What is Unclaimed Property?
Unclaimed property refers to certain types of “intangible property” (such as uncashed checks, securities, refunds, customer overpayments, etc.) that a business owes to its employees, customers, vendors, creditors, or shareholders where there has been no activity/contact with the owner of the property for a specified period of time (“dormancy period”). After the dormancy period lapses (generally three to five years) with no owner contact or activity occurring, the property becomes “unclaimed,” and it must be turned over to the state with the corresponding jurisdiction. All US states and territories have unclaimed property statutes.
Unclaimed Property Annual Reporting
Nine jurisdictions have spring reporting deadlines beginning March 1 and extending through July 1, including Delaware, New York, Connecticut, Pennsylvania, Florida, Illinois, Vermont, Michigan, and Texas. An additional 43 jurisdictions have deadlines of Oct. 31 or Nov. 1, and it is not too early to start preparing for these, as well.
When preparing for any reporting deadline, it is important to confirm that proper policies and procedures are in place, including preparation of statutory required due diligence mailings to owners, so that you are ready to report any dormant property to the appropriate jurisdictions timely. A failure to properly report or maintain annual compliance could result in the assessment of penalties or interest and/or a costly and resource-consuming audit from one or more jurisdictions.
Companies that do not have a history of filing unclaimed property reports are encouraged to undergo an internal review to assess their current policies and procedures and quantify any unclaimed property liability before filing initial reports to jurisdictions. With no prior filing history, these “first-time” filings may raise an organization’s audit profile with one or more jurisdictions. This can be particularly important for organizations with a history of mergers or acquisitions, as they may have successor liability for unreported unclaimed property of the acquired business. When available, the best solution may be to take advantage of voluntary disclosure agreement programs to minimize the impact of statutory interest and penalties due to late filings and to minimize an organization’s audit profile.
For more information on unclaimed property annual compliance requirements, please contact us.
Published on January 16, 2023