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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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Tennessee Reduces Dormancy and Lookback Periods, Adds Requirements

Posted By Administration, Thursday, August 10, 2017

Among the first states to pass a version of the Revised Uniform Unclaimed Property Act this year was Tennessee. On May 25, 2017, Tennessee Gov. Bill Haslam signed H.B. 420 into law, effective July 1, 2017. The new law includes several substantial changes to the state’s unclaimed property requirements. Noteworthy provisions include:

 

New property types: Among the new property types addressed in H.B. 420 are health savings accounts (HSAs) and stored value cards. HSAs are presumed abandoned if unclaimed three years after the earlier of either the date distributions must begin to avoid tax penalty or 30 years after the account was opened. Stored value cards (other than payroll or gift cards) are presumed abandoned five years after the later of: Dec. 31 of the year in which the card was issued or funds were last deposited; the most recent indication of owner interest in the card; or a verification of the balance by or on behalf of the owner. 

 

Due diligence: Holders must perform due diligence for property valued at $50 or more. Notices must be sent to apparent owners by first-class mail between 180 days and 60 days before the unclaimed property report is filed. Owners who have consented to receive electronic communications must be sent the notice by both first-class mail and email unless the holder believes the email address is invalid. 

 

DMF matching requirement: The new law specifies that life insurers must perform searches of the death master file and comply with the Unclaimed Life Insurance Benefits Act. 

 

Dormancy periods: Most property type dormancy periods have been reduced from five years to three years under H.B. 420.

 

Audit lookback period: For audits in Tennessee, the lookback period has been reduced from 10 years to five years. 

 

Record retention: Holders are required to retain records for 10 years after the unclaimed property report was filed or was due to be filed. 

 

Promulgation of examination rules: The new law specifies that the state treasurer should develop rules for examinations, including procedures and standards for estimation, extrapolation and statistical sampling.

 

Sale of securities: H.B. 420 requires the treasurer to sell a security between eight months and one year after receiving it and giving the apparent owner notice. If the treasurer sells the security within six years, and a valid claim is filed before the six-year period expires, the owner will be entitled to receive a replacement of the security or its market value plus interest.

 

Informal conference provision: This law establishes provisions for an informal conference in situations where an examination results in a determination that a holder has failed to pay or deliver reportable property to the treasurer. It also allows for judicial review of the treasurer's decision. 

 

Exemptions: The law retains the state’s business to business and gift card exemptions. 

 

For the latest information about this and other noteworthy unclaimed property bills, visit UPPO’s govWATCH website

 

Tags:  audits  DMF  dormancy periods  due diligence  record retention  RUUPA  securities  Tennessee  unclaimed property 

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UPPO Asks: How do you raise the profile of unclaimed property compliance in your company?

Posted By Administration, Thursday, August 3, 2017

Periodically, UPPO asks members to respond to a question, sharing their ideas, insights, and experience. The recurring UPPO Asks feature is a compilation of their responses. 

 

We recently asked several members: How do you raise the profile of unclaimed property compliance in your company?

 

“I met with leaders and staff in departments that produce unclaimed property items. I explained the importance of keeping good records and following up on unresolved items as soon as possible. Through these meetings, we identified areas for improvement and implemented process changes to reduce the number of items from becoming unclaimed property. I ask other groups to include me when establishing new programs and processes to make sure potential unclaimed property issues are addressed and become part of the new plan. The high rate of retirements is causing a higher than normal turnover in staff. As a result, I set up short meetings with new leaders in departments that produce unclaimed property to make sure they understand the process. I also contact the leader when I hear of something in the works that may affect unclaimed property to make sure I am included from that point forward. I do my best to be proactive, and that takes good communication.”—Jeannie Matthews, unclaimed property administrator, Idaho Power Company

 

 

“We have monthly meetings with our corporate director of finance to review internal processes and to discuss state regulatory updates. Our director of finance also holds meetings with our controllers to review UCP processes and ensure compliance. Our audit team sends an annual compliance questionnaire that requires our business areas to provide proof of UCP compliance and their sign-off. In the past, we sent out quarterly newsletters to provide UCP updates and processes.”—anonymous

 

 

“Our most effective approach to raising the profile of UP compliance is to raise the profile of the entire area of unclaimed property. Early on, we enlisted a ‘sponsor’ (actually the vp of tax) to assist us with projects to initiate compliance. This has evolved into a steering committee (essentially C level executives), which can help us remove obstacles and handle escalations as needed.

 

“Beyond the power of the C-suite, communication and education are key. I tap into every internal newsletter with articles—since there is always a need for content. I arrange training sessions and webinars for a variety of audiences—from educating the steering committee on new requirements to training operational groups on to how to better meet the requirements for compliance. It is impossible to overeducate/overcommunicate! We talk about audit potential and audit defense to be built into our processes. Working in a company where ethics and compliance are both deep in the culture helps to validate our efforts.

 

“We are actively embedding processes to move potential escheatable items into a pre-escheat account and out of the hands of the operational groups. This greatly reduces the complexity of compliance (at least for the supporting teams) and gives the UP team greater visibility and control.

 

“I think the final piece of raising visibility is the same networking that helps in every area of business. There is nothing that can replace having relationships with solid contacts. These folks become ambassadors within their own organizations. My contacts range from internal audit to controllers to AP/AR analysts, and everyone in-between. It becomes much easier to get results when people know you!”—Charlotte S. Kirk, manager, unclaimed property, ABB Inc.

 

 

“Raising the profile of unclaimed property is always a challenge. Audit notices and the need to file a VDA definitely gets attention, though not in a preferred manner. I find that quantifying the potential exposure of accounting methods and procedures is the best means of focusing user groups on the UCP process. It all boils down to dollars and cents, and persistence.”—Pam Runkel, CPA, indirect tax manager, ADT LLC

 

 

“I’ve worked at several (11) different companies over the last 30 years, and have been involved in unclaimed property for 20+ of those years. I’ve started the process in two companies, and enhanced the process in three companies. One company didn’t want anything to do with UCP at all.

 

“I think the best way to get the message across of the importance of UCP compliance is to have an ally in your department that has access to the C-suite. But to get that audience, you must have supporting documentation to show the potential audit exposure, which is a moving target at best. If you can show that this compliance is a value-added proposition, i.e. refunds from the states, limiting audit exposure, then this will help as well.

 

"This is only the beginning of the journey. Once you get the C-suite buy in, then you must get the other players on board to help with gathering the documents, payroll, A/P, A/R, benefits, accounting, etc.”—Mike Marion, CMI, senior manager indirect tax, Fruit of the Loom Inc.

 

 

Now it’s your turn. What do you think are the most important personality traits for an unclaimed property professional? Add a comment to this post to share your response.

 

 

Tags:  Compliance  unclaimed property  UPPO Asks 

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Unclaimed Safe Deposit Box Basics

Posted By Administration, Thursday, July 27, 2017

Unlike most of the property types in the unclaimed property world, safe deposit boxes are an anomaly because they contain physical, tangible items. As such, handling of safe deposit boxes has a unique set of rules, requirements and concerns. Candace Rummel, senior operations manager, consumer operations, for Capital One Bank, discussed the handling of safe deposit box contents during a recent UPPO webinar. 

 

Drilling the Boxes

There are two scenarios for when a financial institution would likely drill open a safe deposit box: nonpayment and relocation. In either case, state bank laws and the rental agreement between the financial institution and the customer govern how the property should be handled.

 

Because most consumers are likely to return to the location where they left their physical property, the state where the safe deposit is located—rather than state where the owner lives—dictates the requirements for safe deposit box handling. Familiarity with the specific requirements of the applicable state is essential. 

 

When owners violate their rental agreements by failing to pay rent, the financial institution where the box is located will usually opt to drill the box. First, the holder should make appropriate collection attempts. Because most safe deposit box fees are charged annually and property is held for long periods of time with little thought, customers may not realize they have neglected to pay. For example, if a linked bank account that was used for automatic payments for several years is closed, the customer may inadvertently neglect to link a new account. So, efforts should be made to collect payment before assuming boxes have been abandoned. 

 

Most states set a dormancy period beginning on the date of the last rent payment, plus additional time for the holder to send a drill notification and await payment. If customers don’t respond to the drill notification, the holder may proceed with drilling. 

 

“If you decide you want to allow the customer to keep their contents in the box without paying, that is your decision,” Rummel said. “But be careful. If you determine you’re not going to drill at all, it could be viewed as avoiding escheatment.”

 

During the drilling, most states require holders to maintain dual control. They usually specify that one or two bank personnel—in some cases a bank officer—be present. A notary is also required. In some states, the notary cannot be a bank employee. Finally, the holder will need a drill vendor. 

 

As soon as the box is drilled open, the holder and notary complete an affidavit, ensuring all of the box’s contents are listed.  

 

“It is wise to err on the side of caution and be vague with descriptions on the affidavit,” Rummel said. “For example, if there is jewelry in the box, remember that you are not a jeweler when describing those items. Instead of saying the box includes a diamond ring, list it as a yellow ring with a clear stone. If it’s not a diamond and you list it as such, you may find yourself in litigation and owing someone a diamond.”

 

Contents should be kept safe in a tamper-proof bag. The affidavit should stay with the contents. If you plan to place the affidavit in the bag, make sure to keep a copy elsewhere so you don’t have to open the bag later. Having a process in place to track the chain of custody is also essential. Some states require that a post-drill notification must be sent to within a set time (often 10 to 30 days) after a box is drilled. 

 

The second scenario for drilling, relocation generally occurs when a bank branch is moving or closing. If the physical bank of boxes is being moved and not drilled, different rules apply because the holder is not technically breaking the rental agreement. Consult with applicable state laws regarding requirements for moving the entire box rather than its contents.

 

For relocation, notify safe deposit box owners that the branch is relocating or moving, and ask them to take their contents. Some states have specific language and mailing requirements. 

 

If owner payments are current but they have not responded to the relocation notice, dormancy generally begins at the time of drilling. In these instances, the customer has been paying but did not respond to the notice about the relocation. Holders may have to store items longer than required for nonpayment drilling because the one-year nonpayment gap doesn’t exist in this scenario. Otherwise, the same rules apply regarding dual control, notaries, affidavits and content handling.

 

Remittance

Once the holder completes the drilling, the state requires holding the contents for a designated period specified by state law. In the event customers claim their property, there should be a process for documenting their receipt of the items—typically a section of the affidavit they complete and sign. Make sure to keep a copy of this to prove the customer picked up the items if needed. If customers claim items after reporting to the state, follow the state’s notification process, specifying that the property is no longer unclaimed. 

 

At some point defined by each state, the holder is expected to remit either the entire safe deposit box contents or just certain items. If states do not require remittance of the complete contents, holders send an inventory list and the state specifies which items they want. For items the state does not accept, there may be an additional holding period. Once this period ends, destruction or auction of remaining items may be allowed. Each state has its own time frame and requirements. Holders should keep detailed documentation of how all property was disposed. 

 

Safe deposit boxes present a unique set of challenges for property holders. However, they still share a significant similarity with other forms of unclaimed property—lack of consistent requirements from state to state. Banks and credit unions holding customer property in safe deposit boxes should consult with their state banking laws to understand the many nuances for their individual locations. 

 

Tags:  banks  safe deposit boxes  unclaimed property 

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Illinois Passes New Unclaimed Property Act, Repeal Effort Underway

Posted By Administration, Thursday, July 20, 2017

On July 6, 2017, Illinois budget bill S.B. 9 became law after the House voted to override the governor’s veto. Among the provisions added to the bill shortly before passage was the Illinois Revised Uniform Unclaimed Property Act, which repeals the state’s current unclaimed property statute and replaces it with new language. 

 

S.B. 9’s unclaimed property provisions become effective on Jan. 1, 2018. However, a movement to repeal the Illinois RUUPA is already underway. 

 

Illinois RUUPA

Among the Illinois RUUPA provisions that are most noteworthy for holders are:

  • The new statute’s definition of escheatable “property” specifically excludes game-related digital content, loyalty cards and gift cards. The definition of “stored-value card” specifically excludes loyalty cards and game-related digital content but includes gift cards. Because stored-value cards are escheatable property, these opposing definitions present an obvious conflict for holders that deal with gift cards. 
  • The new statute defines “virtual currency,” and includes it within the list of escheatable property.
  • Tax-deferred accounts are considered abandoned under the new statute three years after either the required distribution date for avoiding tax penalties, or the 30th anniversary of the account’s opening date—whichever is earlier. Earlier abandonment dates are specified for deceased owners of such accounts. The statute specifically includes health savings accounts in the tax-deferred account provision. 
  • Similarly, the statute includes detailed provisions regarding custodial accounts for minors.
  • Holders are required to maintain records for 10 years. Retained records must include unclaimed property report information; the date, location and circumstances that led to the property rights; property value; last-known owner address; details for items that were not reported as unclaimed; and details related to money orders, traveler’s checks and similar instruments. 
  • The statute incudes a “transitional provision” that requires holders to file an initial report for property that was not previously reportable, but is reportable under the new statute for a period of five years from the effective date (Jan. 1, 2018). 
  • The state’s current business-to-business unclaimed property exemption is excluded from the new law. 

 

Repeal Effort

Before S.B. 9 passed, efforts to repeal the Illinois RUUPA provisions were already underway. On July 3, 2017, Rep. David McSweeney introduced H.B. 4078, which specifies that if S.B. 9 becomes law, the Illinois RUUPA provisions contained in S.B. 9 will be repealed, effective immediately. If passed, the state’s current unclaimed property law, the Uniform Disposition of Unclaimed Property Act, would remain in effect. Before the Illinois legislature’s recess, 19 representatives signed on as co-sponsors of the bill. 

 

For the latest information about this and other noteworthy unclaimed property bills, visit UPPO’s govWATCH website

 

 

Tags:  B2B exemption  gift cards  Illinois  RUUPA  unclaimed property  virtual currency 

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2017 Unclaimed Property Legislative Roundup

Posted By Administration with contribution by Marcella Easly, senior compliance advisor at UPCR, Thursday, July 13, 2017

Across the nation, unclaimed property has been a popular topic for state legislatures this year. Although a handful of state legislatures are still in session, most have completed their work. Following is a brief summary of some of the most noteworthy unclaimed property bills that became law during the 2017 session. 

 

Delaware

Effective on Feb. 2, 2017, S.B. 13 adopts in substance many provisions from the 2016 Revised Uniform Unclaimed Property Act promulgated by the Uniform Law Commission. In addition, it adopts certain recommendations from the Delaware Unclaimed Property Task Force formed under Senate Concurrent Resolution No. 59 of the 147th General Assembly, and makes significant changes to the state's unclaimed property reporting process and compliance initiatives. More specifically, these changes include reducing the look-back period of all voluntary disclosure agreements and audits to 10 report years, and creating a 10-year statute of limitations for the state to seek payment of unclaimed property due to the state. In addition, this legislation aligns the state’s record retention requirement for companies with the statute of limitations and look back period, which brings State law into conformity with a majority of other states. This bill also offers any company currently under audit prior to July 22, 2015, the opportunity to convert their audit into a voluntary disclosure agreement by entering into the Secretary of State Voluntary Disclosure Agreement program. All companies who received a notice of examination and are currently under audit as of the effective date of this Act will have the opportunity to engage in an expedited audit review process. Finally, the bill mandates that interest be assessed on any late-filed unclaimed property, as a means to incentivize voluntary compliance. See previous UPPO’s May 4 blog post for more information about S.B. 13. 

 

Effective on June 29, 2017, S.B. 79 makes changes and corrections to SB 13. Among these changes, the amended bill ensures holders have sufficient time to comply with SB 13’s due diligence requirements with owners. It further clarifies that the state will indemnify and defend a holder against claims made by a foreign jurisdiction for property paid or delivered to the state escheator in good faith.

 

Idaho

Effective on July 1, 2017, H.B. 152 establishes an exemption from Unclaimed Property law for nonprofit corporations providing telecommunications service and delivery of electric power.

 

Illinois

Effective on Jan. 1, 2018, S.B. 9 creates the Revised Uniform Unclaimed Property Act. It adds language concerning definitions, applicability, rulemaking, and presumptively abandoned property. The bill also includes rules for taking custody of property that is presumed abandoned, reporting requirements, and required notice to property owners, among other provisions. The bill expressly excludes gift cards, loyalty cards and game-related digital content from property subject to escheat. However, it does not exclude gift cards from the definition of “stored-value cards,” which are subject to escheat, creating a potential conflict. The bill also specifies that virtual currency is subject to escheat. The state’s business-to-business exemption is not retained under the new bill.

 

New Hampshire 

Effective on Jan. 1, 2018, H.B. 473 increases the threshold above which merchants can sell gift cards with expiration dates from $100 to $250. The bill further clarifies that gift certificates of $250 or less shall not be considered abandoned property, and it revises the definition of gift certificate by removing the requirement that a gift certificate be in writing. The bill also provides that gift certificates and store credits remitted to the state prior to Jan. 1, 2018, must remain in the custody of the state until returned to the owner.

 

South Dakota

Effective on March 10, 2017, S.B. 34 revises provisions related to securities held as unclaimed property. It requires the state treasurer to sell all stocks, bonds, and other negotiable instruments within 90 days of confirmed receipt, unless the property is on an open claim.

 

Effective on July 1, 2017, H.B. 1081 revises provisions for establishing a trust for a mineral owner who cannot be located. It provides that a person or entity holding interest in a tract of land may petition a county court to create a trust in favor of an undetermined owner of a mineral interest in that tract of land. It further provides conditions for the creation and administration of such a trust.

 

Tennessee

Effective on July 1, 2017, H.B. 420 repeals and reenacts the Uniform Unclaimed Property Act. It includes dormancy periods, reporting and due diligence requirements, and abandoned life insurance provisions, among other measures. The bill requires the treasurer to sell or liquidate securities between eight months and one year after receiving the security. 

 

Texas 

Effective on Sept. 1, 2017, S.B. 561 relates to unclaimed life insurance and annuity contract proceeds. Among its provisions, the bill requires an insurer to periodically compare its applicable in-force life insurance policies, annuity contracts, and retained asset accounts against a Death Master File. In the event of a match, insurers are required to complete a good faith review of the situation, and if proceeds may be due, to conduct outreach to beneficiaries within 90 days and provide assistance in making a claim. The bill further requires an insurer to report and deliver unclaimed proceeds to the comptroller of public accounts.

 

Effective on Sept. 1, 2017, H.B. 2964 adopts a Senate amendment and provides that a holder of mutual fund shares must notify an owner at initial purchase that the owner may designate a representative to receive a notice of abandonment.

 

Utah

Effective on May 8, 2017, H.B. 175 repeals and reenacts the Revised Uniform Unclaimed Property Act. Among its provisions, the bill revises presumptions of abandonment, amends reporting procedures, and addresses the duties of a holder of abandoned or unclaimed property.

 

Effective on May 8, 2017, H.B. 42 makes comprehensive revisions to insurance law. Among other changes, the bill amends definitions under the Unclaimed Life Insurance and Annuity Benefits Act by removing the definition of "Knowledge of death."

 

For the latest information about these and other noteworthy unclaimed property bills, visit UPPO’s govWATCH website. 

 

About the contributor 

Marcella Easly, senior compliance advisor at Unclaimed Property Consulting & Reporting (UPCR), contributes to UPPO’s regular legislative update blog posts. Easly has more than 30 years of unclaimed property experience with special focus in state legislative tracking and resolving client-state advocacy issues. She was Unclaimed Property Manager for the State of Oregon for 14 years.  She was active in the National Association of Unclaimed Property Administrators (NAUPA), serving as president, and regional vice president.  She was instrumental in the creation of the NAUPA property type reporting codes.  She has been with UPCR for 11 years, and has been active in UPPO for more than 13 years.   

 

 

Tags:  Delaware  Idaho  Illinois  legislation  New Hampshire  South Dakota  Tennessee  Texas  unclaimed property  Utah 

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