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Unclaimed Property Focus
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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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As unclaimed property enforcement increases, need for compliance grows

Posted By Administration, Thursday, September 3, 2015

States are increasingly dependent on unclaimed property as a major non-tax revenue source. As such, many are implementing new tactics to identify reporting gaps and more aggressively audit property holders. The potential costs associated with a lengthy audit, steep non-compliance assessments and reputational risk pose significant threats, making compliance with unclaimed property requirements more important than ever.

 

To help individuals who need to build their company’s unclaimed property compliance program, educate internal stakeholders of the importance of compliance and keep up with the latest compliance trends, UPPO’s upcoming Lunch ‘n Learn events in Minneapolis-St. Paul and Denver will address compliance issues.

 

“Unclaimed property is an area that’s high risk and low reward. You only get noticed when you get in trouble,” says Jamshid Ebadi, director of abandoned and unclaimed property practice at Ryan and UPPO Lunch ‘n Learn - Denver speaker. “Never has it been more important to make sure you have processes and tools in place to meet your unclaimed property requirements.”

 

Although awareness of unclaimed property in general has increased significantly in recent years, many holders still struggle to define which areas of their businesses are covered by unclaimed property requirements. Many recognize the most obvious sources, such as accounts payable, payroll and gift cards, but may not consider other areas until they’re being audited.

 

“You really have to look at each state’s statutes to determine what falls under their definition of unclaimed property,” says Samantha Petersen, west region unclaimed property practice leader, state and local tax at KPMG and UPPO Lunch ‘n Learn - Denver speaker. “If there’s any question whether something is considered unclaimed property or not, chances are a state and its auditors will argue that it is.”

 

As states try to increase revenue without the stigma of raising taxes, they are increasingly looking at unclaimed property to help their budgets. Many now retain third-party auditors paid on contingency, and use analytics to identify likely reporting gaps and tax database crosschecks to find companies that haven’t filed unclaimed property reports.

 

So how can holders without adequate policies, procedures and practices in place begin to get control of their unclaimed property responsibilities?

 

“Anything you’re learning brand new is hard to do without assistance,” Ebadi says. “Reach out to people who have that knowledge. Don’t try to handle it without speaking with people who have implemented unclaimed property policies and procedures.”

 

Peterson agrees, adding that conducting a complete review and exercising caution when coming into compliance is essential. “If you’re going to report past-due properties, it’s best to identify all areas of exposure and approach all states one time,” she advises. “Simply submitting a report with past-due property could trigger an audit.”

 

Understanding the complexities of unclaimed property requirements and keeping up with compliance trends is challenging. To learn more, discuss firsthand compliance challenges and network with other unclaimed property professionals, attend UPPO’s Lunch ‘n Learn events in Minneapolis-St. Paul and Denver on Sept. 15 and Sept. 17, respectively. Register today!


Tags:  compliance  Denver  education  lunch ‘n learns  Minneapolis  unclaimed property 

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Top 7 reasons to participate in the UPPO Unclaimed Property Certificate Program!

Posted By Administration, Thursday, August 27, 2015

Here are the top seven reasons to participate in the UPPO Unclaimed Property Certificate Program!

1. Be acknowledged internally for your expertise. What we do as unclaimed property professionals isn’t always understood by our employers, but the meaning of being a certificate holder within your profession is understood. Universally, holding a certificate means that you hold a certain level of expertise and had to complete quantifiable goals to receive it.

2. It’s an obvious one, but an important reason – you’ll become more effective and confident in your responsibilities. You’ll learn the fundamentals of compliance at a deeper level than you could in one education session.

3. Be one of the first to hang the unclaimed property certificate above your desk. It’s something only 30 people in the profession will be able to do. 

4. (For managers with new employees) Use this as a long-term training solution for your newer employees. It will teach and re-teach topics throughout the year – to relieve you from providing that continued education new professionals demand and need. Take a peek at the program curriculum.

5. Grow as a professional. It’s always good to challenge yourself and learn something new.

6. You’ll earn CPE while you learn! For every live webinar and in-person education session you attend at the Annual Conference through the certificate program, you’ll be eligible to earn one CPE credit. That’s six CPE credits, right there!

7. Be able to provide feedback and improve the program for future classes of the program. The program has been reviewed and tested, and we think it’s pretty awesome, but we recognize it’s the first year it’s ever been offered. We’ll want your honest opinions about how to make this better for future participants – leaving the first class with the ability to influence change the most. 

Do you have a reason why you are participating in the program that wasn’t included in this list? Leave it in the comments section.


More information

Find more information about the program on the FAQ page

Tags:  certificate program  education  professional development  unclaimed property  UPPO 

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UPPO Submits Audit Manual Recommendations to Delaware

Posted By Administration, Thursday, August 20, 2015

On Aug. 14, 2015, the Unclaimed Property Professionals Organization (UPPO) submitted recommendations to the Delaware Department of Finance for consideration in its development of an audit manual, a provision of Delaware S.B. 11 (S.B. 11). UPPO’s recommendations include the issues that holders believe are important to address before, during, and after an audit in order to achieve clarity, transparency, and predictability in Delaware’s enforcement environment.

The submitted document is broken into two sections, the first addressing guiding principles and clear definitions of audit components. Audit expectations are covered in the second section and organized by audit phase. Here are the key components of UPPO’s recommendations submission:


Section 1: Overview regarding guiding principles

  • Guiding principle stating the purpose of an examination should be to determine whether the holder is in substantial compliance with unclaimed property laws
  • Standard definitions of key unclaimed property terms
  • Measures to increase transparency of auditor contracts and collection quotas
  • Directives that the Delaware Escheator is responsible for selecting audit candidates and that the manual must be followed by auditors

Section 2: Overview regarding the phases of the examination and expectations

  • Notice: The notice should contain the following information entities being examined, name of auditor, examination period, and suggested dates for an entrance conference.
  • Initial records request: The auditor needs to provide the holder an initial document request no less than 45 days before the entrance conference.
  • Entrance conference: During the conference the auditor should address specific information such as (not a comprehensive list):  
  • Examination staff
  • Examination process (which should be supplied to holder in written form as a reference tool) and defined time period
  • Records to be reviewed and property types typically reviewed during audits
  • The consequences if records aren't available, missing, or incomplete and the estimation techniques used to determine liability. 
  • Rights of the holder during the examination, which is to include access to the state escheator 
  • Administrative and judicial options available to holders
  • General standards to apply to the examination and fieldwork: UPPO recommends that Delaware define standards for each of these phases and include in the manual.
  • Exit conference:  The state escheator should be required to hold an exit conference including the holder, holder representatives, auditor, and the escheator or other state-employed delegate.

  • Burden of proof: This section of the manual should specify that the Escheator has the burden of proving the existence and amount of property that is abandoned.

Read the document in full.

The recommendations submitted were debated and drafted by a government relations and advocacy committee (GRAC) task force appointed after the passage of S.B. 11. The task force is comprised of individuals with deep knowledge of Delaware’s unclaimed property laws and first-hand experience in unclaimed property audits.

UPPO is looking forward to continuing the dialogue with Delaware regarding its audit manual, and applauds the State of Delaware on its enactment of S.B. 11. The Department of Finance is tasked to complete the audit manual by Dec. 31, 2015.

Questions? Contact Dana Terry, UPPO president regarding UPPO’s advocacy priorities and projects.

Stay in the know, and subscribe to UPPO’s new, monthly unclaimed property newsletter.

More information

Delaware unclaimed property task force releases final report

Tags:  audit manual  compliance  Delaware  reform  unclaimed property  UPPO 

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Why should you participate in the certificate program?

Posted By Administration, Thursday, August 13, 2015

Fast forward 10 years. You’re sitting in front of the employees you manage, encouraging them to get involved in UPPO’s Unclaimed Property Certificate Program (certificate program). As one of the first certificate holders, you can confidently tell them that it made you more effective and confident in minimizing your employer’s risk and your day-to-day compliance responsibilities.

“We [certificate program task force and subcommittee] came up with the program’s topics, based on what we know a person, who is new to unclaimed property, needs to successfully complete unclaimed property reporting and be recognized by their peers as an expert,” says Becky Stephens, past chair of the UPPO Certificate Program Task Force, and assistant vice president, business operations analyst at U.S. Bank. And the group responsible for identifying the program’s education topics gets unclaimed property. They had a roster of seasoned professionals, who like Stephens, has dedicated 10+ years to understanding the complexity of unclaimed property regulations.

Among the topics program participants will learn about are: record retention, dormancy, reporting and remittance, due diligence, and the risk of non-compliance. Explore the full curriculum agenda.

It’s certain that in June 2016, we’ll have 30 unclaimed property professionals receiving not only tangible validation that they’ve achieved a certain level of expertise but the confidence to articulate the knowledge to superiors and hiring professionals. “One of the things that our profession is lacking is something that provides people with the sense that what they do is important, specialized, and it takes a certain level of expertise to do what we do well. This [program] will create that sense of specialization and confidence,” says, Karen Anderson, 13/14 UPPO president and vice president, reporting compliance at Keane. During Anderson’s presidency, a task force to explore the feasibility of the certificate program was formed.

Anderson also noted, “Having well-trained people in our profession will help us relate to our regulators that much better.” “It gives the individual a better sense of self-confidence when working with a regulator or even your own internal audit team,” added, Stephens.

Registration for the certificate program will open after Labor Day. Space is limited to 30 participants, and participants will be selected on a first come, first served basis.

Questions? Take a look at the FAQ page for additional information or contact us at 763-253-4340 or uppo@uppo.org.

Tags:  certificate program  continued education  education  unclaimed property  UPPO 

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Contemplations of Consolidated Unclaimed Property Reporting

Posted By Christopher Jensen, director, Sam Schaunaman, senior manager & Christa DeOliveira, manager at Ryan, Tuesday, August 11, 2015

Introduction

The lack of uniformity with abandoned and unclaimed property laws and requirements is frustrating for holders.  A primary goal most holders pursue is to maximize resource efficiency and streamline processes, while complying with unclaimed property’s myriad of filing obligations.  One noteworthy way to achieve this goal is for holders of unclaimed property to prepare and file consolidated reports.

 

A consolidated unclaimed property report is one compliance report sent to a specific state or jurisdiction by a parent on behalf of multiple legal operating entities and contains properties reportable to that jurisdiction.  Sometimes, this is also referred to as reporting under one Federal Employee Identification Number (FEIN). It has been an increasingly frequent practice for holders to consolidate their compliance reporting to each applicable jurisdiction and a welcome practice by many states in environments where they have been asked to do more with less.  As this article indicates, the use of consolidated unclaimed property reporting generally is a “win-win” for both the holder community, as well as for the jurisdictions that receive such reports.*       

 

Use of Consolidated Reporting in Other Areas

Consolidated unclaimed property reporting is not an isolated practice.  Rather, consolidated reporting is also typical for other key areas holders use to report information to other governmental entities.  Specifically, it is common for any companies preparing financial statements to do so in a consolidated manner, rolling up financial reporting under a parent company.  For instance, according to the Financial Accounting Standards Codification Topic 810, a parent company is required to consolidate “…the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single economic entity.” This is due to the premise that “…consolidated financial statements are more meaningful than separate financial statements….”

 

By way of further example, the Internal Revenue Service (IRS) allows for consolidated reporting among its legions of filers.  In addition to consolidating balance sheets and income statements, IRS Form 851 - Affiliations Schedule is submitted to disclose affiliated entities that have been included with the submitted federal income tax return.  The instructions for completing Form 851 specify to identify “the common parent corporation and each member of the affiliated group.”

 

An Important Caveat

A notable difference for unclaimed property reporting for consolidated financial statements and consolidated corporate income tax filings, when compared with unclaimed property consolidated reporting, is related to the fact that the state of corporate domicile, also sometimes referred to as the state of incorporation, is the most important report for many unclaimed property holders. This key difference is tied to the priority scheme determined by the Supreme Court in Texas v. New Jersey.  Under the federal priority rules determined in that case, first priority is given to the jurisdiction identified as the owner’s last known address, according to a holder’s books and records, and second priority is given to the state of incorporation, if either the owner is unknown or the owner’s address is unknown.  Therefore, it may be undesirable in some situations to co-mingle entities with different states of incorporation. Similarly, companies in the practice of acquiring companies, retaining them for a limited period, and then selling them for financial benefit (e.g., private equity holder) may not be interested in consolidated unclaimed property reporting.  However, for many holders, the consolidated unclaimed property report assists in making best use of scarce resources.  

                                                       

General State Practices

Allowing consolidated reporting is a benefit to the state or jurisdiction as well.  From an administrative perspective, it significantly reduces the number of reports to accept and process each year, all while maintaining the same volume of properties reported and remittances accepted.  In an era where state personnel have been asked to do more with less, it will exponentially reduce the burden with processing (possibly) unnecessary reports.  From a practical perspective, allowing consolidated reports may encourage compliance with state unclaimed property laws, as the once laborious requirements that dictated a separate report per entity have now been made more efficient and holder-friendly.  

 

Some states expressly acknowledge acceptance of consolidated reports.  Michigan notes in its Manual for Reporting Unclaimed Property, “Michigan does accept consolidated reports. A consolidated report is one that is filed on behalf of more than one legal holder (e.g., a parent company that files one report for itself and a number of subsidiaries).” Additionally, the directions on Arkansas’s Unclaimed Property Transmittal form AOS/UP1 instruct for “[h]olders reporting for multiple entities under a single entity name (consolidated report) must attach a detail of the entities included in the report…”

 

Additionally, when polled informally, the following states confirmed they indeed accept consolidated reporting: Idaho, Illinois, Iowa, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, and West Virginia.  Most of these states, like Arkansas, did indicate they prefer or even require an attachment listing all of the FEINs of the entities included within the report to be submitted with the report packet.*The understanding and experience of Ryan’s Abandoned and Unclaimed Property (AUP) practice is that most all jurisdictions will accept consolidated unclaimed property reports.

 

In contrast, Nevada’s Unclaimed Property Division has taken the lonely stance that “consolidated reporting is not permitted.” Further, Nevada’s stated position is that any “reports submitted in this manner will be returned unprocessed and subject to penalty.” Nevada specifies that, unlike other jurisdictions, “[c]onsolidated lists attached to holder reports stating the entities listed are included as part of the actual holder report submitted are not permitted.” With respect to Nevada’s approach to individual FEIN level reporting and disallowing consolidated reporting, it is expressly neither required nor denied by statute nor regulation.  It is worth noting, based on informal conversations with Nevada officials, the state may be considering alternatives to this current policy, but no immediate changes are anticipated.*** Undoubtedly, the status of this will be closely monitored by the unclaimed property holder community.

 

Unfortunately, requiring holders to file individual unclaimed property reports for each legal operating entity causes reporting problems for the holder community.  For example, significantly more individual reports need to be processed, signed, and in some cases, also have the report signer’s signature notarized.  In addition, it also requires for holders needing to report to Nevada to have a singularly different process for reports.  Presumably, filing individual reports also requires states to load thousands more reports than they would otherwise have needed to do.  Incidentally, many larger companies may only have a limited number of entities with actual disbursements or other activity leading to possible unclaimed property.  Without consolidated reporting, a much larger number of “zero” or “negative” reports would have to be filed by the various subsidiaries, thus creating a larger volume of tracking activity for the states.  

 

Future of Consolidated Reporting

Solutions can perhaps be found in a new National Association of Unclaimed Property Administrators (NAUPA) Standard Electronic File Format (“NAUPA Format” or “Format”).  Unfortunately, a new NAUPA Format is unlikely to be a quick solution, but it could be a mid-term or long-term solution.  As listed on NAUPA’s website, the current Format was originally developed in 2002 and has been used since 2003, with some revisions made over time, most recently in 2010 adding property type codes and in 2013 revising relationship codes. Additionally, the NAUPA Format calls for the output file to be text with fixed width file fields. 

 

NAUPA most assuredly recognizes there are limitations to the current Format. As such, NAUPA included updating the Format as part of its Strategic Plan dated 2013 – 2017. The Strategic Plan was promulgated by NAUPA, indicating a goal to begin writing a new NAUPA Format by 2017; however, this date was based on the completion of the Uniform Law Commission’s Drafting Committee to Revise the Uniform Unclaimed Property Act.  Specifically, the goal stated: “Update NAUPA’s file format by end of 2017 following resolution of revised Uniform Unclaimed Property Act in 2015.” Based on updates provided at the NAUPA track, during the recent National Association of State Treasurers 2015 Treasury Management Training Symposium held in Kansas City, Missouri, May 12–15, 2015, it appears the timing on a rewrite of the Format could be extended. 

 

Although certain provisions of a new Format could be altered by the outcome of the Uniform Law Commission’s (ULC’s) Revised Uniform Unclaimed Property Act (RUUPA) Committee, some of the necessary work could be accomplished in advance of the completion of this process.  Happily, NAUPA officials have expressed interest in working with the holder community to develop the new Format.

 

Undoubtedly, any revisions to the NAUPA Format will result in an output file that is in a more current language, significantly changing flexibility and allowing for more information to be reported.  Ideally, the new Format will be designed to allow holders to correspondingly report specific holder information at a property level—whether this is to be accomplished by a new method of submitting consolidated reports, the pertinent information captured directly in the property record, or another unforeseen alternative yet to be determined.  Regardless of the method, this could allow for holders to both streamline reporting operations and responsibly use internal resources, with the added benefit of consolidated reports providing states with property-level holder information and likely more information to enable states to appropriately return properties to claimants. 

 

Conclusion

Filing consolidated unclaimed property reports allows for holders to follow one efficient and effective reporting process.  The numerous advantages associated with creating efficiencies in the reporting process should not be undervalued. Given the importance in this area, we should see a continued focus by holders, service providers, and states to ensure the consolidated reporting option continues to be available to the unclaimed property reporters.  Additionally, a revised NAUPA Format will be forthcoming, hopefully providing a method for all states to accept consolidated reporting and, at the same time, provide owner information to aid states in the process of returning funds to the correct claimants. 

 

Contacts

Christopher S. Jensen, CPA

Director

Abandoned and Unclaimed Property

972.934.0022

christopher.jensen@ryan.com

 

Sam Schaunaman, J.D.

Senior Manager

918.518.5179

sam.schaunaman@ryan.com

 

Christa DeOliveira, CIA, CCEP

Manager

Abandoned and Unclaimed Property

319.378.5707

christa.deoliveira@ryan.com

 

Ryan, LLC is neither a CPA firm nor a law firm.



*FASB ASC 810-10-10-1

PURPOSE OF CONSOLIDATED STATEMENTS

1. The purpose of consolidated financial statements is to present, primarily for the benefit of the owners and creditors of the parent, the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single economic entity. There is a presumption that consolidated financial statements are more meaningful than separate financial statements and that they are usually necessary for a fair presentation when one of the entities in the consolidated group directly or indirectly has a controlling financial interest in the other entities.

**Ryan internally conducted informal polling inquiries to confirm that states accepted consolidated reporting, and to ascertain if there were any related restrictions.  The question was posed to Idaho, Illinois, Iowa, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, and West Virginia.

***Until the NAUPA Format is updated and expanded to allow for greater detail in reporting details at the property level, there is the possibility of including ancillary information in field 45 of the property record.  The NAUPA Format identifies this field to be used to provide “[a]ny additional information that will assist in identifying the owner of the property should be listed in the property description field…” NAUPA Standard Electronic File Format, http://www.unclaimed.org/reporting/naupa-standard-electronic-file-format/


Tags:  abandoned property  consolidated reporting  Ryan  unclaimd proprety compliance 

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