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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: Property Types

Posted By Administration, Sunday, July 14, 2013
Updated: Friday, July 12, 2013

Welcome to another installment in the Unclaimed Property 101 series. Whether you’re new to the unclaimed property field or simply need a refresher, these posts are for you. Past posts have covered "What IS Unclaimed Property” and "Who’s Responsible, and How Does It Become Abandoned?

Today, we cover the different types of unclaimed property that your organization is held responsible for when reporting. Some types of unclaimed property – such as payroll or accounts receivable – are more obvious and memorable than others. But did you know some states have as many as 120 distinct property types?

In order to be sure your organization is in compliance with unclaimed property laws, you need to know all the various types of property that fall under the unclaimed property umbrella. After all, in order to be compliant it’s not enough to simply file an unclaimed property report; that report needs to completely capture all potential unclaimed property your company may be holding.

The following is a list of potential property types to look for when you’re working on your unclaimed property reports. Think of this list as a starting point and be sure to work within your state’s definitions and requirements for unclaimed property reporting, as every state’s laws are different.

Assets

  • Accounts receivable credit balances
  • Unidentified cash (check your company’s "miscellaneous income” account)
  • Abandoned tangible personal property
    • Needs to have intrinsic fair market value or considered a "valuable keepsake” (military medals, historic documents, Elvis concert tickets, etc.)
    • Check each state’s policy

Liabilities

  • Uncashed vendor checks
  • Uncashed payroll checks
  • Uncashed stock dividends and bond interest checks
  • Layaway accounts
  • Customer deposits
  • Self-insured benefit payments
  • Refund accounts
  • Unpaid retirement account distributions
  • Liquidated amounts due and payable under the terms of insurance policies
  • Moneys deposited to redeem stocks, bonds, coupons and other securities to make distributions
  • Amounts distributable from a trust or custodial fund established under a plan to provide health, welfare, pension, vacation, severance, retirement, stock purchase, profit sharing employing savings, supplemental

Owner Equity

  • Untendered stock certificates
  • Untendered bonds
  • Transfer agents
Income Accounts
  • Other income/miscellaneous income

It’s important to note that, if your company outsources certain payment functions to a third party – such as a transfer agent – it is critical that the contract specifically spells out which entity has unclaimed property reporting responsibilities, and which property types will be reported by the third-party service. You can read more about third-party reporting solutions in an earlier blog post.

For more Unclaimed Property 101 topics, check out our free webinar on the basics of unclaimed property. The UPPO Holders Seminar will also include topics of interest for unclaimed property novices and experts alike – register for the Holders Seminar and boost your unclaimed property knowledge.

Tags:  Compliance  education  FAQs  UP101 

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Oops! How To Avoid The Five Most Common Unclaimed Property Reporting and Remitting Errors

Posted By Guest Author - Valerie M. Jundt, Managing Director, Keane UP, Sunday, May 19, 2013
Updated: Friday, May 17, 2013

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

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

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

1) Reporting and remitting unclaimed property to the wrong jurisdiction

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

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

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

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

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

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

- Un-cashed checks

- Deposits

- Customer credits

- Refunds

- Unapplied payments

- Dormant accounts

- Benefit payments

- Accounts receivable

- Accounts payable

- Retirement assets

- Un-cashed payroll

- Unidentified cash/credits

- Retirement assets

- Workers’ Comp

- Travelers’ checks

- Matured bonds

- Un-exchanged shares

- Unpaid dividends

- Underlying stock

- Other general ledger items

- Tangible property (safe deposit box contents)

- Commissions

- Rebates

- Mineral-related property

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

3) Failure to properly address and consider successor liability

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

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

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

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

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

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

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

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

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

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

govWATCH


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  FAQs  Reporting  UP101 

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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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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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Whose Property Is It, Anyway? – A Brief History of Escheatment Law

Posted By Administration, Sunday, January 20, 2013
Updated: Friday, January 18, 2013

Children may be fond of the phrase "finders keepers, losers weepers” but unclaimed property professionals know this is rarely the case and state escheatment laws are never as simple as calling "dibs” on abandoned assets.

So, where did our confusing patchwork of unclaimed property laws originate and how has it evolved over the years?

Blame Our Forbearers

Like many time-honored American traditions (whiskey and fried food come to mind immediately), the concept of unclaimed property was first established in feudal England. The term "escheat" derives from the Latinex-cadere ­– meaning "to fall out.” Under English common law, any lands held "by tenure” (i.e., occupied by someone other than the owner) were returned to the feudal lord upon the death of an heirless tenant.

The idea behind escheatment laws was simple: when a landholder died, went to war or was convicted of a crime and imprisoned, his property reverted to the landowner in order to ensure its continued productivity and to prevent "squatters” without inheritance rights from usurping land that did not belong to them.

Following the Norman Conquest of England, the monarch became the sole "owner" of all the land in the kingdom, a position that persists to the present day. The king then granted land to his favored followers, who became"tenants-in-chief,” under various contracts of feudal land tenure. Such tenures never conferred ownership of land but merely ownership of rights over it. This distinction between ownership and stewardship of unclaimed property would be a hallmark of later U.S. laws.

Seems logical enough, right? All land belongs to the state (or in this case the crown) and reverts back to the crown once the holder is dead or otherwise loses his claim to the property.

Early common law forms of escheatment applied only to real estate – the concept of bona vacantia ("ownerless goods”) emerged many years later as a statute provision governing personal property without a clear heir.

Crossing the Pond

Inspired by English common law and the Magna Carta, property rights are among the most uniquely important elements of U.S. law, so important that they were codified in the Fifth Amendment of the U.S. Constitution.

The philosophical basis for U.S. escheatment law is not as clear as its feudal roots, but 19th century writings indicate the principles are similar, with individual states taking the place of feudal lords and the monarchy. William Draper Lewis, the dean of the University of Pennsylvania’s Department of Law in 1898, wrote:

"It is a general principal in the American law…that when the title to land fails from defect of the heirs and devisees, it necessarily reverts or escheats to the people, as forming part of the common stock to which the whole community is entitled…and the lands vest immediately in the state by operations of law.”

Over the years, there have been several statutory changes to U.S. unclaimed property laws, many resulting from court challenges in the 1930s and 1940s. The first nationwide unclaimed property law debuted in 1954 and was drafted by the Commission on Uniform State Laws. This model Act was commonly known as the Uniform Disposition of Unclaimed Property Act (UDUPA), but it soon became apparent that multiple liabilities (with different escheatment laws being applied to the same property holder doing business in different states) would be problematic.

Goin’ Through Changes

UDUPA has since been superseded, first by the Revised Uniform Disposition of Unclaimed Property Act (RUDUPA – 1966) and later by the 1981 Uniform Unclaimed Property Act (UUPA) which would be adopted by 26 U.S. states, the District of Columbia and the U.S. Virgin Islands. The 1981 Act was the most comprehensive of all in that it not only included various definitions for certain property types, but this Act also included language that would give the state the right to create an estimated liability in the absence of records. It also included penalties, interest and audit cost provisions and a records retention requirement.

Revised in 1995, the Uniform Act was broadened to include additional property types (such as gift cards, royalties and mineral interests); and the new Act doubled the penalties and audit fees for failure to comply with the laws. The 1995 Act also shortened dormancy periods and generally streamlined the process of escheatment for both holders and state regulatory agencies.

Modern wrinkles continue to challenge unclaimed property administrators, holders and associated service professionals, such as lawyers and accountants. The advent of Internet gift cards, paycards and other newly created forms of intangible personal property has caused many states to update their escheatment laws. But the primary foundation in which these laws were drafted has remained unchanged since the 1950s – reversing the old "finders keepers” adage in favor of a new approach: a virtual, state-by-state "lost and found” box.

For further reading:

Escheatment Laws and Regulations (from coveringcredit.com)
Unclaimed Property Laws, Compliance and Enforcement (Adreoli/Spotswood-CCH)

Unclaimed Property Laws and State Authority (Bureau of National Affairs)

The U.S. Securities and Exchange Commission (SEC) Escheatment Page


This information is not intended as a substitute for legal advice on compliance or reporting requirements.

Tags:  FAQs  Policy  UP Laws  UP101 

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