10 Things You Need to Know About Unclaimed Property

Posted by Susan SabatinicloseAuthor: Susan Sabatini Name: Susan Sabatini
Email: susan.sabatini@redmoonsolutions.com
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About: Susan Sabatini is the Client Services Manager at Red Moon Solutions. She uses her project management experience and a client focus to ensure Red Moon Solutions’ clients have successful implementations. Susan also leads our client support team.See Authors Posts (9) on Nov 30, 2011 | 2 comments

If I rated the sessions I attended at the Chicago Tax Club’s recent Fall Seminar, I would have to say the most fascinating (bet you don’t often hear that word to describe a tax session!) was SOX Controls Issues & Much More, a panel discussion led by Michael Giannettino of PwC, Matthew Chenowth of True Partners Consulting and Robert Peters of Duff & Phelps.  I picked this session to attend since our Tax Calendar product supports all of the state due dates for Unclaimed Property (UP) filings, and l wanted to learn more about the topic.  I was not disappointed, as the three panelists shared their insight into why unclaimed property has become such a big issue for corporate tax departments.

Below are 10 things I think you should know about unclaimed property after attending this session:

1. Originally UP was written for insurance companies, banks, and brokerage houses where unclaimed dividends and insurance proceeds were becoming the property of the original issuer.  Now the audits have focused on uncashed payroll checks, unclaimed gift cards or items sent to a company but never invoiced.

2. Most companies are not dealing with unclaimed property correctly.

3. Delaware is the most aggressive state in pursuing unclaimed property.  UP constitutes 1/3 of Delaware’s state budget.  States are using UP as a revenue raiser rather than acting as administrators of the property.

4. States are reducing dormancy periods, the period you can hold the funds before remitting to the state, in an effort to get more money into the state sooner.

5. Most states have voluntary disclosure for companies that want to comply but may have been negligent in prior years.  For those, the state may forego interest and penalties and only look back 10 years.  A few other states may forego the interest and penalties with voluntary disclosure, but limit the time they grant you to compile the information.

6. States are hiring outside audit firms that may be very aggressive in the amount and timing of the information they are requiring from you.  The audit firms are sophisticated, thorough, and capable, and they could be banking on the probability that you can’t provide the info they are asking for.

7. If you are in an acquisition or merger, you will want to look at the rules of unclaimed property beforehand.  You may be bound to the historical liability depending upon whether the merger or acquisition is a stock or asset transaction.

8. Holders of unclaimed property do not have to track property owners down.  It is only necessary that they try to make contact through the last address they have.  Companies should keep the documentation regarding property owner location for all prior years.

9. Gift card rules by state are as different as the states.  Virginia has liberal rules and New York, not so liberal.

10. Insist on a closing agreement in an audit or voluntary disclosure.  Know what is and isn’t covered by the agreement and save the document.  You may need it again in the future.

If I get the chance to attend next year’s Chicago Tax Club Seminar, I will definitely attend the Unclaimed Property sessions.  As the presenters pointed out, in prior years they have had a small following, but as time goes by they are getting a larger and larger following.  This session was almost a full house.

Are you dealing with unclaimed property issues in your tax department?  What is causing you the most problems?  Let us know in the comments below.

Photo courtesy of Oregon.gov