Monday, May 20, 2013

Why Delaware Gets An "F" from Industry on Unclaimed Property Regulation

Despite its small size (49th out of 50 states) and relatively modest population (45th out of 50), Delaware has always played an important role in the commercial and governmental history of the United States:  Delaware was the "First State" -- that is, the first state to ratify the Constitution.  Delaware also was home to the first scheduled steam railroad service, and (according to some references) the state where  the U.S. flag was flown for the first time (at the Battle of Cooch's Bridge, near Newark, Delaware on September 3, 1777).  

However, probably nowhere more than in the corporate world has Delaware played an important role in the business of this country, especially as a corporate domicile.  For example, despite having a population of approximately 917,000 people, Delaware is home to nearly a million companies.  The reasons for Delaware's position as the corporate domicile of choice are varied, but include a well-developed business law, an established and respected court system well-versed in corporate law, and a business-friendly reputation.

Delaware can likewise be considered "The First State" with regard to unclaimed property reporting and remittance.  As we've discussed earlier, under the rules established by the Supreme Court, a holder's state of incorporation is the state with priority to take possession of owner-unknown, address unknown, and foreign owned unclaimed property.  So, for the same million companies, Delaware is an important state for unclaimed property compliance.  In this area, however, Delaware's reputation is far from sterling.  In a recent editorial published by Investors Business Daily, Douglas Lindholm, the president and Executive Director of the Council on State Taxation outlines some of the reasons why Delaware's unclaimed property administration is not "business friendly" and he explains why COST gives Delaware an "F" in unclaimed property regulation.

In a few short paragraphs, the editorial provides an overview of the most frequent holder complaints:  the state's overly aggressive (and legislatively shaky) audit procedures and techniques, its questionable liability "estimation" techniques, and most importantly, the fact that in Delaware, these "consumer protection" laws are really nothing more than a revenue generator for the state.  (As the editorial points out, of the $320 million collected last year by Delaware's unclaimed property regulators, less than $20 million was paid to owners). While COST is obviously an interest group whose first priority is to advocate for the interests of its members, none of these critiques should come as a surprise to unclaimed property professionals or corporate holders.  Indeed, it was probably these concerns (among others) that led to Delaware adopting a (comparatively) holder-friendly, but limited time, VDA Program.

While the VDA was a positive start, the editorial argues, a variety of other fixes are necessary before Delaware can reclaim its historical reputation as a business friendly environment.  It is well worth a read.





Wednesday, May 15, 2013

UPPO to Host Webinar on Potential Revisions to Uniform Unclaimed Property Act

As we mentioned in January, the National Conference of Commissioners on Uniform State Laws (NCCUSL) announced the formation of a "study committee" to consider revisions and/or amendments to the Uniform Unclaimed Property Act of 1995.  The NCCUSL is the entity that promulgated the 1995 Uniform Act, a variant of which is in effect in a substantial number of states.  Given the infrequency with which the Uniform Acts are revised (the revisions that became the 1995 Act came 14 years after the enactment of the previous Uniform Act) potential revisions are a big deal.  Ultimately, the committee may suggest amendments to the current (1995) Uniform Act, draft a completely new uniform act, or decide that no action is warranted.

The NCCUSL sponsored a hearing on April 24, during which time a variety of participants provided comments on whether the Uniform Act should be revised.  For those looking for more information about the Uniform Act process, some of the issues raised at the April 24 meeting, and/or how the process is expected to play out, the Unclaimed Property Professionals' Organization will be hosting a May 22 Webinar discussing these, and related, issues.  Registration information for the webinar can be found here.

Monday, May 13, 2013

Politicians - They're Just Like Us (Unclaimed Property Edition)

Yesterday's Oklahoman had an article about unclaimed property being held by the state for a variety of state elected officials, including the Lieutenant Governor.  One might think that elected officials and government entities (so closely involved with the government of the state) would be well aware of state unclaimed property laws, and would thus be quick to notice and claim any property that was surrendered to the state.  One might think that.  One would be wrong.  In just a small sample:

The California Secretary of State's Office and Franchise Tax Board both have property held by the State Controller's Office.  The Florida Department of Insurance, New Jersey Division of Motor Vehicles, and Mississippi State Treasurer all have property held in their own states.

Former Governors Mitt Romney (MA), Arnold Schwarzenegger (CA), and Jim McGreevey (NJ) all have unclaimed property being held for them by a variety of states.

Moving to even higher elective office, President Barack Obama has property waiting for him in Texas, while the last President from Texas, George W. Bush, has money being held for him in D.C. (reported by the State of Maine).

Monday, May 6, 2013

Life Insurance Updates: Mountain Time Zone Edition


The past few years have seen substantial developments relating to life insurers, and this year is no exception thus far.  While past years have seen audits, investigations, lawsuits and settlements regarding insurers' purported failures to look for deceased policyholders, legislative developments this year are focusing on requiring such searches to be done going forward.   In particular, in the first third of this year, a variety of states have passed laws requiring life insurers to check their policies against the Social Security Death Master File in order to determine whether policyholders are deceased (and thus, whether benefits are payable).

For example, on March 29, 2013 Montana enacted the “Unclaimed Life Insurance Benefits Act” (Montana Senate Bill 34) which will require insurers and related entities, starting next year, to compare their policies against the Social Security Administration’s death master file (or a similar database) on a semiannual basis.  Similar searches are also going to be required in New Mexico beginning on July 1 of this year, and in North Dakota before next November, as a result of legislation that passed in those states (New Mexico Senate Bill 312, enacted April 1; North Dakota House Bill 1171, enacted Apil 30).   

Back here on the East Coast, New York is also requiring such searches, albeit on a quarterly basis, as a result of NY AssemblyBill 1831, enacted on March 15.