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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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New Year’s Resolutions for Unclaimed Property Professionals

Posted By Administration, Thursday, December 21, 2017

As the end of 2017 approaches, you may have begun thinking about new year’s resolutions for 2018. To help you with your list, UPPO offers several options for your consideration. Much like state legislatures evaluating the Revised Uniform Unclaimed Property Act, you may choose to adopt this list in its entirety, implement specific sections or stick with the same resolutions you’ve had in place since 1995.

 

Get at least seven hours of sleep nightly. Consider it your “required dormancy period.”

 

 

Travel somewhere you’ve never been. We hear Delaware is supposed to be pretty nice, plus you’ll have a chance to see where you send all that money.

 

 

Claim only reasonable exemptions. Stop justifying that nightly ice cream binge as a diet exemption by claiming calories are units of heat, but ice cream doesn’t count because it’s cold.

 

 

Don’t hold extended grudges. Take a lesson from Delaware S.B. 13 and Tennessee H.B. 420, and reduce your “lookback period.”

 

 

Implement a VDA program for your significant other. Encourage voluntary compliance with your “no major purchases without my approval” rule by offering to waive penalties in exchange for simply admitting that those obviously new golf clubs haven’t really been in the basement for ages. You probably snuck them in when I wasn’t home. I’m no fool. Just admit it, why don’t you?

 

 

Cut down on the use of “escheat” as a curse word.


 

 

Good luck and happy holidays from UPPO!

 

All images from giphy.com

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Industry Conference Calls and Sessions Provide Open Forums for Sharing Information

Posted By Contribution from Marilyn Henry, 2017/18 UPPO First Vice President, Tuesday, December 19, 2017

One of the most beneficial aspects of attending the UPPO Annual Conference every year is the opportunity to learn from other unclaimed property professionals in the same industry. The Industry Focus Breakout Sessions perfectly complement the traditional educational workshops and speakers to provide a well-rounded combination of formal and informal learning at the event.

 

These industry focus breakout sessions have been so popular that attendees have suggested developing a way to continue the valuable open forum discussions throughout the year. As a result of these requests, UPPO held a Banking and Finance Industry Conference Call in August. Like the annual conference breakout sessions, the call provided the chance for participants to raise questions, share solutions and chat about common issues.

 

August’s call was successful, with nearly 100 attending. Since then, another call was held in November, and the third call is scheduled for Jan. 16.

 

When I first attended unclaimed property conferences 20 years ago, one of the things that was most valuable was the ability to pick up little bits of information and advice from other people who had more experience in unclaimed property. For that reason, the UPPO Annual Conference and Industry Focus Conference Calls can be especially helpful for new UPPO members and novices to unclaimed property compliance.

 

Even for those of us who have been involved in unclaimed property for a long time, however, the incentive to participate remains strong. With regulatory changes happening within the states at such a rapid pace now, having more opportunities to learn about how others are responding is very useful. If I pick up just one new piece of information or useful tip, the investment of my time to attend is worthwhile.

 

Thanks to the success of the Banking & Finance Industry Conference Calls, UPPO leadership is currently evaluating developing similar calls for another industry in 2018.

 

If you are involved in the banking and finance industry, I recommend participating in the next call. If not, take a look at the UPPO Annual Conference agenda, register and participate in the Industry Breakout Sessions. I think you’ll find that the friendly, comfortable environment is perfectly suited for sharing information, comparing strategies and getting real-world advice from industry peers. I hope to see you there!

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UPPO Advocacy Year in Review

Posted By Administration, Thursday, December 14, 2017

With state legislatures beginning to consider which, if any, parts of the Revised Uniform Unclaimed Property Act to enact, 2017 was an especially active year for UPPO’s Government Relations and Advocacy Committee (GRAC). Following is a review of highlights from the committee’s advocacy work during the past year.

 

February

Arkansas and South Dakota introduced bills that would require the liquidation prior to or shortly after the escheatment of securities property, respectfully. UPPO sent comments to both state legislatures expressing concerns with the bills and encouraging each state to adopt the applicable securities provisions of the Revised Uniform Unclaimed Property Act. 

 

Later in the month, Utah introduced Utah S.B. 175, a version of the Revised Uniform Unclaimed Property Act. On Friday, Feb. 24, UPPO submitted a letter to Senate leadership and bill sponsor Sen. Lyle Hillyard regarding the bill's approach to securities property, requesting Utah seriously consider reverting back to the RUUPA language. 

 

March

Delaware made headlines with its swift passage of S.B. 13 in February 2017. UPPO assembled a work group to thoroughly analyze the legislation and identify both practical and legal concerns with the S.B. 13 to raise to Delaware. UPPO compiled the concerns in a comment letter, submitted to Delaware on March 16, 2017, which pointed out issues UPPO believes Delaware should tackle in its administrative rules/guidance and also to consider amending in future legislative sessions.

 

Following introduction of Illinois H.B. 2603, a RUUPA-inspired bill, UPPO submitted comments to the Executive Committee regarding concerns with the bill, encouraging it to track RUUPA more closely and improve the language to provide more clear language. 

 

April

In response to two Tennessee RUUPA bills (H.B. 420 & S.B. 371) introduced in February, UPPO submitted comments to articulate the changes Tennessee should consider to improve the clarity and fairness of the bills.

 

Also in April, Texas unclaimed property officials responded to questions UPPO submitted in December 2016 regarding H.B. 1454. The law, which went into effect on Sept. 1, 2017, allows property owners to designate a “representative for notice,” which triggers a requirement that the holder must mail or email the required due diligence notice to both the representative and the owner.

 

May

On May 4, UPPO filed an amicus brief with the U.S. Court of Appeals for the Third Circuit in the case of Office Depot v. Cook. The amicus brief supported the arguments of the plaintiffs, retailer Office Depot and its gift card management company, North American Card and Coupon Services. Unfortunately, in July Third Circuit Court of Appeals Judge Joseph A. Greenway Jr. denied UPPO’s motion to file the amicus brief. The judge gave no reason for the denial.

 

July

In July, UPPO surveyed state unclaimed property administrators, requesting information about a variety of possible changes affecting holder reporting. Thirty-seven states responded.

 

August

The American Bar Association is in the process of drafting a revised version of its Model Unclaimed Property Act, an alternative to the Revised Uniform Unclaimed Property Act, approved by the Uniform Law Commission last year. On Aug. 4, UPPO submitted comments to ABA regarding the working draft of its model act. In September, ABA incorporated most of UPPO’s suggestions.

 

On Aug. 30, UPPO filed comments with the Delaware Department of Finance regarding its proposed unclaimed property regulations. UPPO had filed comments in May on the first set of proposed regulations and while the new version is similar to those posted earlier, UPPO wanted to go on record again regarding the most problematic sections.

 

November

On Nov. 10, UPPO sent comments to Nebraska Sen. Matt Williams regarding the L.B. 141, Nebraska’s Revised Uniform Unclaimed Property Act. UPPO’s comments discuss issues related to several Nebraska proposal deviations from the Uniform Law Commission’s Revised Uniform Unclaimed Property Act

 

On Nov. 14, Allen Mayer, deputy general counsel for the Illinois Treasurer’s Office, spoke to the Illinois Chamber of Commerce about the Illinois Revised Uniform Unclaimed Property Act. UPPO submitted several questions, most of which Mayer addressed during his presentation.

 

December

As the American Bar Association neared completion of adopting a revised version of its Model Unclaimed Property Act, UPPO submitted additional comments for consideration.

 

Let Your Voice Be Heard

As more and more legislatures and regulatory agencies take on issues affecting unclaimed property compliance, advocacy has become an increasingly important role for UPPO. Please take a few minutes to complete our Government Relations and Advocacy Survey to help us: 

  • Prioritize topics for the government relations and advocacy session at the 2018 Annual Conference.
  • Build our grassroots advocacy network. 

Responses will give us the ability to better provide you with the information you want and need, and will allow us to mobilize UPPO members when we are faced with legislative and regulatory challenges and opportunities. 


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Managing Multi-State Audits

Posted By Administration, Thursday, December 7, 2017

In today’s unclaimed property environment, the constant threat of a multi-state audit is very real for holders. Those who find themselves under examination face a daunting process that will likely last three to five years and will most certainly result in a significant resource strain across many departments.

 

Multi-state audit liability can be quite costly. The third-party firm conducting the audit works on a contingency fee basis, providing an incentive to discover a large liability in every state for which it is working. If one of those states is the holder’s state of incorporation, estimated liability with a lookback period of 10-15 years is in play, depending on the specific state.

 

Company-wide engagement in the audit process is essential. Several departments, including accounts payable, payroll, accounts receivable. finance, IT and legal, will likely be called on to commit their time and effort to the audit process – all while continuing to carry out their regular day-to-day responsibilities.

 

So, with this looming threat, what should a holder do to manage the multi-state audit process?

 

First, be proactive. If a multi-state audit has not yet been initiated, conduct a risk assessment to understand potential exposure. Identify holes in existing procedures that could lead to potential unclaimed property issues – small dollar balance write-offs, stale-date check write-offs and lack of documentation to support voided checks, for example. Evaluate the level of risk so you can address areas likely to cause significant problems. Consider signing up for states’ voluntary disclosure agreement (VDA) programs to come into compliance voluntarily, rather than waiting for an audit notice.

 

If it’s too late for proactive measures and you’ve already received a multi-state examination notice, get organized. Appoint a lead person to manage the audit process, serve as the point of contact for the auditors, compile documentation and review materials before submission to the auditors. Evaluate whether to hire an experienced advocate to help manage the process.

 

Get legal counsel involved early. Because a significant amount of litigation surrounding unclaimed property audits has occurred, legal counsel may be able to identify industry-specific legal defense issues to help mitigate the audit.

 

The first 12-18 months of a multi-state audit are especially critical. Expect frequent document requests from the auditors, each with a 30-60-day timeline. The initial requests will be used to establish the audit scope – which entities and property types will be included. Auditors will then likely review trial balance and general ledgers, disbursement bank account information, accounts receivable reports and aging reports.

 

Depending on the holder’s industry, record requests may fall outside of the accounts payable, payroll and accounts receivable departments. For example, retailers may need to supply gift card records, or manufacturing companies may be asked for customer rebate records.

 

It is critical for the person managing the audit process to review all information before submitting it to the auditors, ensuring they receive exactly what they need but nothing more that could complicate the process.

 

As the audit proceeds, the holder should recognize its exposure in additional states not covered as part of the audit. If a company doing business in 40 states undergoes an audit covering 10 of them, there may be existing exposure in the other 30. The audit provides an opportunity to manage that additional risk, enter into VDA programs and enact processes to prevent the problem from spreading.

 

Undergoing a multi-state audit is never pleasant, but it provides an incentive for holders to improve their practices. Through the hard work required to complete the audit, best practices can be implemented to ensure better procedures and controls in the future. Executives are more likely to remain aware of unclaimed property issues following an audit, increasing the likelihood of increased support to prevent another such audit in five, six or 10 years.

 

To get a more in-depth look at navigating the challenges of a multi-state audit, join UPPO for the Multi-State Audits webinar on Dec. 12, 2017, at 1 p.m. EST. Matt Hedstrom from Alston & Bird LLP and Heela Popal from PricewaterhouseCoopers LLP will provide insight into managing the process, tackling business continuity challenges and preparing for a potential audit. 

Tags:  audits  VDAs 

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Delaware Makes a Case for Converting Audits to VDAs

Posted By Contribution from Carla McGlynn, 2017/18 UPPO president, Thursday, November 30, 2017

With Delaware’s Dec. 11, 2017, deadline for converting existing audits to state’s Voluntary Disclosure Agreement Program fast approaching, the Secretary of State’s Office recently held a webinar for eligible unclaimed property holders. Alison Iavarone, Delaware’s unclaimed property VDA administrator provided background on the VDA Program and addressed frequently asked questions about the conversion option.

 

The VDA conversion option originates from S.B. 13, legislation intended to shift the state’s unclaimed property compliance efforts away from audits, while promoting voluntary and continued compliance, according to Iavarone. Holders that received an examination notice before July 22, 2015, are eligible. Those that were under audit as Feb. 2, 2017, also have the option to choose a fast-track audit, administered by state’s Department of Finance.

 

Why Convert?

Iavarone suggested several reasons why eligible holders should consider converting their audits to VDAs:

  • The VDA Program is intended to be a more business-friendly method than an audit for holders to come into compliance.
  • The VDA Program is designed to be faster and less expensive than an audit.
  • The holder manages the VDA process and presents its findings to the state for validation. After completion, holders that meet future reporting obligations are protected from audit for historic liabilities for the property types and entities reviewed under the VDA.
  • The state waives interest and penalties for holders participating in the VDA Program.
  • Holders are not expected to begin their internal VDA review from scratch. They can use any review information gathered before converting to the VDA to ensure greater efficiency.
  • Work papers from the audit will not transfer to the Department of State as part of the conversion. The only shared information pertains to the scope of the audit – a summary of entities, property types and audit population periods.

Frequently Asked Questions

Iavarone addressed several key questions related to the state’s VDAs.

 

What is the look-back period?

The look-back period is 10 report years (15 transaction years) from the date the original examination notice was sent to the holder.

 

What is the scope of the VDA from a converted audit?

The scope, for most eligible holders, was determined by the auditor. At a minimum, holders are expected to use the same scope as the audit for the VDA. If they choose, holders may expand the scope.

 

How is the state handling bifurcated audits, covering securities and general ledger items?

Under Delaware law, only the general ledger portion of the audit may be converted to a VDA. Securities are not eligible.

 

What if a holder already settled part of an examination?

If holders have settled and closed portions of the audit before conversion, only the remaining entities and property types will be covered under the VDA.

 

What is the statute of limitations?

S.B. 13 includes a 10-year statute of limitations from when the reporting duty arose. It will not be applied retroactively, as the previous six-year statute of limitations applied before S.B. 13 was effective.

 

How is estimation applied?

The estimation process continues to use second-priority or gross estimation, as it has in the past.

 

What if a settlement cannot be reached?

The audit will refer back to the Department of Finance if a settlement cannot be reached for a particular property type or some other aspect of the VDA.

 

Who is managing the VDA process for Delaware?

Drinker Biddle continues to manage the VDA Program on behalf of the Delaware VDA administrator, who ultimately has final review and approval responsibilities. 

 

Eligible holders must file Form NOI CONV with the Department of State by Dec. 11, 2017, to participate. For more information, visit http://vda.delaware.gov

Tags:  audits  Delaware  VDAs 

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