Monday, September 12, 2016

Pennsylvania Changes IRA Rules

According to the Investment Company Institute, Americans have $5.68 trillion in Individual Retirement Accounts (IRAs).  In a traditional IRA account, a person can make tax deductible contributions to an account that can grow over the years with no tax impact until distribution.  Importantly, individuals must wait until age 59.5 to make withdrawals without a tax penalty (and individuals generally must begin taking distributions at age 70.5).  In other words, an IRA is a prototypical long term investment.  Depending upon the individual's age when he or she opens the plan, decades can go by before the money is touched, in fact, to avoid tax penalties, it is likely.

The unclaimed property laws account for the fact that long dormancy is expected.  Pursuant to the 1995 Uniform Unclaimed Property Act, the dormancy period for IRAs and similar accounts does not begin to run until (1) the attempted distribution of assets or (2) the date that distribution must begin under the tax laws. 

This position is sensible - the whole purpose of these accounts is to put the money away until retirement.

Pennsylvania, however, has recently amended its unclaimed property laws for IRAs.  Under the new law (House Bill 1605) the dormancy period begins to run when two account statements are returned to the custodian as undeliverable.  In other words, if a person moves, but forgets to tell his or her IRA custodian within the period of two account statements, the IRA account is on its way to being turned over to the Commonwealth. 

It is unclear if there are any positive impacts from this change, but there certainly could be negative impacts.  Under the former law, if a person moved without notifying his/her broker, their funds would not be escheated until the mandatory distribution date (therefore there is no adverse tax consequence).  Now, if the same move happens, and the property is escheated, the account owner may suffer tax implications as a result of the "distribution" of his or her property to the Commonwealth. 

Moreover, it wouldn't seem that delivering the property to the Commonwealth does not make it any more likely that it will be returned to the owner.  If an individual remembers that he or she had a forgotten IRA account, he/she is more likely to remember (and contact) the broker rather than to contact the Commonwealth.  Accordingly, other than simply bringing more money into Pennsylvania's treasury, the reasons for this change are not clear.   

Monday, August 8, 2016

Delware and Temple Inland Settle - Questions to Remain Unanswered

In late June, 2016 a Delaware federal court issued a decision ruling that Delaware's unclaimed property audit and estimation practices "shock[ed] the conscience" of the court and likely violated the due process rights of Temple Inland (a Delaware company being subjected to an unclaimed property audit on Delaware's behalf by a private auditing firm).  While the court's holding was big news in the unclaimed property industry and signaled potentially seismic changes in the way unclaimed property audits are conducted, the real work was left to be done:  the Court expressly left open the issue of how Delaware's violations were to be remedied.

Even with this important step left to be taken, the holder community was understandably excited that -- finally -- there would be some answers concerning (a) the interplay between estimation and availability of records; (b) the proper methods for calculating and sourcing historical unclaimed property liabilities; and (c) the retroactivity of Delaware's estimation authority.

Well, it seems that we will have to wait a little longer.  According to a an Associated Press story in Saturday's Chicago Tribune, the parties in the Temple Inland case reached a settlement resolving the matter in full.  According to a joint-motion to dismiss the case filed by the parties on Friday, Delaware and Temple Inland have "entered into a voluntary settlement agreement that fully and finally resolves all claims, including all claims that were asserted, or that could have been asserted, in the case and therefore the matters in dispute between Plaintiff and Defendants have been resolved."

Accordingly, while the Temple Inland case showed that courts are willing ask the hard questions about Delaware's unclaimed property audit practices, it ultimately left those questions unanswered.

Tuesday, July 12, 2016

Charging Money For Free Informaton On Both Sides of the World

The Sydney Morning Herald (Australia) recently posted an article outlining how various companies in Australia seek to make money by repackaging otherwise public information at increased prices. According to the article, profit-minded Aussies are charging for public information relating to unclaimed property, ancestry records, government reports -- sometimes at a significant profit. 

The experience here in the U.S. is no different, particularly with regard to unclaimed property.  Agreements with so-called "finder firms" are allowed in many states, pursuant to which the finder agrees to assist a claimant with obtaining his or her money from the state in exchange for a percentage fee.

Of course, states generally charge no fees for searching, claiming and receiving unclaimed property that they hold for the benefit of the rightful owner.  Accordingly, finder firms (might) provide you with expertise or time (i.e., the they will deal with the the claim process so you don't have to).  They are NOT, however, providing you with access to the money; the underlying funds belong to the owner and is (or shortly will be) claimable directly from the state without the involvement of a finder firm. 

Everyone is free to spend their time and money how they wish, and everyone has their own individual balance of what is worth doing and what is worth paying someone else to do.  Just know what you are paying for.  In the case of unclaimed funds and finder firms, it is (maybe) time and expertise, not access, that you are buying.

Wednesday, June 29, 2016

Temple Inland Scores Win in Delaware Estimation Suit - Impact to be Determined

In 2014, Temple Inland filed a lawsuit against the State of Delaware, challenging the results and methodology of an unclaimed property audit performed by that state.  As part of a 2008 audit, the State of Delaware assessed Temple Inland unclaimed property liabilities for a 22 year time period, allegedly because of Temple Inland's failure to maintain records (notwithstanding the fact that no Delaware law requires a holder to keep such records).  After availing itself of the state's administrative appeal process, Temple Inland filed a lawsuit in federal  challenged the state's use of estimation in the audit context, arguing that the technique (1) was preempted by the Supreme Court's Texas v. New Jersey decision; (2) violated Temple Inland's rights under the Due Process Clause of the Constitution; (3) represented an unconstitutional "taking" of Temple Inland's property; and (4) violated the ex post facto clause of the Constitution.

Initially, both parties moved for a quick knockout -- Temple Inland sought a preliminary determination that the use of estimates was completely prohibited by the U.S. Supreme Court's decision in Texas v. New Jersey, while Delaware asked the court to dismiss the suit in its entirety.  In March 2013, the court denied both those arguments, allowing the case to continue.

Later both parties moved for summary judgment (a ruling providing that there is no need for a trial because one party is right as a matter of law) on the remaining claims that estimation was barred by the Due Process Clause, represented an unconstitutional taking of Temple Inland's property, or violated the ex post facto clause.  The court ruled on those motions yesterday.

The Court Rules Against Delaware on Due Process Claim, Leaves Remedy Open

The court began its substantive opinion with a section titled "Delaware's Dependence on Unclaimed Property Revenue."  While none of the following facts will be particularly startling to unclaimed property professionals, seeing them acknowledged by a federal judge is notable.  In  particular, the court recognized:
  • Unclaimed property represents Delaware's third largest revenue source;
  • In 2007, Delaware transferred over $350 in unclaimed property to the general fund, but only returned $20 million to owners; and
  • It is estimated that 90% of the property collected by Delaware is owner-unknown property (meaning it will likely never be paid out to its rightful owner).
Against this backdrop, the court evaluated whether Delaware's use of estimation was consistent with its obligation to provide Temple Inland with due process of law.  As the court noted, the key protection of the due process clause is to prevent "arbitrary" government action.  Under the relevant caselaw, the court recognized, action by a government agency like the Delaware Department of Finance is deemed to be arbitrary when it "shocks the conscience" of the court.  While noting that no clear precedent existed for the court to determine whether any of Delaware's individual actions met this threshhold, the court concluded that "in combination, defendants' executive actions shock the conscience."

In particular, the court singled out the following actions for criticism:
  • The fact that Delaware attempted to avoid the three or six year statute of limitations (which does not apply where no report has been filed) by not requiring negative reports and by not (apparently) keeping copies of reports filed by holders;
  • That Delaware never gave the holder notice that it must keep records of unclaimed property compliance (Delaware has no unclaimed property records retention statute) then tried to capitalize on the lack of such records to justify its estimation practices;
  • Delaware's attempt to impose the estimation statute retroactively;
  • The mechanics of the estimation process itself.  In particular, the he court intimated that Delaware may not properly take custody of estimated sums where the underlying liabilities upon which those estimates are based relate to amounts owed in other states.  Specifically, the court explained that “[I]f the property in base years shows an address in another state, then the characteristic of that property has to be extrapolated into the reach back years;” and
  •  The potential for double liability if other states estimate the same period.
While the court ruled that this conduct amounted to a violation of Temple Inland's due process rights, it did not decide the appropriate remedy.  Instead, it deferred to Delaware for suggestions, explaining that "[i]t is defendants who are best able to know which remedy will be the most palatable in its anticipated efforts to normalize the enforcement of its unclaimed property laws.  Thus, the court will defer its decision on the subject of an appropriate remedy until another day."

The Court Defers the Takings Clause Claim

The court made no final decision on the "taking" claim.  Pursuant to the Fifth Amendment (made applicable to the states by the Fourteenth Amendment) a state may not take private property for public use without just compensation.  Temple Inland argued that, by demanding estimated property in the context of an unclaimed property audit, the state was impermissibly taking Temple Inland's property for public use.  The court rejected the absolute nature of this argument.  While the court recognized that an inaccurately performed estimate could result in the taking of a holder's property, the court held "reasonable" estimation, in and of itself, did not represent an unconstitutional taking of a holder's property.  Noting that the parties had not yet presented evidence on whether the estimation at issue was "reasonable," the court deferred a decision on this issue.

The Court Rejects the Ex Post Facto Challenge

The court found in favor of Delaware on the ex post facto cause claim.  The Constitution's ex post facto clause (Art. I, Sec. 10) prevents states from retroactively punishing an act that was not prohibited at the time of the act.  As the court recognized, however, violations of the ex post facto clause have generally only been found in connection with criminal statutes, or civil statutes that operate as criminal punishments.  Because the court found that the estimation provisions of Delaware's unclaimed property law were civil, not criminal, in nature it rejected this claim.

The Temple Inland decision is no doubt a big win for the unclaimed property holder community that, for years, has been complaining about Delaware's overly aggressive and at times seemingly arbitrary estimation practices.  That said, the Court has expressly left open the issue of how Delaware's violation is to be remedied.  Until the court's ruling is given some practical effect, it is unclear just how much of a game changer this ruling will be.









Monday, May 23, 2016

Arizona to Take a Closer Look at Contingent Fee Audits

A few days ago, the Governor of Arizona signed House Bill 2343 into law.  The legislation makes some welcome and well-meaning changes to the way that unclaimed property audits (including, specifically, contingent fee audits) are conducted.  For example, the legislation provides that all holders will receive a "notice of rights" (1) making clear that the Department of Revenue makes all final decisions "that any unclaimed property is reportable;" (2) setting forth appeals procedures; (3) notifying holders where they can file complaints regarding auditor conduct; and (4) contact information for designated employees. 

In addition to these changes, the new legislation also signals that Arizona is taking a fresh look at the use of contingent fee audits, and whether there are any practical alternatives.  The law requires the Department of Revenue to issue a Request for Information by the beginning of next year to "explore the feasibility of contracting for audits . . . that are not directly or indirectly contingent on the auditor recovering unclaimed property."  This is obviously an important issue to the holder community.  Because the audit firm's payment at the end of an unclaimed property audit is generally calculated as a percentage of reportable property "identified" by the auditor, it is in the auditor's financial interest to take aggressive and novel positions intended to increase the amount due.  That is not to suggest that all audit firms do so, but the incentive alone is enough to cause many in the holder community to question the fairness of impartiality of these audits.  Hopefully, this is a first step in Arizona to formulating an audit process designed to locate unclaimed property actually due to the state, no more and no less.

Friday, May 20, 2016

Friday Lost + Found: "Show Me State" Searches, "Sunshine State" Slowdown, Upcoming Compliance Webinar

Missouri Legislature Passes Life Insurance Bill . . . . -- The Missouri legislature recently passed House Bill 2150, which would require insurance companies to compare policy information against the Social Security Administration's Death Master File on a semiannual basis.

. . . .While Florida Insurers Seek to Block Bill -- In the same vein, WMFE is reporting that a group of insurers has filed suit in Florida state court seeking to prevent retroactive provision of a law that requires them to undertake DMF searches back to 1992.

UPPO Audit Webinar -- The Unclaimed Property Professionals Organization (UPPO) is hosting a webinar on compliance efforts and avoiding audits.  Among the topics to be covered are state amnesty programs, completing state unclaimed property questionnaires, and fine-tuning compliance procedures.  Further information and sign-up details can be found at the UPPO website.


Friday, May 13, 2016

Friday Lost + Found: California's Audit Haul, Delaware Faces Threats, AARP Says "Open Your Mail"

California Unclaimed Property Audits Bring in Over $1B Per Year -- The Lake Arrowhead, California Mountain News has an article about a recent speech given by California State Treasurer John Chiang.  In addition to discussing the state budget, new technology initiatives, and "his perspective on the 'American Dream,'" Treasurer Chiang gave some information relating to his time as the State Controller.  As reported by Mountain News, Treasurer Chiang claimed that California's unclaimed property program was "broken" when he took over as Controller, and that his focus on "high profile audits brought in $9.3 billion" during his time in office (or about $1.2 billion per year).   To put that number into some perspective, $1.2 billion per year is more than the GDP of at at least 17 countries.

Delaware Online Chronicles Threats to Delaware's Revenue -- In Delaware Online there is an editorial by Harry Themal which outlines some of the "clouds on the horizon" with regard to Delaware's future financial outlook.  Along with many of the same problems that plague other states, the article specifically notes Delaware's vulnerability to fluctuations in revenue from abandoned property and the possibility of future lawsuits (as suggested by Justice Alito's comments in Taylor v. Yee).  As Mr. Themal notes, "[e]scheat has netted Delaware half a billion dollars – an eighth of the budget – so court rulings could be deadly."

AARP:  "Open Your Mail!" -- The AARP recently posted an article entitled "Abandoned Funds May be at Risk" which sounds the alarm over the speed and relative ease with which some states declare investment accounts and securities as "abandoned" property.  While many investors favor a "buy and hold" or similar passive investment strategy, the article notes that investors need to stay in contact with financial institutions (and open their mail) to prevent funds from being deemed "abandoned."

Monday, May 9, 2016

Oklahoma Supreme Court Affirms Dismissal of Suit Challenging Unclaimed Property Program as "Ponzi Scheme"

Recently, the Supreme Court of Oklahoma issued a decision in Dani v. Miller, an attempted class action suit challenging Oklahoma's Unclaimed Property Program as a "Ponzi Scheme."  In that case, an Oklahoma resident filed a number of constitutional and common-law challenges to the Oklahoma Unclaimed Property Act and its administration.  In particular, the plaintiff was challenging Oklahoma's practice (shared by nearly all the states) of only holding a portion of unclaimed property to pay out claims, while using the rest for state revenue.  As the Oklahoma Supreme Court explained:
"[T]he UUPA contemplates and accounts for the fact that not all owners of abandoned property will seek to recover it.  The UUPA therefore creates a system where a reserve is maintained in the Unclaimed Property Fund to pay approved claims and the remainder is deposited to the General Revenue Fund for use by the state."
 The plaintiffs contended that Oklahoma's unclaimed property program was a "Ponzi scheme"* because "the reserve is not sufficient to pay all potential (including not-yet-established) claims and new abandoned property is to be used to pay any established claims exceeding the reserve." The Court rejected this argument on two grounds.  First, the Court held that there was nothing fraudulent or deceptive about Oklahoma's program as its procedures (including the deposit of funds into the states general revenue) were all disclosed (and in fact, mandated by) state law.  Second, the court explained that "[t]he State is not deceiving new investors to pay valid claims, but rather is paying those claims with abandoned property it would be taking in anyway, per the terms of the UPPA.  [The Act thus] operates in such a manner that even if they must wait, owners of abandoned property with valid claims will always be able to eventually recover their previously presumed-abandoned property."  (emphasis added).

While the Court's reasoning seems  sound insofar as it recounts how state unclaimed property programs actually work, notably implicit in the court's decision -- and, in fact, in the operation of the states' programs themselves -- is the idea that the influx of unclaimed property funds will continue forever.  While there may be nothing deceptive or fraudulent in how these programs work, the fact remains that, at least in the first instance, a claimant's ability to recover his or her property is not a function of the state's ability to serve as a custodian or caretaker of unclaimed property, but rather its ability to keep that property coming in.



*  A "Ponzi scheme" named after Charles Ponzi is a fraudulent scheme wherein victims are generally promised a guaranteed return in exchange for an investment, and those investments are used by the fraudster to pay out returns to earlier investors.  Eventually, when the flow of new investments slows or stops, there is no money left to pay returns (or the initial investment) to any investors, and the fraudster has generally taken steps to disappear.  One of the most recent, and well-known, Ponzi schemes was the Madoff Investment Scandal.

Thursday, May 5, 2016

Friday Lost + Found: Airport Accumulations, Bucks on the Bayou, Reporting Refresher

Loose Change Adds Up -- The UK's Daily Mail reports that the Transportation Security Administration collected over $750,000 last year at U.S. airports (and over $4.3 million over the last eight years) in loose change and the like left at security checkpoints.  

States, They're Just Like Us -- WBRZ in Baton Rouge, Louisiana (home of Mike the Tiger) has an article about the unclaimed property held by the State of Louisiana on behalf of various agencies of . . . the State of Louisiana.  According to the story, some of the $700 million held by the State is owed to various government agencies, many of which are operating under limited budgets.

Upcoming UPPO Webinar on Reporting -- On May 18, the Unclaimed Property Professionals Organization is hosting a webinar on the details of unclaimed property reporting.  If you need a refresher in advance of the fall reporting season, signup information is available at the UPPO website.

Friday, April 29, 2016

Friday Lost + Found: More Fraud Warnings, Is DMF the Answer?

Massachusetts Warns of Fraudulent Letters -- Massachusetts Treasurer Deborah Goldberg issued a warning that her office has been receiving reports of fraudulent unclaimed property letters seeming to come from the Office of the Commonwealth Treasurer.  As a reminder, states do not charge owners of unclaimed property for searching for and obtaining property from the state.

Life Insurance on Sixty Minutes -- CBS's news program 60 Minutes recently ran a story about life insurers payment practices that is based, in large part, on the mutli-state audits of insurers' unclaimed property practices.  As a result of those investigations, states have become increasingly more insistent that insurers consult the Social Security "Death Master File" in order to determine when life insurance benefits have become payable.

But Is DMF The Answer? -- Though more and more states are requiring DMF searches as part of unclaimed property law or insurance regulatory compliance, some in the industry think that the approach is flawed.  In a recent editorial on InsuranceNewsNet, Michael Babikian voices some of those concerns and offers some alternatives.


Tuesday, March 22, 2016

Further Update on West Virginia Life Insurance Legislation

We recently published a brief post concerning West Virginia legislation relating to the obligation (or not) of life insurers to review the Social Security Death Master File (DMF) to determine when a life insurance policy becomes payable.  After the West Virginia Supreme Court held that life insurers had a duty to periodically ascertain when life insurance policies become payable, a few West Virginia legislators introduced a bill that would largely undo that decision - by specifically providing that "the obligation to pay does not arise until after a claim is made."

Instead of that legislation, however, the West Virginia legislature recently passed a bill that would make DMF searches a statutory requirement for insurers.  The Governor signed that bill on April 1, effective June 30, 2016.

Monday, March 14, 2016

West Virginia Insurance Battle Moves From Courts to Legislature

Last summer, the West Virginia Supreme Court of Appeals issued an opinion in Purdue v. Nationwide Life Insurance Company, a case presenting the issue of whether a life insurer is required to undertake periodic investigations to determine whether any of its policyholders are deceased (and, thus, that a death benefit is payable).  While the Court did not rule that insurers had a specific obligation to review the Social Security Death Master File (DMF) or similar databases, it nonetheless held that the dormancy period for a life insurance policy begins at the date of death and placed the burden on insurers to figure out how to ascertain that information.  Of course, an insurer could search the DMF, the Court explained, but they could also "contact its insureds directly" (e.g., call them every year), farm the task out to agents, or do whatever else the found "the most economical" so long as they obtained the required information.

 While the West Virginia Supreme Court's ruling seemed to be the end of the matter, some lawmakers are opening up a new front in the state legislature.  A few weeks ago, two West Virginia lawmakers introduced House Bill 4473, which would amend the state unclaimed property act to provide that: 
in the case of a life or endowment insurance policy or an annuity payable upon proof of death, the obligation to pay does not arise until after a claim is made with the insurer and due proof of death is received by the insurer.
 The bill provides that it is being introduce to "clarify an unintended result" of the Supreme Court's decision in Nationwide.  Not everyone agrees, however, that the obligation to contact holders was "unintended" by the Court.  According to a story in the Charleston Gazette-Mail, one of those who disagrees with this characterization, and the new legislation, is West Virginia State Treasurer John Purdue, the official who began the case against the insurers in 2012 which led to the Supreme Court's decision.  According to the Gazette-Mail the Treasurer noted that the Supreme Court's decision was "bipartisan" and unanimous, and urged the legislature to reject the bill.

The bill is currently pending before the West Virginia House Judiciary Committee.

Wednesday, March 9, 2016

Delaware Proposes New VDA and Audit Guidelines - Comments Welcome

The Delaware Department of Finance has posted proposed regulations for public comment to govern the state's unclaimed property audits and VDA proposals.  The proposed regulations are intended to implement the Delaware legislature's direction "to complete the development of a detailed manual containing procedural guidelines for the conduct of Delaware unclaimed property examinations" as per January 2015's Senate Bill 11.

Among the highlights of the proposed regulations relating to VDAs administered by the Department of Finance* is the establishment of a "rolling look-back date of 19 report years" for all VDAs entered into on or after January 1, 2017.

The proposed audit regulations include details regarding the appropriate sampling and estimation methodologies, rules for the auditor's conduct of the audit, procedural steps, as well as a sample (though very summary) non-disclosure agreement acceptable to the state.

The proposed regulations also contain a list of information and factors that may be used to select a holder for audit.  These include a review of the holder's reports for "inconsistencies, omissions or a lack of detail" and a "comparison of a Holder’s past reports to the reports of similar Holders within the same industry and of the same approximate size." 

Comments are due to the Department of Finance by 4:30 p.m. on April 1.

*  By virtue of legislation enacted in 2012, the Delaware Secretary of State's office also administers a Voluntary Disclosure Agreement program for holders of unclaimed property.  The proposed regulations above relate to the Department of Finance program.  Implementing guidelines for the Secretary of State's program can be found here.

Monday, February 29, 2016

Supreme Court Declines to Hear Unclaimed Property Case, But Fires a Shot Across the Bow of "Cash-strapped States"

Today, the Supreme Court of the United States issued an order declining to hear the case of Taylor v. Yee.  In Taylor, the United States Court of Appeals upheld a federal court's dismissal of a case challenging the methods used by California to notify owners that there property is about to be, or has been, escheated to the state. Specifically, the Taylor plaintiffs alleged that California violated the constitutional rights of unclaimed property owners by failing to, among other things, access databases of other California government agencies for information relating to the whereabouts of unclaimed property owners.

The Supreme Court's review of lower court decisions is mostly discretionary, so the decision not to review a particular case is not an approval by the Supreme Court of the decision reached below.  In fact, that seems to be especially the case here, as Justices Alito and Thomas agreed with the decision to deny review the Ninth Circuit's decision in Taylor, but warned that the "constitutionality of the current state of escheat laws is a question that may merit review in a future case."

In making that determination, the Justices noted that the combination of "shortened escheat periods with minimal notification procedures" raised "important due process concerns."  Among the notable points of the concurrence:
  • a critique that some states' notification procedures "rely on old-fashioned methods that are unlikely to be effective."  (citing Delaware's newspaper publication statute); and
  • affirmation of the view that the Constitution requires states to provide "pre-escheat notice" before property is taken by the state; and
  • a recognition that "[a]s advances in technology make it easier and easier to identify and locate property owners, many States appear to be doing less and less to meet their constitutional obligation to provide adequate notice."
While the states may have avoided review of their escheat practices in Taylor, the Alito/Thomas concurrence suggests that they may want to take a long hard look at their notification procedures before the Supreme Court does so.






Tuesday, February 2, 2016

Florida Senate Bill 970 -- Will Florida Expand the Use of Estimation?


One of the most controversial issues surrounding unclaimed property audits is estimation -- the use by auditors of statistical sampling and extrapolation to calculate a holder's historical unclaimed property liability in years that there are no researchable records available.  Holders and states dispute, among other things, when such estimation is appropriate, how it should be performed, and whether estimation can be used at all when not specifically authorized by statute.  Estimation has been a commonly contested issue arising in litigation between holders and states, and is one of the issues hotly contested in connection with the proposed revision of the Uniform Unclaimed Property Act.

While states, auditors, holders, and holder advocates dispute a number of issues with regard to estimation, until now they all agreed on at least one thing:  that unclaimed property liabilities for "estimated" years (where actual records were not reviewed) were all payable to the holder's state of incorporation.  As you may recall from our post about unclaimed property jurisdictional rules, unclaimed property generally gets turned over to the state where the owner's last-known address is located.  Where the holder has no owner-address information, unclaimed property gets reported to the holder's state of incorporation.  Using that same logic, estimated liabilities (which, being a simple calculated liability are by definition not associated with owner names) have historically been escheatable only to the holder's state of incorporation.  

Recently introduced legislation in Florida seeks to change all that.  Florida House Bill 783 / Senate Bill 970 proposes to amend the audit provisions of the Florida Unclaimed Property Act to provide:

If the records of the holder that are available for the periods subject to this chapter are insufficient to permit the preparation of a report of the unclaimed property due and owing by a holder, or if the holder fails to provide records after being requested to do so, the amount due to the department may be reasonably estimated, regardless of whether the holder is incorporated, formed, or organized in this state.
 In other words, the proposed legislation not only expressly authorizes Florida's auditors to estimate the liabilities of holders incorporated in states other than Florida, but it also provides the auditors with the authority to estimate "the amount due to the department" (i.e., Florida).  That runs contrary to most auditors' current practices, and is likely to cause significant disputes among the states, as most states clearly instruct that all estimated property gets reported and delivered to the holder's state of incorporation.  While holders may be concerned by this development, it is really the private auditing firms that run the risk of being forced to try to reconcile multiple state demands for the same property. 

The legislation is currently in committee in both the Florida House and Senate.  

Friday, January 22, 2016

Friday Lost + Found: Just How Much Are States Holding in Unclaimed Property?


As the East Coast prepares for its first major snowstorm of 2016, we take a quick look at some recent stories concerning the dollar value of unclaimed property held by state governments. 

California --  Over $8 billion

Connecticut -- $710 million

Illinois -- Over $2 billion

Maryland  -- Over $1 billion

New York --  Over $14 billion

According to the National Association of Unclaimed Property Administrators, the states collectively are holding in excess of $40 Billion in unclaimed property for the rightful owners of those sums. 

Like so many snowflakes, those misplaced pennies add up.

Monday, January 4, 2016

Happy New Year - A Look Ahead

Welcome to 2016.  What unclaimed property issues will come up over the next 365 (actually, 366) days?  While you can never be sure, here are some stories that we will be keeping an eye on.

Lawsuits, Lawsuits, Everwhere -- More and more holders are challenging state audit procedures, practices, and results.  The Unclaimed Property Professionals Organization has a great roundup that we needn't repeat here, but cases are pending challenging Delaware's estimation techniques (Temple Inland v. Cook), the legality and use of gift card subsidiaries (French v. Card Compliant), federal preemption (National Freight v. Sidamon-Eristoff), and a variety of other issues.  A decision in any one of these cases could have a significant effect on unclaimed property practices.

Revision to the Uniform Unclaimed Property Act -- The Uniform Law Commission of the National Conference of Commissioners on Uniform State Laws is continuing its efforts to revise the Uniform Unclaimed Property Act.  For a primer about the who, what, where, when, and why of the revision effort, see our previous post here.  The next meeting of the committee is scheduled for late February in Dallas.

Owner Challenges to State Unclaimed Property Laws -- While the historical justification for the state taking custody of unclaimed property for the rightful owner is the theory that the state "steps into the shoes" of the missing owner, some citizens are beginning to challenge the eagerness with which the state jumps into those shoes (sometimes while they are still being worn).  Lawsuits in Minnesota and Oklahoma are challenging the methods by which the state takes custody of unclaimed property or the actions that the state takes (or doesn't take) to direct those funds to the rightful owner.