Many states impose a November 1 deadline for filing reports of unclaimed property. With the deadline approaching, companies should evaluate whether they:
- Own reportable property
- Are current with state reporting requirements
What Is Unclaimed Property?
Every state has an unclaimed (sometimes known as escheat) property program that requires businesses to report abandoned property they hold but don’t own. Businesses in possession of unclaimed property also must make reasonable efforts, known as due diligence, to contact the owner and return the property, according to unclaimed property programs. If the business can’t find the owner, the business must remit the property to the state. The business isn’t allowed to retain unclaimed property.
Unclaimed property generally includes interests in intangible personal property such as:
- Dormant savings or checking accounts
- Life insurance policies and annuities
- Uncashed checks for dividends
- Insurance proceeds
Some states also treat unused gift certificates as unclaimed property. Property may also include tangible personal property such as contents of safe deposit boxes. These types of property generally become “unclaimed” and subject to state reporting requirements after a specified period, also known as a dormancy period, which is generally two, three, or five years.
Are You Required to File in More Than One State?
If the business can’t find the owner and the dormancy period has passed, the property must be remitted to the state. The property may be required to be reported to one of the below:
- The last known address of the owner
- The property holder’s state of domicile
- The state where the transaction took place
Determining the proper state can be complicated and involves analyzing a cascading set of rules. If the rules aren’t followed properly, or conditions for reporting aren’t met, then penalties can be imposed even if the property was remitted.
Can a State Impose Penalties on the Business for Not Reporting?
Generally, states impose penalties on businesses failing to report or deliver property.
In Washington, for example, the penalty is $100 per day with a maximum of $5,000 and a civil penalty of 100 percent of the property value. In Idaho, the penalty is 5 percent of the property value. In Arizona, the penalty is $100 per day with a maximum of $5,000 and a civil penalty of 25 percent of the property value.
Some states also impose interest for failing to report or deliver property. Most states allow unclaimed property audits to include at least 10 and even 20 years; however, audit demands can be difficult and expensive for a business to comply with and contest because records may be missing or incomplete for these older periods.
Many states do offer voluntary disclosure or amnesty programs that may allow a business to come forward and remit previously unreported property.
Review your books and records to identify any unclaimed property you may hold. If reportable this year, determine:
- Whether due diligence letters need to be sent to owner
- Which states will require you to report
Also review unclaimed properties you hold from prior years. Consider entering into voluntary disclosure agreements or reporting under amnesty.
Advantages of Entering into an Amnesty or Voluntary Disclosure Program
These programs allow you to:
- Clear out any outstanding credit memos and uncashed payroll checks
- Reduce your risk of being assessed large penalties on outstanding unclaimed property filings
- Avoid time-consuming due diligence requirements in the event of a transaction
- Start the next reporting period fresh
- Please your customers or clients by returning property or accounting for it properly
We're Here to Help
Unclaimed property laws are complex, and identifying the states that require reports isn’t straightforward. We can assist your company in determining whether it has property subject to the unclaimed property laws. If you do have unclaimed property, we can help you identify state filing requirements, enter into amnesty programs or other states’ voluntary disclosure programs, or file your company annual reports.
For more information about unclaimed property, or to understand the implications for your business, contact your Moss Adams professional or:
Shannon Wright, Manager
Marke Greene, Partner