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New Pennsylvania and Texas due diligence requirements raise questions

Posted By Administration, Tuesday, February 21, 2017

In recent years, Pennsylvania and Texas enacted new unclaimed property due diligence requirements that affect holders this year. In both cases, the statutes raise several questions for holders required to comply with the new requirements.

 

Pennsylvania

Last year, Pennsylvania amended its unclaimed property law, effective Sept. 12, 2016. Among the changes was the addition of a due diligence requirement. According to draft guidance from the state, the new due diligence requirement applies to all property to be reported on April 15, 2017.  

 

The due diligence requirement specifies that property holders must send a notice to owners between 60 and 120 days before reporting the property to the state treasurer. The requirement applies to any property valued at $50 or more for which the holder has an owner address it believes is valid.

 

Holders are also permitted to provide optional, additional notice any time between the date of last activity by, or communication with, the owner and the escheatment date, under the new requirement.

 

Unless the holder has valid consent from the owner for electronic contact the owner, written notice must be sent by first-class mail. The holder is required to include descriptions of the property and property ownership, value of the property (if known) and information for contacting the holder to avoid escheatment of the property.

 

The due diligence requirement’s language raises several questions for holders. It is unclear whether having valid consent to communicate electronically triggers a requirement that the holder must provide the notice electronically, or if the holder has the option to provide notice either electronically or by first class mail.

 

It is also unclear what constitutes owner consent to receive the due diligence notice electronically. Does the consent have to specifically mention due diligence notices? Does consent apply if the owner agreed to receive only specific types of documents, such as tax forms, electronically?

 

UPPO has raised these questions via comments to Pennsylvania’s treasurer in hopes of receiving clarification for the holder community.

 

Texas

In June 2015, Texas passed H.B. 1454, which includes new due diligence requirements, effective on Sept. 1, 2017. Under the new requirements, if a property owner has designated a “representative for notice,” the holder must mail or email the written notice required upon presumption of abandonment to the representative in addition to mailing the notice to the owner.

 

The requirements specify that, although the designated representative does not have any rights to claim or access the property, the dormancy period will cease if the representative communicates to the holder knowledge of the owner’s location and confirms that the owner has not abandoned the property.

 

Holders are also required, under the new requirements, to include the name and last-known mailing or email address of the representative for notice designated by the holder.

 

As with Pennsylvania’s new requirements, the Texas requirements raise several questions for holders:

  • What types of property are covered? The law specifies mutual funds, deposit accounts and safe deposit boxes, but doesn’t specify whether both open-end and closed-end mutual funds, and IRAs are included?
  • What are the acceptable methods for obtaining representative information? The requirement specifies that the comptroller provides a form that a holder may make available to an owner to designate a representative. However, it does not specify whether this is the only acceptable method for collecting this information.
  • Is there any criteria for being designated as a representative for notice, and does the designated representative have to provide any sort of consent to serving this role?
  • How long does a designation of being a representative for notice last, and are there any requirements for an owner to revoke this designation and/or for a holder to notify Texas of the revocation?
  • If the owner holds multiple accounts with the same holder, is designation of a representative for notice on one account considered applicable to all accounts? Likewise, does a representative response regarding one account automatically reflect interest in all of the owner’s accounts maintained by the holder?

UPPO has raised these questions with Texas officials and will continue to monitor implementation of the new requirements.

 

 

Tags:  due diligence  Pennsylvania  Texas  unclaimed property 

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