Keane's Unclaimed Property Blog

A California Unclaimed Property Voluntary Disclosure Agreement Program?

California Unclaimed Property Voluntary Disclosure Agreement Program

Keane Compliance Update: April 23, 2018 – California Assembly Bill 2773 was pulled from the State Legislature by its sponsor.

New legislation would establish a California unclaimed property voluntary disclosure agreement program. Introduced on February 16, 2018 as a bill unrelated to unclaimed property, CA Assembly Bill 2773 was amended on March 19, 2018 and directs the Controller to create an unclaimed property VDA program.

Proposed California Voluntary Disclosure Agreement Requirements

Holders of past due property who have not reported property in accordance with the reporting deadlines may enroll in the VDA program by completing the following steps:

  • Executing a participation agreement with the Controller.
  • Accurately reviewing its books and records, and reporting all unclaimed property due for the past 10 years, starting from the date that the holder’s intend to enter the VDA program was accepted by the Controller.
  • Making payment of the property in full, or entering into a payment plan, within 12 months from the date that the holder’s intent to enter into the VDA program was accepted by the Controller.

Holders currently under audit would be ineligible from participating in the program.

Key Benefits of the California Unclaimed Property Voluntary Disclosure Agreement Program

Holders accepted into the California VDA program and complete the voluntary disclosure in good faith will receive a full waiver of interest and penalties.

Holders will also receive audit protection, as the Controller would be prohibited from auditing the holder for the periods covered by a VDA, unless the Controller reasonably determines that the holder has made a fraudulent or willful misrepresentation as to a voluntary disclosure.

The Controller may adopt regulations for the implementation and enforcement of the VDA program.

If passed, the Act will remain in effect until January 1, 2024, unless a later enacted statute deletes or extends the date.

The Impact of a California Unclaimed Property VDA Program

A California VDA program for unclaimed property would be a welcome sign for the holder community, as the state not had a voluntary compliance program in place since its amnesty program ended in 2002.

The Unclaimed Property Professionals Organization, the national trade association for holders and service providers, has volunteered its efforts to sponsor CA AB 2773 and provide support in the form of helping California establish a VDA program that encourages holder participation and ultimately enables a greater number of businesses to come forward to achieve compliance with California unclaimed property law.

California is a unique state in that it operates on a two-part process where, following due diligence, holders must submit a California Holder Notice Report, then allow the state to send its own notices to reported owners, and then file a California Holder Remit Report with final remittance for any property not claimed by owners.

California is also a state that automatically assesses penalties and interest for late unclaimed property reports. Late filers incur a 12% per annum interest assessment where daily interest calculation is applied.

This means a population of unclaimed property liabilities valued at $10,000 would incur a penalty of approximately $12,000 if it was reported ten years after its due date.

We will continue to monitor the activities of this important piece of legislation and the efforts to establish an unclaimed property VDA program in California.

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