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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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Unclaimed Property 101: Who’s Responsible, and How Does It Become Abandoned?

Posted By Bellmont Partners/Administration, Sunday, April 14, 2013
Updated: Friday, April 12, 2013

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

 


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Compliance  education  FAQs  Members  UP101 

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Modernizing the Uniform Disposition of Unclaimed Property Act

Posted By Administration, Sunday, April 7, 2013
Updated: Friday, April 5, 2013

During UPPO’s 2013 Annual Conference held in San Diego, March 24-27, there was a lot of buzz about the possibility of revisions to the Uniform Disposition of Unclaimed Property Act ("the Act”). The current Act hasn’t been updated since 1995. There is little disagreement that since that time our world has changed in many ways that impact unclaimed property professionals as never imagined in 1995. To further complicate matters, many of the states have not adopted the 1995 Act and are still using modified versions of the 1981 and 1954 Acts or even homegrown unclaimed property statutes.

The Uniform Law Commission (ULC) has formed a study group to determine the feasibility of revising the 1995 Act to bring it current with today’s business environment including but not limited to new property types, financial instruments, accounting practices and technologies. The study group is holding an exploratory meeting in Washington, D.C., on April 24 to solicit input from the unclaimed property community. Key stakeholders, including UPPO, have been invited to attend the meeting to participate in the preliminary discussions.

A revision to the Act is not a task that will be done quickly or in a vacuum. If the study group recommends that the ULC move forward with revisions to the Act, the actual process may take several years to complete. UPPO’s Government Relations and Advocacy Committee (GRAC) is establishing work groups to begin the process of identifying changes that will be beneficial to its membership, considering the needs of the wide variety of industries our members represent.

At this point, one thing is for certain: UPPO pledges its support and resources to assist in the revision process. We will establish and/or join coalitions, as well as work independently, to develop position statements as deemed appropriate. We will be conducting educational and informational meetings throughout the process to assure members are informed and to be sure our membership has a voice.

The possibility of revisions to the Act is an exciting and perhaps much overdue. The apparent support from other industry groups including NAUPA, ICI, and ABA, just to name a few, bodes well for the overall collaboration of the unclaimed property community to affect changes. At this point, the key message is to stay tuned!

ADDITIONAL RESOURCES
ULC Study Committee - Unclaimed Property Act
UPPO LinkedIn Group
Follow us on Twitter for the latest information


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.


Tags:  Advocacy  Members  News  Policy  UP Laws 

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Spring Reporting Checklist

Posted By Administration, Monday, March 18, 2013

Although many states are still seeing snowstorms and cold weather, believe it or not, it is time for spring unclaimed property reporting. Many of you are probably saying, "But I just finished the fall reporting!” Well, an unclaimed property professional’s work is never done.

Please pay special attention to the 2013 reporting deadline for Connecticut! The statute requires reporting within 90 days after the end of the current calendar year. However, because March 30, 2013 falls on a weekend, reports are due by March 28, 2013.

As you work on spring reporting requirements, there are a few key questions to consider and some recommended best practices that were identified in UPPO’s recent Spring Reporting Checklist webinar that may be helpful to you.

A few key questions to consider:

  • Which states require spring reporting?
  • Are there specific property types that require spring reporting?
  • Are you required to file negative reports?
  • Are extensions granted?
  • Can you file paper reports? If so, are there any limitations? (Such as for fewer than 10 properties)
  • What types of electronic media are allowed for filings? Electronic file transfer? CD-ROM?
  • Are wire or EFT payments available?If you use software to generate your reports, does the state require any additional forms be sent? (Such as Florida and DFS-UP-111 cover sheet)
  • Who is required to sign the report?

As with any business function, developing and maintaining best practices for unclaimed property reporting is an important consideration that can provide huge dividends over time.

Best Practices to consider can include:

  • Develop an unclaimed property committee: Include key individuals from areas such as payroll, accounts receivable, accounts payable, and even marketing, especially if your company deals with gift cards or rebates.
  • Designate a point person from each area: This person is responsible for gathering the data for each reporting period.
  • Determine a process for staying abreast of dormancy changes and reporting guidelines: As state budgets tighten, states are very active in the area of unclaimed property legislation and it can be a full time job just to keep up with the changes. If you are not already a member of UPPO, consider joining to take advantage of the govWATCH legislative and regulatory monitoring service.
  • Review your record retention policy: Almost every state and jurisdiction has adopted one iteration of the Uniform Unclaimed Property Act ("the Act”), many using the Act of 1995, which requires record retention for a minimum of ten (10) years. Review record retention practices in all of the areas of your business perhaps using the unclaimed property committee discussed previously. Some of the items to consider are payroll records, aging reports, bank statements, data conversion records, etc.
  • Software systems or outsourcing: Because of the complexity of unclaimed property reporting, consider having the Unclaimed Property Committee review the pros and cons of using a third party service provider and/or an unclaimed property software package to assist.

Reporting is always a stressful time. Being as prepared as possible can only help to ease the process.

ADDITIONAL RESOURCES
UPPO govWatch

Spring Reporting Checklist – UPPO webinar

State requirements: www.naupa.org


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Compliance  Due Diligence  education  Members  UP101 

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Surviving an Unclaimed Property Audit

Posted By Administration, Sunday, March 10, 2013
Updated: Friday, March 8, 2013

The term "audit” can strike fear into the hearts of most people. Whether it’s an IRS audit of your personal taxes, a wage and hour audit of your company or – in our world of unclaimed property – an unclaimed property audit, the process can be intimidating. However, there are a number of things you can do to survive an unclaimed property audit.

Unclaimed property audits can be performed by internal state unclaimed property auditors or by an external third-party audit firm contracted by the state. Regardless, the expectations for the holder (your company) are the same:

Expectations of the Auditor for the Holder

  • Holder will pay attention and be responsive to the audit
  • Respond to the audit letter
  • Schedule an opening conference with the auditor
  • Dedicate personnel to comply with audit requests
  • Comply with timelines.(Note: penalties can be applied if you’re not cooperating)
  • Open and regular communication

Expectations of the Holder for the Auditor

  • Written work plans including the methodology/process to be used
  • Formal written formal requests for records and documents
  • Confidentiality agreements between the holder, auditor and state(s)
  • Timely response to questions

Surviving an unclaimed property depends greatly on preparedness. The following is a list of some preventative measures you can take to prepare for a possible unclaimed property audit:

  • Keep good accounting records
  • Maintain and follow good policies and procedures
  • Keep up with the unclaimed property laws, regulations and requirements in the state(s) where your company does business
  • Understand unclaimed property types and which types your company has
  • Keep good records pertaining to the due diligence processes being followed
  • Report unclaimed property to the state(s) regularly and as required
  • If you find you have not been in compliance with a state, consider any VDA programs the state(s) may have available
  • Ask for assistance! This can be accomplished by contacting state administrators or by contracting with a third-party service provider to assist with unclaimed property compliance.
  • If your company receives an audit letter, be responsive. There may be penalties if you ignore it.

Some of the items listed above are perhaps "common sense,” but unfortunately companies are often not prepared or fail to follow their own policies and procedures. For example, a record retention policy may require seven years, but upon review documents are being destroyed before the seven-year point or are retained for longer than required.

Documentation of the due diligence process is also a key factor and one that can be difficult for holders to manage. For that reason, you may want to consider using a third-party service provider to assist with the due diligence process. Please refer to previous posts on third party due diligence providers and software options to assist unclaimed property professionals.

Finally, understand the possible defenses to unclaimed property audit findings:

  1. The property wasn’t actually owed. This is a good example of why good accounting records are necessary.
  2. The property wasn’t subject to the Unclaimed Property Act
  3. The property was already reported

Unclaimed property compliance is an incredibly complex and constantly changing area. As we’ve all heard before, "a good offense is the best defense.” Being proactive, learning and maintaining your knowledge about unclaimed property and creating good policies and procedures are key measures to ensure you have confidence going into an audit. Being a member of UPPO can help you to gain that confidence through education, state-specific legislative alerts through govWATCH and the UPPO Forums.

ADDITIONAL RESOURCES

UPPO Webinar: Third Party Audits: What Holders Should Know From an Auditor & State Administrator’s Perspective
UPPO Annual Conference
: Please refer to the Agenda for a list of sessions concerning audits.

UPPO LinkedIn Group

UPPO on Twitter


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Audits  Compliance  Due Diligence  education  UP101 

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UP 101: What IS Unclaimed Property?

Posted By Administration, Monday, March 4, 2013

Professionals enter the world of unclaimed property from several areas: accounting, legal, payroll, and more. No matter what your background, now that you’re working with unclaimed property for your organization, it’s vital to understand the key aspects of unclaimed property compliance and reporting.

In this series of Unclaimed Property 101 blog posts, we’ll walk through the basics of unclaimed property, starting with a look at what unclaimed property is exactly. Whether you’re new to unclaimed property or simply need a refresher course, this series is for you!

What is unclaimed property?

Understanding what unclaimed property is should be the basis for your work going forward. The most basic definition is:

Intangible personal property that has gone unclaimed by the rightful owner (i.e., remained outstanding) for a specified period of time.

To drill down a little further, let’s look at the requirements for defining what constitutes unclaimed property (also known as escheatable property). Property is considered unclaimed or abandoned if it meets all of the following three requirements:

  • It is held or issued in the ordinary course of the holder’s business;
  • It constitutes a debt/obligation of the holder to a creditor/owner, and;
  • It remains unclaimed for more than the statutory dormancy period. The dormancy period is determined by property type and by each state. One thing that may surprise you is that states do not want you to turn over unclaimed property early; they want you to hold onto it for the full dormancy period to give owners the full amount of time available to find it.

If the property in question does not meet all three requirements, you may not necessarily have to report it. As usual, we recommend that you work closely with your company’s legal counsel if there are any discrepancies or grey areas.

Another way of looking at it is through the lens of "when is property not abandoned?” Property is not abandoned when:

  • The owner has increased or decreased the amount in the account.
  • There has been owner-initiated written communication with the holder.
  • The owner has indicated an interest in the property, as evidenced by memo/record in file (such as a telephone conversation record).
  • The owner has another relationship where there has been owner-generated activity (e.g., another active account).

Those are the basics of defining unclaimed property. However, there are a few more important things to keep in mind:

  • While most of the items you’ll encounter in unclaimed property are intangibles, such as customer credits or checks that haven’t been cashed, there are exceptions to the "intangible” rule. Namely, most states claim contents of safe deposit boxes or items with fair market value.
  • Also, all states have unclaimed property laws. Unfortunately, no two state laws are the same. That means you need to stay up to date on your state’s law and any changes to it. If you’re a member of UPPO you can sign up for free govWATCH emails that automatically alert you to changes in state law.

If you’re interested in learning more about the basics of unclaimed property, stay tuned to the blog for more in the Unclaimed Property 101 series. You can also view a free webinar on the topic and explore our glossary of unclaimed property terms.

ADDITIONAL RESOURCES
Unclaimed Property 101 Webinar
(FREE)

Previous UP 1010 Post - History of UP


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  education  FAQs  UP101 

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