Keane's Unclaimed Property Blog

You Asked. We Answered. – Unclaimed Property Best Practices Q&A

You asked, we answered.

Below are the questions asked by your peers during our latest webinar, “Unclaimed Property Reporting: Best Practices for Compliance” and answered by the unclaimed property experts here at Keane.

Please note that the questions and answers provided do not constitute legal, financial, accounting or any other type of advice. It is provided solely for educational and informational purposes for the viewers of this presentation. You are urged to consult with counsel and other advisors about their particular facts and circumstances.

Are we able to submit all funds through our home state?

In accordance with Texas vs. New Jersey, you are to report the property to the state of the owners’ last known address.

If a holder has never reported to a state before, are there any states that require a registration to establish an account, or do you just start reporting annually?

If you have not started reporting annually, you may want to explore VDA opportunities in certain states, so as not to trigger an audit. There are some states that require registration on their website in order to upload reports.

If a holder has been reporting unclaimed property with all states, and ceases doing business and selling all of its assets, do any states require the holder to file a final report to close out of the state, even though the holder has nothing to report to the state?

You may want to file a final, zero report, but it’s not similar to tax reporting, in that you must file a final report. It should be noted, that if you’re going through liquidation, that sometimes those do have shortened dormancy period, when liquidating and closing out your business.

What states require a state specific footer?

North Carolina, California, Delaware, and Vermont all have that specific language that we squeeze into the footer.

What about filing escheat reports to Canada?

There are certain Canadian provinces that have escheatment laws, however, many of them require that you have a brick and mortar location, in Canada, in order to have to file there. If you are in the banking industry, I think it probably affects you a little bit more. The question also asks about penalties and interest for Canada. I have not seen any, so far in my experience.

Is the dormancy period on the age of a payable, or on the age of the last check issued or payable? For example, if the check was not cashed annually, anything uncashed is voided in the accounting system and reissued with a current check date. So the check is less than a year old, but the payable itself could be five years old.

You need to start aging for unclaimed property dormancy when that initial check was issued, if we’re talking about an accounts payable check. You can kick the can down the road to circumvent escheatment, unless you would have contact with that owner and they’ve requested that that check be reissued. You would need to age that payable from the initial check date.

Accounts receivable credits would be aged from when the credit was incurred. If it’s wages, it’s from the date that that payment was made to them. Securities dormancy gets a little bit more complex, because you have to take into consideration the activity of the owner, as well as mail returned by the post office. We could spend another hour talking about that.

For the state of Texas, which has penalty and interest, what if my company currently has never filed, but we do have unclaimed outstanding checks? Will we be subject to penalties upon filing the first time, since we never have?

The short answer to that is yes, Texas does have a VDA program. Previously, up until this year, it used to be for first time filers only. My understanding is that it has since expanded to any holder of unclaimed property. But they will, also, if you are assessed penalties and interest, we have seen them abate that with a letter explaining the circumstances.

Can you address issues around foreign entities and their requirements?

This question can be answered a couple of different ways, first of all, what I will say is just that you are a US based company and you have a foreign payable. Right? If you have something that’s due to someone in Europe, for example, that property would be reportable to your state of incorporation. Now, if you are a foreign entity and it is a foreign to foreign transaction, those items are not subject to US unclaimed property laws.

There are other countries, such as Kenya and the UK, that do have their own unclaimed property programs. However, I am not well enough versed in those particular programs to speak contemporaneously about those at this time.

Can you explain business to business (B2B) states, and that compliance that surrounds them?

There are opportunities for holders to take advantage of business to business exemptions. You do need to read the laws very carefully. Some are exemptions, true exemptions, where if you have a payable to another business, that it may not be reportable. Sometimes, the law is defined between accounts receivable credits and accounts payable. Other states talk simply about a business to business deferral, so that at the time you cease doing business with the company, that it is reportable at that time.

Those laws, again believe it or not, vary from state to state. You need to make sure that you have a good understanding of them, before applying them. We also have some folks here at Keane, that are very well educated in B2B and could assist you, if necessary.

Is there a time frame in which an audit needs to be completed?

Some auditors tend to be a little bit more motivated than others. They are often compensated on a contingency fee basis. Any property that they determine to be past due and is collected, that’s how they get paid.

There is an expedited Delaware audit program right now that is going on that’s a little bit of a different beast. But that would be the only audit, that I would say, needs to be completed within a certain time frame.

What are some suggestions for a new controller who has never reported unclaimed property?

I think I would recommend is conduct a self-audit or risk assessment. Simply put, you don’t know what you don’t know. That exercise will really help you to get your arms around what your obligations are, where your potential areas of exposure are, and then you can develop a plan of action to move forward. Whether that’s any catch up filings, or moving forward with a voluntary disclosure, or general ongoing reporting.

I’d definitely start by understanding where your liabilities are and moving on from there.

What states offer a Voluntary Disclosure Agreement program?

States offer both formal and informal programs, so we don’t have a full list at our fingertips. I do know that we have a blog post on our site that outlines VDAs. There’s a rather lengthy list of I think about 12 states that we’ve detailed at least at a high level.

How do you stay informed of all the recent state changes?

There are various sources out there, from the trade groups that we mentioned. Keane also offers our own legislative alert service, where you can sign up for free alerts and get notified in real time when there’s breaking news. Then there’s access to our online compliance portal, where you can access legislative alerts where it’s tracked by Heather and her team any time a bill moves, or past pending failed. It’s a great way to keep up to date.

Per agreement with our client, their funds are placed in an interest bearing account. Are we of liable for interest on the funds we have been holding while trying to find an heir?

If you have an account agreement that says you are to pay them interest, I would say that, yes, that would probably be reportable and you would be liable for that interest.

Are there currently any options for the customer to be notified through email or text, rather than a letter in the mail about any money that is owed to them that would allow them to possibly reply in real time through email or text, and have the option for that money to be direct deposited to their bank account or paid on an act of policy?

There are some states, as Heather was talking about, with the RUUPA legislations where electronic notification is becoming a requirement. I would certainly say though, if you are receiving a response through email or text, to make sure that you have an identifiable way to know that you have the owner contacting you.

I have checks over 10 years old. Do I need to report those as unclaimed property?

Yes. Assuming they are eligible for escheatment, dormancy periods have tended to decline in length, so I would assume that most of those checks are eligible for escheatment, and should be reported.

Must all payment reports, meaning accounts payable, AR payroll, be submitted on the same report?

If they’re all eligible for escheatment, yes they should be filed on the same report.

Does the state require a negative report if there is no reportable unclaimed property?

Some states, yes, do require negative reports to be filed. Others do not, but again, I still say it’s a best practice to show consistency in your reporting.

How do you handle if you want to consolidate companies to report under one?

You can do that for most states. There are some states that do not allow consolidated reporting, Nevada is one that comes to mind that does not allow consolidated reporting. if you were to do that, I would consider sending a cover letter with your report notifying them of the entities that you’ve rolled up into that one.

Do you have a list of states which require due diligence and the requirements of each state?

Each state at this time does require due diligence letters to be mailed. Pennsylvania was the last holdout that did not have it officially in their law and they changed that recently. There requirement, state by state, certainly Keane could assist you with that.

What if the last known address is foreign? Will the unclaimed property be escheated under the branch state or the state of incorporation? Does that also apply to military addresses?

If you have property that is foreign addressed, it is reported to the state of incorporation.

For military addresses, I have seen that handled a variety of different ways. APO, DPO, FPO can be reported to the state of incorporation. I have seen it reported to the state where the zip code is. I’ve also seen, one holder in particular that comes to mind, take the extra step, research the permanent address of the owner, and report it to the state of the permanent address in order to give the owner a better chance at reclaiming their funds.

What are the risks involved in reciprocal reporting?

There are some states that do say, you can report the minimum number of accounts to us and we’ll see that it gets to the correct state. Not all states allow reciprocal reporting. The other thing that I would mention, again, if you are reporting in a three year state, and you analyze all of your property based on that three year dormancy, you could potentially be escheating property early.

If you are in a state that liquidates shares, for example, and you report them early, you lose the indemnity, you also have a customer that is really upset or potentially liquidating their property at a low in the market.

We merged two entities and the remaining entity is domiciled in a different state, if we escheat in the future, do we escheat to the state of the new entity?

You have to think about your look back period or pipeline property.  In your newly incorporated state, you would report anything that would be due in that state for the prior dormancy period. If you are becoming newly incorporated in a five year state, you would have a look back period of five years for that state for any unknown or foreign property. If you are in a three year state, you would be looking back at the prior three years.

What is the standard for taking care of credit balances associated with health care benefits? Can these be sent to states where insurance company is located?

You need to report them to the address of the owner, to their state, and if it’s unknown it would go to the state of your incorporation. The location or the nexus of company would be irrelevant.

What are your questions? We’re ready to answer.

If you have specific unclaimed property questions or concerns, we invite you to speak with one of our escheat compliance experts by contacting us at 800.848.8896 or Questions@KeaneUP.com.  We’ll be happy to lend a hand in any way we can.

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Compliance, Unclaimed Property Reporting


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