Friday, October 23, 2020

Unclaimed Property on the Ballot in Louisiana

Constitutional Amendment Would Create Unclaimed Property Trust Fund to Pay Claims

You may not have heard, but this year is an election year. In addition to contests at the federal, state, and local level there is a constitutional amendment on the ballot in Louisiana relating specifically to unclaimed property. Louisiana Amendment 7 would create a permanent trust fund expressly earmarked to pay unclaimed property claims. The proposed amendment would require the State Treasurer to annually deposit, into a dedicated fund, net unclaimed property receipts (after deductions for certain expenses and statutory allocations) until such time all of the state’s potential unclaimed property liabilities are funded.

The specific language on the ballot is as follows:

Do you support an amendment to create the Louisiana Unclaimed Property Permanent Trust Fund to preserve the money that remains unclaimed by its owner or owners?

2020 Louisiana Act 38, Section 4.

This amendment results from the settlement of a lawsuit between Louisiana Governor John Bel Edwards and State Treasurer John Schroeder over the use of unclaimed property as general treasury funds. Historically, Louisiana (like most states) has used unclaimed property receipts in excess of claims to fund state expenditures. After a reserve for claims, unclaimed property revenue is transferred from the unclaimed property fund to the state’s general treasury.

In 2019, Treasurer Schroeder refused to make the transfer, arguing that the funds did not belong to the government, but rather to the owners of those funds. The Treasurer also claimed that transfers to the general fund rendered the state unclaimed property program to be temporarily unable to pay claims. (A shortfall that happened again this year). The Governor disagreed, arguing that the use of these funds was expressly authorized by the state legislature. A lawsuit followed, in which the court ruled in favor of the Governor. Shortly thereafter, the two sides reached a deal that provided Edwards with additional funds now in exchange for the creation of a trust to fund future claims.

If it passes, the amendment will go into effect on July 1, 2021.


Friday, May 1, 2020

Holders: Don't Forget That You're Owners Too

Unclaimed Property Holders Should Take Another Look at Potential Claims


Before getting to unclaimed property news, just a quick word to our readers (both of you!):  we hope that you and your families are safe and well during these turbulent times.

The COVID-19 crisis is, first and foremost, a human tragedy.  But even if and when the virus is tamed, and the immediate economic crisis ends, there is expected to be a significant long-term economic disruption as well.  One place where that disruption will be particularly felt is with regard
 to cash flow and liquidity. For companies operating on a thin margin, every dollar in the door counts.

Accordingly, this is a good time for holders of unclaimed property to remember that they very well may be owners of unclaimed property too. Often, companies do not bother searching for or claiming unclaimed property reported to the states on their behalf, thinking that the process is too cumbersome or not worth the effort.  In these changing economic times, holders would be well advised to rethink that position and at least take a look at what is out there ready for claiming.

Friday, April 24, 2020

Certain Spring Reporting Deadlines Automatically Extended Due to COVID-19

Like other business operations, many holders have found that the COVID-19 crisis has caused a disruption to the process of reporting and remitting of unclaimed property, particularly in those states with a Spring reporting deadline.  While holders should check the relevant state unclaimed property administration website for specific information (and to request an extension if necessary), many states have proactively responded to this disruption by either unilaterally extending the unclaimed property reporting deadline or granting a prospective wavier of late-reporting interest and penalties for a defined period.  Some of the highlights are as follows:

Arkansas – The May 1 annual reporting deadline for life insurance companies had been extended to
June 1, 2020.

Illinois – According to the website of the Illinois State Treasurer, interest and penalties will be waived for up to 60 days after the end of the Illinois declaration of emergency.

Maryland – The April 30 annual reporting deadline for life insurance companies has been extended to July 31, 2020.

Massachusetts – The May 1 annual reporting deadline for life insurance companies has been extended to July 1, 2020.

New Jersey – The annual reporting deadline for life insurance companies has been automatically extended to June 30, 2020.

North Carolina – The annual reporting deadline for life insurance companies has been automatically extended to June 1, 2020.

Pennsylvania – The April 15, 2020 reporting deadline remains in place, but the Department of Treasury’s website provides that the Department will waive all fines, penalties, and interest for property that is reported and remitted to the Department by June 15, 2020.

Note that the foregoing are only the automatic extensions provided by the states. Extensions can also be applied for, on a case by case basis, by contacting the relevant state unclaimed property administrator.

Monday, March 2, 2020

An Offer You Might Not Want to Refuse

Delaware Secretary of State Issues VDA “Invitation” Notices


The Delaware Secretary of State’s Office recently sent letters to over 100 companies identified as “likely” out of compliance with Delaware’s unclaimed property laws. The letters “invite” those companies to enroll in Delaware’s Voluntary Disclosure Agreement (VDA) program. Delaware’s VDA is an amnesty-type program pursuant to which a company performs a thorough self-review of its unclaimed property reporting history and remits any overdue unclaimed property to the state. That self-review is, in turn, double-checked by state staffers on behalf of the Secretary of State’s office who may identify additional property, if any, to be reported and remitted. In exchange for performing this self-review, the VDA program provides companies with a waiver of all penalties and interest that the state might otherwise assess on late-reported unclaimed property. In addition, the company and the state will generally agree in advance on a methodology for certain contested issues that come up during the review: How far back does the review go? What entities have to be reviewed? What is the process for dealing with periods for which the company does not have researchable records?

The waiver of penalties and interest is the VDA’s “carrot;” now for the “stick”: companies who do not accept the invitation to enroll in the VDA program may be selected for audit by the State. That audit is not a self-review, but rather is generally conducted by a private auditing firm retained by the state. Those audits tend to be much (much, much) lengthier than a VDA self-review and carry the threat of interest and penalties. In addition, the auditors generally employ more aggressive and controversial audit methodologies, seeking to shift the burden upon the company to prove that items are not unclaimed property, rather than the auditors demonstrating that items are unclaimed property. Indeed, there have been several lawsuits filed in just the past few years challenging the practices used by Delaware’s selected auditing firms. See Univar v. Geisenberger, Case No. 18-cv-01909 (U.S. District Court, D. Del.); AT&T Capital Services v. Geisenberger, Case No. 19-cv-2238 (U.S. District Court, D. Del.); Eaton Corp. v. Geisenberger, Case No. 19-cv-2269 (U.S. District Court, D. Del).

Given the potential audit risk, companies that are incorporated in Delaware should be on the lookout for these notices.  Unfortunately, the letters often do not go to the individual responsible for reporting and remitting unclaimed property at the organization, but rather are generally addressed to a senior executive such as the Chief Financial Officer.  Time to accept the invitation is limited; companies receiving the notice have 60 days from the date the request was made to enroll in the VDA program.  After that, an audit notice may issue.

Monday, February 3, 2020

Maine Amends Unclaimed Property Act to Exempt Gift Obligations Beginning in 2022

Amounts deemed abandoned to reduce from 60% to zero over four year period.

On January 30, the Governor of Maine signed Public Law 553, “An Act Regarding the Presumption of Abandonment of Gift Obligations.” Over a four year period, the new law will reduce — from sixty percent to zero — the dollar percentage of “gift obligations” that a holder must report and remit to Maine as unclaimed property.

Pursuant to the Maine Unclaimed Property Act, “gift obligations” (which include most gift certificates and gift cards that are not redeemable in cash) are deemed unclaimed property two years after December 31st of the year in which the obligation is sold or the most recent transaction occurs. Currently, holders of such items are required to report and remit 60% of the outstanding balance of these items as unclaimed property, keeping the remainder as income. Pursuant to the new law, the percentage to be reported will remain 60% for those items with last activity in 2019, but will drop to 40% for those obligations with a last activity in 2020, to 20% for those obligations with a last activity in 2021, and finally to zero for those items sold or last active in 2022 or later.