This page addresses key areas of interest regarding California unclaimed property escheatment laws and regulations.
Escheat reporting in California is anything but a modest task because, unlike every other state, California utilizes a two-tiered unclaimed property reporting structure.
Below are the steps that holders must take in order to comply with California Unclaimed Property Reporting laws.
Step 1: Identify Unclaimed Property
California businesses must review financial records annually to determine if they are holders of any property that has remained dormant or inactive beyond the obligatory dormancy periods. Some of the more common types of unclaimed property include checking and savings accounts, customer overpayments, payroll checks, insurance proceeds, stocks, other securities, and utility deposits.
California unclaimed property laws mandate that holders of unclaimed property perform due diligence to try and reconnect with property owners. Holders are required to send notices to owners of securities, regardless of value, and for all safe deposit boxes and other property types valued at $50 or more prior to reporting accounts to the State Controller’s Office.
The Holder Notice Report is the first step in the two-part California escheat reporting process. This report is due before November 1st of each year (May 1st for life insurance companies). California holders are NOT to remit any properties at this time. Any property received will be returned to the holder.
The State Controller’s Office will send out its own form of due diligence to reported owners upon receipt of the Holder Notice Report. These notifications will inform owners to contact the holder to claim their unclaimed property before the mandatory Holder Remit Report period of June 1st to June 15th (December 1st to December 15th for life insurance companies). The holder must remit payment to the property owner once contact has been made.
The Holder Remit Report is the second step in the two-part reporting process. This report is due between June 1st and June 15th per annum (December 1st and December 15th for life insurance companies). Property not claimed by the owner must be remitted along with the report.
The State Controller’s Office has the authority to perform holder audits if there is reason to believe the holder failed to report property that should have been reported pursuant to California escheat laws. California, like many other states, utilizes a combination of state employees and third-party auditors to conduct unclaimed property examinations to enforce compliance.
Under Section 1530 of California’s unclaimed property law, holders who fail to timely report, pay or deliver unclaimed or abandoned property shall pay interest at a rate of 12% per year on the property or value thereof from the date the property should have been reported, paid or delivered.
If a holder pays or delivers unclaimed property in a timely manner, but files a report that is not in substantial compliance with the requirements of Section 1530, the interest payable shall not exceed $10,000.
A fine will be assessed after a reasonable amount of time has passed from the delivery of notice from the State Controller’s office to the holder notifying the holder that a report is required. The willful failure of a holder to deliver a report or perform other duties, including the use of the property report format, will result in a fine of $100 per day for each day the report is withheld or such duty is not performed. Additionally, a fine of anywhere between $5,000 and $50,000 will also be assessed for willfully refusing to pay or deliver the property.
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The California unclaimed property reporting process can be challenging for holders. Does your organization have questions about individual state unclaimed property laws and requirements? Click the link below for frequently asked questions regarding unclaimed property reporting and compliance.
Unclaimed Property Reporting & Compliance FAQs
Unclaimed Property Reporting can be a stressful task. However, when properly managed, the annual reporting and escheatment process does not need to be a burdensome experience.
Contact Keane for help or visit our resource library to see how we guide organizations on the path to unclaimed property compliance.