Monday, October 6, 2014

Say "Aloha" to Your Unclaimed Property

Modern day unclaimed property laws are "custodial" in nature, meaning that the state takes possession of, but not legal title to, property that is reported and remitted to the state.  As a consequence, it is the rule in most states that although unclaimed money and assets may be remitted to the state's general fund and used for state spending, the owner never loses the right to reclaim his or her property.  This is in contrast the the historical practice of bona vacantia in England and prior Roman civil law, where "ownerless goods" would be owned by the crown.

In fact, it is the custodial nature of these laws and the unlimited opportunity for the owner to reclaim his or her money that serve as the states' most prominent response to frequent holder complaints that state unclaimed property laws are increasingly unfair, complex or burdensome.  Some states, however, are quietly limiting owners' rights to make claims for property held by the state. 

For example, pursuant to Hawaii Senate Bill 2321, effective July 1 of this year, an owner has 10 years to file a claim for property valued at $100 or less.  After that time, according to the new law, the property "shall escheat to the state" permanently.  According to testimony by the Director of the Department of Budget and Finance (who, to his credit, testified against this legislation) the new law means that there are 275,000 items (in an aggregate value in excess of $20 million) that are now subject to escheating permanently to the state.

Similarly, in Idaho, the amendment to Section 14-518 of the Act means that items valued at less than $100 need not be listed on the state's website database of unclaimed property held by the state.  While this represents a small fraction of unclaimed property held by the states as a whole, as states become more addicted to unclaimed property as a revenue raising measure, such initiatives will probably increase (to the detriment of owners).




Monday, September 22, 2014

California Amends Definition of “Owner” to Give Charities Greater Access to Unclaimed Funds

On September 15, California Assembly Bill 1712 became law.

This legislation expands the definition of an "owner" under the Act authorized to make a claim for unclaimed property in the Controller's possession.  In particular, the definition of "owner" was amended to add "a nonprofit civic, charitable, or educational organization that granted a charter, sponsorship, or approval for the existence of the organization that had the legal right to the property prior to its escheat but that has dissolved or is no longer in existence, if the charter, sponsorship, approval, organization bylaws, or other governing documents provide that unclaimed or surplus property shall be conveyed to the granting organization upon dissolution or cessation to exist as a distinct legal entity." 

In other words, if the California Controller's office is holding unclaimed property for the American [Charity] Association - LA Chapter, and that entity is dissolved or no longer exists, the property can be claimed by the nationwide American [Charity] Association.
According to a report on the bill by the Assembly Judiciary Committee, the bill arose from the acknowledgment that "there is a large amount of unclaimed property  . . . that is owned by nonprofit chapters or affiliates that have dissolved."  By amending the definition of owner to include the parent or sponsoring entity of the dissolved organization, the bill's sponsors intend to "retrun [the funds] to the charitable sector where it can once again benefit the community."

While the legislation is certainly laudable, insofar as it requires that the organizational documents of the dissolved entity to provide that unclaimed property will pass to the parent entity, it is unclear what impact it will have on the millions of dollars already in the Controller's possession.

Wednesday, September 3, 2014

Welcome to Fall (Reporting Season)

Labor Day has just passed, the kids are back at school (or will be, shortly) and the (unofficial) end of Summer has passed.  Next up for unclaimed property professionals is the Fall reporting season.  As of today, we are 60 days out from the November 1 reporting deadline in a few dozen states.  Due diligence letters have (hopefully) been sent out, and the process of preparing the Fall reports will now begin in earnest.  As we being the annual crunch to get the reports out the door on schedule, consider if there is anything you can do today to prevent the last minute rush, or to adopt new lessons learned.

Need to learn new lessons?  New to unclaimed property reporting?  Consider checking out the Unclaimed Property Professionals' Organization Holder Seminar in Atlanta, Georgia on September 17 & 18.  The agenda can be found here.  As always, the Seminar is designed for beginning and intermediate unclaimed property professionals and address a number of both general and specialized topics.  Full disclosure:  the author is a member of UPPO and will be one of the speakers.  (Completely unrelated aside:  the "Unclaimed Property Buzz" seminar on the first day should be fascinating and entertaining).

Whether you need to learn the basics or sharpen you the skills you've already learned, consider checking it out.

Monday, August 4, 2014

Unclaimed Property Postcard Scams Abound

Unclaimed property administrators in a number of states are warning about an identity theft scheme where the thieves send "Unclaimed Property Notifications" to the public to solicit personal information.  The postcards contain a toll-free number and ask the caller to provide identification information in order to claim the property.  This scam has shown up in Delaware, Kansas, Nebraska, West Virginia, Maine, Kentucky and probably a number of other states.

While these potential scams come in a number of different varieties, here are some tips to (try to) avoid scams relating to unclaimed property:

  • Don't Pay to Search -- States do not charge a fee for allowing you to search for unclaimed funds, or in most cases, even to collect unclaimed funds.
  • Don't Trust Links -- If you receive an email purporting to be from your state unclaimed property office with a link, go to the site directly.  A link to every states' unclaimed property office can be found on the website of the Nat'l Association of Unclaimed Property Administrators.
  • Don't Trust Phone Numbers -- Similarly, don't call the number provided to you in an unsolicited email or voicemail.  Look up (using NAUPA or some other source) the phone number for your state unclaimed property office yourself, and call them directly.  Some scams seek to trick victims into calling an international phone number and incurring high fees for those calls.
  • Don't Provide Financial Information -- You do not have to provide any financial or bank account information to perform a search or to learn if a state is holding unclaimed funds on your behalf. 

Monday, July 21, 2014

Pennsylvania Reduces Dormancy Periods

On July 10, Pennsylvania House Bill 278 was approved by the Governor.  The 112 page budget bill makes a number of legislative changes, but for purposes of this blog the most notable is the reduction in dormancy period for most property types from 5 years to 3 years.

What's behind the Pennsylvania push for shorter dormancy periods?  As usual, it appears to be a response to a nearly $1 billion budget deficit.  According to a Fiscal Study by the Pennsylvania House Appropriations Committee, "it is estimated that the reduction in holding period for the newly identified classes of unclaimed property will generate $150,000,000 in revenue for the General Fund in 2014."

There are a number of problems, however, with this statement:
  • First, with the exception of a clarification regarding IRA accounts, the new legislation does not contain any "newly identified classes of property"; rather, it simply shortens the dormancy period for the classes of property already covered by the Act. 
  • Second, if the legislative purpose of state unclaimed property laws is to effect only a change in "custody" of unclaimed property (i.e., from the holder corporation to the state) allegedly because the state is a better guardian of the funds, than the characterization of these amounts as Commonwealth "revenue" is misleading.  Assuming that the Commonwealth will make all reasonable efforts to reunite its citizens with their unclaimed money (an assumption we won't challenge for purposes of this post) than the "revenue" received by the Commonwealth is temporary at best.

  • Finally, it should be reasonably clear that the shortening of dormancy period itself does not "generate" any unclaimed property.  Instead, it essentially requires holders to triple the years reported next April 15.  That is, instead of reporting all property that is 5 years old, each will report all property that is 5 years old, 4 years old and 3 years old.  The upshot is that the $150 million increase cited is a one time only event, due not to any change in the structure of the Act, but simply because holders next year will be required to essentially report three years worth of property. 
This is yet another example of dormancy periods being modified to produce a short-term, artificial increase in governmental revenue. 


There are a few other notable provisions of the law that we will get to later in the week.