?
• What was the amount last remitted?

The enactment of AB 466 and the introduction of the VCP show that the California legislature and SCO are openly focused on unclaimed property compliance and enforcing the unclaimed property law.   However, instituting the VCP and offering holders a way to come into compliance without the 12% mandatory interest assessment on late property suggests CA understands the benefits of a voluntary compliance program especially for holders that have not filed or that have past due property.

The MarketSphere team is available to assist holders understand and navigate California’s VCP program. We encourage you to Contact Us or call 844.357.1099 to discuss any issues or concerns you have.

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