By Sandra Willard, Vice President of Corporate Asset Recovery & Joe Lichty, Director of Marketing
For most professionals tasked with managing unclaimed property compliance for their organization, their primary focus is ensuring that all property is reported to the proper jurisdiction, in the proper format, and by the required deadline. Either through this process of escheating these assets to the states, or through outreach to owners, customers, and investors – all of these efforts lend themselves to the end goal of returning unclaimed or abandoned property to its rightful owner.
Many companies rarely, if ever, view themselves as that rightful owner. However, organizations make up the largest share of owners entitled to the estimated $40-50 Billion in unclaimed assets currently held by state and municipal governments and treasuries.
How Does Property Become Lost?
Assets owed to businesses become lost and are escheated for many of the same reasons payments to individuals become unclaimed. Companies change addresses, are acquired, merged, or divested. Departments are consolidated and employees leave. For a variety of reasons, a disconnect between payer and payee exists, resulting in an outstanding payment owed to your organization.
How Do You Prepare for Recovering Unclaimed Assets?
The first step in implementing a program to recover these outstanding assets is to understand what information is needed to search and recover funds.
Aside from your legal company name, you should be searching for subsidiaries, previous company names and acquired entities. Compile a comprehensive list of addresses currently and previously used on your company letterhead. Better yet, keep an archive of previous letterhead, marketing collateral, self-addressed return envelopes, or anything with previous company addresses. This will be important when the time comes to verify addresses to prove your entitlement to the state. Also compile a list of current and past Tax IDs or FEINs. You may be asked to verify a Tax ID.
Obtain a letter of authority for a designated employee, preferably an officer, to recover property on behalf of your organization. This should be on official letterhead, notarized, with a corporate seal (if possible). The authorized employee will also need to provide a copy of a current driver license, business card, and a completed IRS W-9 at the time of recovery.
Now that you’ve gathered the required documentation, let’s determine where to search. A great place to start is within your own reporting system. Make sure not to escheat your own money. Also, make sure to take advantage of Business to Business exemptions allowed in certain states. Next, identify which states are most likely to have property for your company.
Many states operate their own websites to search for property held in your company’s name. There are other sites, such as unclaimed.org and missingmoney.com, where you can search in multiple jurisdictions. Not all states provide the values of assets being held, or they may only display a Min-Max or range of value. Make sure to search for all potential company names and search terms, accounting for common misspellings and transpositions of letters and numbers.
As you conduct your searches and build out your list of potentially recoverable property, you’ll also want to prepare the necessary proof of entitlement. Do not submit a claim for properties that have a fiduciary property type or were reported with multiple owners.
Proving Your Entitlement
As with all other aspects of unclaimed property, there are differences from state to state in regards to recovery requirements. Most states require proof of ownership of the company name and proof the business resided at the address of record. In some cases, states will accept an indemnity bond for properties that were reported in your company name, but there’s inadequate proof of address.
Financial institutions can use the National Information Center website to prove ownership of subsidiaries through acquisitions and mergers. Publicly traded companies can obtain proof of subsidiary ownership using SEC filings.
Before you submit a claim to any state – be sure you don’t owe them any past-due property. One of the biggest mistakes an organization can make in recovering assets held by a government agency is submitting a claim without a solid history of compliance. If your organization has been inconsistent or negligent in filing annual reports, coming forward to request funds from the state is sure to raise a red flag and draw unwanted attention to your reporting history, or lack thereof.
Keane’s Corporate Asset Recovery Services
Establishing a process to track and recover property held by state governments is an endeavor that will greatly benefit your organization. However, an effective program is one that requires a significant investment of resources. As many organizations don’t have an abundance of resources to spare, the services of an asset recovery specialist are often utilized. Many of these “finders” require an organization to delegate power of authority to them in order to recover the assets on behalf of the firm.
Keane utilizes a unique approach to Corporate Asset Recovery, in that we do not require to be granted power of attorney and funds are paid directly to the client. Keane’s service is designed to operate in the background and perform all the heavy lifting, minimizing the involvement of your internal resources. Keane’s team conducts all searches and prepares all applicable and necessary documentation – all without requiring power of attorney. Keane has recovered more than $30 million in assets on behalf of our clients through our white-glove Corporate Asset Recovery service.
To learn how Keane can assist your organization in identifying and recovering property currently held at the states, contact us at Questions@KeaneUP.com or contact Scott Regan, Executive Vice President at SRegan@KeaneUP.com.