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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 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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Reviewing Records for Unclaimed Property

Posted By Administration, Thursday, March 1, 2018

To help ensure that all potential property types and sources are being captured in the unclaimed property review process, holders should periodically review trial balances, general ledger and bank statements. 


The review should identify all open and closed bank accounts that are used to distribute checks and electronic payments. Review open accounts to verify that the outstanding checks associated with the accounts are being captured in the unclaimed property procedures. Review closed accounts to determine the resolution of outstanding items. Ensure voids are well-supported and not being issued to circumvent unclaimed property.    


Conduct an additional review on general ledger accounts to identify accounts that have been established to capture unknown, unreconciled, write-off or suspense balances. If accounts are noted in the system, conduct additional research to verify whether the balances represent unclaimed property.


Uncashed checks

Including uncashed checks is intrinsic to every unclaimed property review. Research checks outstanding more than 180 days to determine if the funds remain due and payable to the payee. If the distribution is still owed, confirm payee name and address and conduct outreach to contact the payee about the status of the outstanding check. If the payee lost or destroyed the original check, the original issuance should be voided and reissued. Make sure to maintain notes pertaining to the reissuance in the accounting records along with the date that the reissued check cleared.


To verify that the reasons for voids are documented and that they weren’t voided simply because they were outstanding and not cashed, review all voided transactions greater than 90 days. Third-party auditors may test outstanding checks aged greater than 90 days from issuance and voided aged greater than 30 days from issuance. As such, to be conservative, transactions voided more than 30 days from date of issue should be documented in the accounting records to cover all bases.


Checks issued by third parties on behalf of the holder can create unclaimed property exposure for a company if responsibilities are not well-defined. Ensure third-party contracts clearly outline the duties and that those responsibilities are executed based on the contract terms. 


If the third party is reporting on the company’s behalf, the company should request and maintain copies of the unclaimed property reports, detail of the property that was reported and all associated payments or remittances to the state. Ultimate responsibility for outstanding checks tends to fall back on the company unless adequate supporting documentation can be produced.


Credit balances

Accounts receivable credit balances tend to be one of the most complicated accounting types in unclaimed property because states take various positions regarding when or if property is deemed to be reportable. For example, some states hold the position that accounts receivable credit balances are not reportable while there is an active relationship with the customer, but the state may not provide a thorough explanation of what constitutes an active relationship. Other states consider all credits as potential unclaimed property, no matter the account relationship, and want holders to confirm that their customers are aware of credits and have the opportunity to use them.   


Most states also allow credits owed to a customer to be offset by balances owed to the company by the same customer. Debits due from the customer that were written-off to bad debt during the same time period can be used to offset the credit balance write-offs. 


When conducting an analysis of the accounts receivable transactions that are potentially escheatable, holders need to look at transactions that may no longer be included in the receivables account – for example, credits that were moved out of accounts receivable and into accounts payable because they were refunded to the payee.


The process should include reviewing reports that contain any unresolved credits that were reclassified out of the receivables account. Review the general ledger detail to identify any credit balances that were reclassified, because these transactions may represent unclaimed property. The states do not accept write-offs to income as sufficient to remove the credit balance and therefore prevent the credit balance from being escheated to the state as unclaimed property.


Holders should review the unapplied cash detail, also commonly referenced as an unidentified remittance, to identify any receipts that are stale-dated and have not yet been applied to a customer’s invoice to offset the credit. 


Determining when the transaction is stale-dated may vary by state. Companies should routinely review unapplied cash detail quarterly, bi-annually or annually. 


For holders that maintain unapplied cash on the accounts receivable aging reports, the unapplied cash detail analysis may not be applicable. In such cases, holders should review aging reports on a regular basis.


Gift cards

Sales of gift cards and certificates may result in escheatable property too. Holders need to review the gift card/certificate reports that identify unredeemed gift card balances. Obtain these reports either internally from the appropriate department or from the third-party administrator if one is used to run the gift card/certificate program.


Holders should review unredeemed gift card/certificate reports to identify cards and certificates that have been inactive and are soon to become dormant. The dormancy period for unredeemed gift cards/certificates varies by state.


Dormant unredeemed gift cards/certificates may be escheatable. If a holder retains the owner or gift recipient’s address information, then the unclaimed property laws for that address state will apply. If the holder does not retain address information, then the laws of the holder’s state of incorporation or domicile will apply. 


Some states do not require the escheatment of unredeemed gift cards/certificates. A vast majority of those states simultaneously require that the cards and certificates do not expire. This allows an owner to redeem the gift card/certificate into perpetuity. Holders should identify the applicable state law to determine if transactions are escheatable and what limitations may apply.



Equity is another type of property record that may result in an escheatable transaction. When evaluating equity for potentially escheatable property, holders need to review outstanding dividends and other payments that are owed and outstanding to the shareholder, as well as the underlying shares. Many states require that, if a dividend check is dormant and escheatable, holders also escheat the underlying share related to the dividend.


Most holders employ a transfer agent to oversee their equity. Escheat review and annual compliance filing is usually included in the duties of the transfer agent. Holders should request and maintain copies of all annual unclaimed property reports filed by the transfer agent on the holder’s behalf. 


Holder conducting their own analysis of potentially escheatable equity transactions should review the report of shareholder activity. This report should include the date of the shareholder’s last activity on their account, as well as list the outstanding dividend check payments.


States vary on what information is considered sufficient contact to identify the shareholder’s last activity date, so consult the applicable state provision.


Mineral rights

Some holders may hold potentially escheatable property in the form of mineral rights and royalties. A holder should review the list of suspended accounts that is due to the holder losing contact with the property owner.  The determination of lost contact may vary depending on the applicable state law, so the holder should always verify what is considered lost contact.


Similar to the analysis of equity transactions, if the royalty is determined to be dormant and escheatable, the holder should be aware that some states require holders to remit all owed royalties with the outstanding payment. Keep in mind, some states have more stringent guidelines for reporting mineral rights and royalties so be sure to research state statutes.


Insurance properties

Insurance companies have a number of unique transactions from other types of businesses that may become escheatable property. In addition to uncashed checks, insurance companies need to conduct analysis on agent commission liability accounts to identify any dormant unpaid commission balances.


These holders should also obtain and review records related to life insurance policies. Identify policies that have matured but were not paid to the policy holder due to losing contact with the policyholder, as these policies may be escheatable.


Holders should obtain a listing of life insurance policies for which the death notice was received but the claim not paid. This often occurs because the beneficiaries cannot be found. Many states have enacted the Life Insurance Benefit Act, which requires companies to check policy inventory against the Death Master File on a regular basis.


Further, holders should obtain and review a listing of unpaid annuities and inactive retained asset accounts to identify transactions that have become dormant and may be escheatable to the states.


As with all property types, dormancy and escheat requirements vary by state, so confirm applicable state laws.

Tags:  checks  credit balances  gift cards  gift certificates  insurance  mineral rights  records 

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Marathon Decision Signals Big Win for Holders

Posted By Administration, Thursday, January 4, 2018

Marathon Petroleum Corporation et al. v. Secretary of Finance, State of Delaware et al.


On Dec. 4, 2017, the Third Circuit Court of Appeals overturned a lower court’s dismissal of Marathon Petroleum’s lawsuit against Delaware. The appeals court decision is exciting for holders for multiple reasons:

  1. It provides holders reassurance that they can sue for violations of federal common law.
  2. It limits states’ ability to look at subsidiaries only to confirm that they’re legitimate and not simply alter egos of the parent company.
  3. It reassures holders that they can “just say no” when faced with unreasonable information requests.


Marathon uses a gift card management company incorporated in Ohio, a state that exempts such property from escheatment. After Marathon objected to an $8 million estimated liability for gift certificates for which the company said it had issuance and redemption records, third-party auditor Kelmar – on behalf of Delaware – requested records related to the gift card company’s creation and operations. 


Among the information requested were contracts, meeting minutes, vendor agreements and accounting records. Marathon refused, arguing that such a request is outside of Delaware’s jurisdiction. Again, Kelmar suggested it would turn over the issue to the attorney general for enforcement action. 


In February 2016, Marathon filed suit. arguing violation of the federal priority rules and the Fourth Amendment. The Marathon case also took issue with the state’s estimation practices. 


Delaware argued that Texas v. New Jersey applies only to disputes between states, not audits of private entities. The defendants also argued that Marathon’s claims were premature, as they would have their chance to make their case in state court if they continued to resist turning over requested documents. Attorneys for Marathon took issue with the state’s interpretation of federal law and compared the nine-year audit of the company to a “fishing expedition.”


The Decision

On Sept. 23, 2016, a U.S. District Court agreed with Delaware’s arguments and dismissed the case. In overturning the District Court ruling, the Third Circuit Court of Appeals stated, “…we disagree with [the] conclusion that private parties cannot invoke federal common law to challenge a state’s authority to escheat property.”


The Appeals Court, however, agreed with the earlier court’s ruling that the case was not yet “ripe.” “To the extent the companies are challenging the scope or means of the examination in this case, the claim is not ripe, since the state has taken no formal steps to compel compliance with the audit,” the court wrote.


The case has been referred back to the District Court to clarify that the case’s dismissal is without prejudice, giving the plaintiffs time to refile the lawsuit at a later date.


Effects of the Decision

Through its decision, the appeals court confirmed that holders can rely on the federal common law priority rules from Texas v. New Jersey. The decision tells holders that the priority rules apply to all relationships involving the remittance of unclaimed property to a state, not just disputes between states.


“To finally have confirmation that holders have standing to sue under the federal common law rules for violations and potential alleged violations is a really big win for holders,” said Jameel Turner, attorney at Bailey Cavalieri LLC. “It forces the states to negotiate audit settlements in good faith because any audit or audit dispute could lead to a federal lawsuit.”


Looking at the holder-subsidiary relationship, the court tackled the long-standing question of what extent the state can investigate subsidiaries incorporated in in another jurisdiction as part of an audit examination. The court confirmed that states have the ability to conduct an inquiry into subsidiaries to determine if they are legitimate and not just alter egos of the parent.


“If the holder asserts that its gift card subsidiary is incorporated in Virginia and holds the company’s gift card liabilities, then producing a certificate of good standing, the articles of organization and a sample journal entry to show how liabilities are booked should be sufficient,” Turner said. “Beyond that, there’s no need to go down a rabbit hole with the state and look at voluminous card-level detail and other irrelevant documents that are typically requested. To receive some clarity about what records holders need to produce relative to their gift card subsidiaries is a significant win for the holder community.”


These limits reassure holders of the ability to “just say no” to information requests outside states’ audit authority. If the state disagrees, it would need to sue and let a court decide.


“I think this case will embolden holders to stand firm in their legal rights,” Turner said. “When they think a state is making information requests that are outside the scope of the state’s audit authority, holders will be more apt to just say no. Marathon provides holders with legal authority to say no to unlawful information requests and force a state to file an enforcement action.”


Disclaimer: This case summary contains a general description of the case. It is not intended as business, financial, legal, tax, reporting or compliance or other professional advice or services. This summary blog is not a substitute for such professional advice.

Tags:  gift cards  litigation 

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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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S.B. 13 makes sweeping changes to Delaware’s unclaimed property statutes

Posted By Administration, Thursday, February 16, 2017

On Feb. 2, 2017, Gov. John Carney signed Delaware S.B. 13 into law, significantly updating the state’s unclaimed property statutes. Many of the changes mirror the 2016 Revised Uniform Unclaimed Property Act (RUUPA), and others appear to respond to issues raised by the Temple-Inland case. The new law is intended to “bring greater predictability, efficiency and fairness to the state’s unclaimed property reporting process and compliance initiatives.” Following is a summary of several of the law’s most noteworthy provisions.


Lookback, Record Retention and Statute of Limitations

S.B. 13 reduces the lookback period for both audits and voluntary disclosure agreements (VDAs) to 10 years plus dormancy. It also defines an express record retention period of 10 years from the date a holder submits a report. The statute of limitations is now 10 years from the date the duty arose, whether or not the holder reported the property. The previous statute of limitations, although shorter, began to run from the time the holder reported the property.


Estimation Methodology

The new law mandates that the secretaries of finance and state develop estimation regulations by July 1, 2017. They must include permissible base periods; items to be excluded from estimation calculation; aging criteria for outstanding and voided checks; and a definition of what constitutes “complete and researchable records.”


Audit Conversion

Under the new law, all holders currently under audit may convert to a two-year accelerated audit. Holders under audit as of July 22, 2015, may convert to a VDA program. Holders have until 60 days after the promulgation of the new estimation regulations to decide whether to convert to an accelerated audit or VDA program. Interest and penalties will be waived if conversion is made. Holders remaining in the audit will be subject to mandatory interest that is waivable only up to 50 percent.


Subpoena Authority

Provisions of the new law give the state escheator the power to issue an administrative subpoena and the ability to seek enforcement of an administrative subpoena in the Court of Chancery. These provisions appear to address issues raised by Delaware Department of Finance v. Blackhawk Engagement Solutions.


Judicial Review

Among the new provisions adopted in Delaware is a process for appeal by holders to the Delaware Court of Chancery, replacing the previous multi-step administrative review process. Under the new appeal process, holders have the ability to challenge the state escheator’s determination of liability. The court’s standard of review is deferential to the state escheator regarding factual determinations, but errors of law will be reviewed de novo. The judicial review provision also expressly gives the Court of Chancery the authority to review questions of state or constitutional law related to the examination. This provision appears to be a response to the Temple-Inland case.


Indications of Owner Interest

S.B. 13 adds a specific list of owner activities that prevent running of the dormancy period. Indications of the owner’s interest in property includes:

  • A written or oral communication by the owner to the holder or agent of the holder concerning the property or the account in which the property is held.
  • Presentment of a check or other instrument of payment of a dividend, interest payment or other distribution.
  • Accessing the account or information concerning the account, or a direction by the owner to increase, decrease or otherwise change the amount or type of property held in the account.
  • Payment of an insurance policy premium with some exceptions.

The new law also specifies that if an owner has more than one investment or account with a holder, an indication of interest in one investment or account is an indication of interest in all of those accounts.


Knowledge of Death

The new law adopts the “knowledge of death” concept as a dormancy trigger for life insurance proceeds. “Knowledge of death” may be identified through any source, such as declaration of death, a death certificate or the comparison of the holder’s records against the Social Security Administration’s Death Master File.


Priority Rules

For the first time, the Delaware unclaimed property law includes a codification of the U.S. Supreme Court’s priority rules. It expressly prohibits Delaware as the state of domicile under the second priority rule from taking property into custody that is exempted in the first priority rule state. It also allows the state of domicile to claim foreign-address property but excludes property claimed under foreign law.


Owner Address

S.B. 13 adopts portions of RUUPA’s definition of an owner’s “last-known address.” The last-known address of an owner is defined as “a description, code or other indication of the location of the owner on the holder’s books and records that identifies the state of the last known address of the owner.”


Disposal of Securities

The new law specifies that the state escheator shall sell or dispose of securities on any established stock exchange or by such other means as soon as the escheator deems it feasible after the delivery. The escheator may not sell a security listed on an established stock exchange for less than the price prevailing on the exchange at the time of sale. The escheator may sell a security not listed on an established exchange by any commercially reasonable method.


S.B. 13 provides for indemnification of security owners for 18 months. The escheator will provide either a replacement security or the market value of the security at the time the claim is filed if the owner comes forward with that 18-month period.


Gift Cards

For the first time, Delaware’s statute defines “gift cards,” “stored value cards” and “loyalty cards.” Gift cards and stored value cards remain escheatable after five years of inactivity. The state retained its unique profit retention provision defining the amount unclaimed as “the amount representing the maximum cost to the issuer of the merchandise, goods, or services represented by the card.” S.B. 13 adds “Goods” and “Services” into the mix, as old statute only provided exemption for “maximum cost to issuer of merchandise represented by the card.” Loyalty cards are expressly exempt.


Holders are prohibited from transferring their unclaimed property liability or obligation, except to a parent, subsidiary or affiliate. This provision affects third-party, unrelated companies that issue gift cards on behalf of a business and appears to address some of the uncertainty resulting from the Card Compliant qui tam litigation.


Compliance Review

Another new provision in the law permits the state escheator to conduct a “compliance review” if the escheator believes a filed report was inaccurate, incomplete or false. The compliance review is limited to contents of report and all supporting documentation. The escheator is required to adopt rules governing the procedures and standards for compliance reviews, but no timeline was included in the statute.


Application of the New Law

S.B. 13 represents a major change in Delaware’s unclaimed property practices with many positive developments for holders. They include reduced lookback, clear record retention period, estimation regulations, statute of limitations regardless of prior reporting compliance, direct appeal to Court of Chancery, new definitions and new exemptions.


As with any new law, it remains to be seen how provisions will be interpreted and applied. Holders await the regulations still in development regarding audit conversions to fast-track audits and VDAs, and the new compliance review provision. Clarification from Delaware will help holders make informative judgments about whether to convert current audits into VDA or fast track audits, and whether other changes to their unclaimed property practices are warranted.


Tags:  audits  Delaware  estimation  gift cards  RUUPA  unclaimed property 

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Litigation update: Motions in Card Compliant whistleblower case raise noteworthy issues

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Thursday, November 3, 2016

The State of Delaware, Plaintiff, and William Sean French, Plaintiff-Relator, v. Card Compliant LLC, et al., Defendants (Superior Court of the State of Delaware)



Delaware ex rel. French v. Card Compliant LLC et al. (Card Compliant) is a qui tam case—a suit brought when a whistleblower exposes alleged fraud against the government with the incentive of receiving a portion of the recovery as a reward. The defendants include Card Compliant LLC, a third-party company that some defendants used to issue gift cards and assume certain gift card responsibilities, and numerous other defendants. Among the various allegations, the plaintiffs claim that some defendants didn’t account for the transfer of liability in the manner its contracts specified. According to the state’s allegations, the liability wasn’t truly transferred and, thus, defendants had the obligation to remit unclaimed property to Delaware but didn’t do so.


Motions to Dismiss

The Card Compliant case currently has approximately 80 defendants. As indicated in a recent order in the case, there are generally two main types of entities created by defendants in the case that are being closely examined. First, there are non-Delaware card issuers, which include card issuers affiliated with the Delaware retailers with which they contracted, which the order refers to as “giftcos.” Second, there are card issuers (including card companies, banks and financial institutions) not affiliated with the Delaware retailer with which it contracted, which the order refers to as “cardcos.” Some defendants have filed Motions to Dismiss and/or Motions of Summary Judgment, raising several issues:

  • Before this suit was brought, some defendants were the subjects of Delaware audits or voluntary disclosure agreements (VDAs). Thus, they believe they should be dismissed from the case under the Administrative Proceedings Bar in the Delaware False Claims and Reporting Act (DFCRA), which generally precludes parties from seeking liability based on transactions that have been the subject of a state-involved administrative proceeding. They argue that audits and VDAs fall within the established definition of “administrative proceeding” and, thus, should not be parties in this suit.
  • Under the DFCRA, the state is generally required to make an independent investigation of whistleblower claims before defendants are included in a qui tam action. Defendants point out that arguably the state did not make such an investigation. As such, the defendants argue that they should be dismissed from the case.
  • Before the action, it is alleged that certain Delaware officials generally held the position that unredeemed gift cards that emanated from out-of-state entities were not escheatable to the state. Thus, defendants don’t believe the state can claim they committed fraud, as they operated under the same position as the state.



On Oct. 17, 2016, Judge Wallace ordered Delaware to produce all documents from 2001 forward related to Delaware VDAs or audits that indicate, among other things, the state’s prior positions on how gift cards were treated. Although unconfirmed, we have heard from reputable sources that the court has engaged the services of a mediator in an effort to resolve the pertinent issues in the Card Compliant case. 


This suit is one of the more interesting unclaimed property cases currently working its way through the court system. While it will likely be some time before the suit is either settled or decided, interested parties anxiously await the court’s resolution of the issues raised by recent defendant motions. UPPO will continue to monitor and report on developments in this case.


About the contributor

Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property and is a frequent author of unclaimed property articles and whitepapers. Schaunaman is a member of the Oklahoma Bar Association and American Bar Association.    


Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering business, financial, legal, tax, reporting or compliance or other professional advice or services.  This summary blog is not a substitute for such professional advice.



Tags:  Card Compliant  Delaware  gift cards  litigation  qui tam  unclaimed property  whistleblower 

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