For those of us working in unclaimed property reporting, we all know the importance of accuracy. If you miss a filing deadline or fail to include all applicable critical information on the report, then you might be facing an audit, penalties or (in some states) misdemeanor charges.

UPPO is committed to providing the most timely, accurate information for unclaimed property holders, helping you take the guesswork out of reporting and making it easier for you to comply with all relevant state laws and deadlines.

Here are the five common reporting errors that holders make, along with advice on how to mitigate those errors. More information on unclaimed property reporting is available at UPPO.org.

1) Reporting and remitting unclaimed property to the wrong jurisdiction

With 54 U.S. reporting jurisdictions and a patchwork of different laws and deadlines, it is not always easy to determine the proper state or territory for reporting and remitting unclaimed property.

There are three considerations when trying to ascertain the appropriate jurisdiction for reporting:

• State of the owner’s last known address
• State of the holder’s incorporation or domicile, if the owner’s address is not known
• State of holder’s incorporation or domicile if the address of the apparent owner is in a foreign country AND if the holder is incorporated or domiciled in the U.S.

Depending on the state law, holders may be obligated to report unclaimed property in all jurisdictions that apply, using the criteria listed above. Check your state’s reporting guidelines to be certain.

2) Failing to include all relevant property types, including liabilities that may be held by a third-party agent

Unclaimed property is a wide-ranging "umbrella” term and can include many different types of tangible and intangible personal property. Property types include, but are not limited to:

If you outsource certain payment functions to a third party (TPA); such as a Transfer Agent (to manage securities, dividend payments, proxies); payroll functions, rebates, etc…it is critical that the contract specifically spells out the responsibility for unclaimed property responsibilities. If the responsibility is assigned to the contractor, it is important to periodically test for compliance and insist on obtaining copies of the reports that have been filed on your behalf. At the end of the day, while you may be outsourcing the "function”, ensuring compliance is your responsibility. Should your company change TPAs or the TPA cease doing business or merge with another company you could be at risk of losing critical data that will ultimately be needed to further confirm that your company is in compliance.

3) Failure to properly address and consider successor liability

Holders may be successors that assume the liability for property created by prior companies. Corporations that grow through acquisitions often have liability for unclaimed property that originated with their acquired businesses. These acquired businesses probably did not file unclaimed property reports for all categories of property, but the states assert that any unclaimed property obligations would likely shift from the successor business. The successor may be successful in showing that it acquired only certain assets and not the stock, but if the acquisition was by purchase or exchange of stock, then the state will assert the corporation is responsible for all liabilities including the unclaimed property.

Sorting out successor liability can be difficult, and staff and outside counsel will need sufficient time to research the facts and law that apply to each corporate merger or acquisition. These problems can be reduced if unclaimed property issues are first considered during the consolidation phase. Again, a suggested best practice is to request copies of the various unclaimed property reports that were filed by the acquired company prior to or in conjunction with the transition.

4) Filing your report "off cycle” (i.e., with an incorrect due date)

Annual reports are due to most states in the fall, with some state laws requiring a spring reporting period as well. The majority of the states outline due diligence requirements to be performed no less than 90 days and no more than 120 days prior to the reporting deadline. Depending on the property type and the state’s individual guidelines, some states may require notifications to be made by certified mail and/or advertising.

There are many unique differences and requirements among states. Reporting property too early, with an incorrect report cycle or due date, or failure to comply with other elements of a state unclaimed property statute can result in fines and/or interest being assessed to the holder. States such as Texas and Michigan recently modified their reporting due dates to July 1 of each year. Check state reporting guidelines to ensure compliance with individual filing schedules and deadlines.

5) Failure to update systems and processes to incorporate changes in various state laws, dormancy periods, due diligence requirements and reporting formats

State laws regarding unclaimed property requirements are changing on a regular basis and often include essential information about the reporting process, including look-back periods, dormancy periods and even the types of files that are accepted as documentation. Staying on top of changes in state statutes can be time-consuming, but ultimately less work than being subject to an audit, fines or other penalties.

An online service – govWATCH – provides weekly email updates of state legislative activity related to unclaimed property, with customizable alerts and search features available to simplify tracking changes in state laws. A govWATCH subscription is included as a membership benefit when joining UPPO. The UPPO Government Relations team also provides a summary of the news and information, making it relevant and applicable to your daily work.

UPPO members and non-members can learn more about common unclaimed property reporting errors, plus dozens of other topics, at the annual UPPO Holders Seminar, August 14-15, 2013 in Chicago. Register today and receive an early-bird discount.

OTHER RESOURCES
State Unclaimed Property Information  (NAUPA)
Securities Transfer Association (STA)
govWATCH

At our Annual Conference last month in San Diego, UPPO awarded its first $1,000 UPPO Scholarship to Ann Hopkins, daughter of UPPO member Chris Hopkins with Crowe Horwath, LLP. Ann is a currently a sophomore at Penn State University and a prospective nuclear engineering major. As a Scholar of the Schreyer Honors College at Penn State, Ann is aiming for success!

UPPO’s Board of Directors established the UPPO Scholarship Program to assist UPPO members and members’ children who plan to continue their education in college or vocational school programs. Renewable scholarships are offered each year for full-time study at an accredited institution of the student’s choice.

The renewable nature of the UPPO Scholarship means that recipients are eligible to receive the award for up to four years or a maximum of $4,000 provided they maintain their eligibility.

UPPO has established a UPPO Scholarship Committee that is responsible for fund raising and oversight of the program. A third-party administrator, Scholarship Management Services, administers the program.

To raise money to support the Scholarship Program, UPPO held its first fundraiser at the Annual Conference with a 5K Fun Run/Walk. More than 130 attendees supported the event and three of our members donated additional corporate contributions to further support the program. The winners of the 5K event were Kelvin Lawrence, Jason Higginbotham and Chris Jensen for the men and Elizabeth Webb, Teresa Miller and Nicole Davis for the women! Congratulations to them and to ALL who supported the Scholarship Program.

Are you or your dependent(s) potential candidates for the UPPO Scholarship Program? Check out the eligibility requirements. UPPO will notify all member representatives when the 2013 application period opens. All applications must be postmarked by December 31, 2013. UPPO’s third party administrator will select the award recipient in early 2014 and the scholarship award will be announced at UPPO’s 2014 Annual Conference in Dallas.

OTHER RESOURCES
UPPO Scholarship Program

Welcome to another post in the Unclaimed Property 101 series. If you’re new to the field, or perhaps need a refresher on the basics, this series is for you. In our last post we covered, "What IS Unclaimed Property?” In this post, we’ll examine two more topics:

1. Who is responsible for reporting unclaimed property?
2. How does property become abandoned?

Who is responsible for reporting unclaimed property?

Unclaimed property must be reported to the state. But who is responsible for doing the reporting? The short answer is every "holder” of unclaimed funds is required to report them. A "holder” is loosely defined as any individual, business association, governmental subdivision, estate, trust or any other type of legal or commercial entity in possession of property that belongs to another or is indebted to another according to most state laws.

While there are some exemptions that may apply, you may be surprised to learn that organizations such as governmental entities, cooperatives and Internal Revenue Code Sec. 501(c)(3) charities are typically held to the same unclaimed property standards. Most states do not provide any unclaimed property reporting exemption for special government or charitable entities – even if they are tax-exempt. Many organizations, especially 501(c)(3) charities, are caught off guard by this and learn the hard way that they were supposed to be filing unclaimed property reports. If you have outstanding unclaimed funds that you’re holding, don’t assume you’re exempt; make sure you do research to ensure that is indeed the case and that you’re not in violation of state laws.

The bottom line: If your state or the state where you should be reporting the funds does not specifically exempt your type of entity, then you must file unclaimed property reports.

How does property become abandoned?

Every year, there is an enormous amount of unclaimed property waiting to be claimed. With all of the tools and systems in place today, you may wonder how on earth such a large amount of money and assets becomes misplaced or abandoned. There are many factors at play that contribute to the issue. A few examples:

• Companies go through system conversions, and perhaps all the accounting information doesn’t transfer correctly. All of the sudden, you’re not sure who the property belongs to anymore.
• Owners move without forwarding address. You may see this a lot in fields in which employees change jobs and move often, such as the restaurant industry.
• Owners simply forget that you have their funds. For example, if you opened a savings account as a teenager and there’s a very small amount of money sitting in it today, that’s incredibly easy to forget. On the other end of the spectrum, consider our country’s aging population. As people grow older, they may find it more difficult to remember and keep track of their investments – especially if the spouse who was more hands-on with the family’s finances passes away.
• Physical documents representing property are lost (such as passbooks, CDs, stock certificates, etc.). As we move to more digital systems, this will hopefully become less of an issue.

Other examples include name changes, deaths and cases in which a company that your organization owes money to goes out of business or declares bankruptcy.

If you’re interested in learning more about the basics of unclaimed property, take a look at our Unclaimed Property 101 webinar and our Glossary of Unclaimed Property Terms.

ADDITIONAL RESOURCE
UPPO Unclaimed Property Tools
UPPO Holders Seminar - August 14-15