2020 Vision: A Look at the Year Ahead in Unclaimed Property
Happy New Year! Last year saw a variety of developments in the world of unclaimed property. Today, we take a look ahead at five topics that might be at the forefront of unclaimed property news in 2020.
Audit Disputes & Litigation — 2019 saw a number of challenges to the State of Delaware’s audit practices; most notably, the battle between Univar, Inc. and Delaware in parallel federal and state litigations arising out of a proposed unclaimed property audit. While there were a number of procedural and narrowing decisions in that case, the real substance remains to be litigated. That battle will continue, and it appears that new ones will get underway shortly. In December, AT&T filed a lawsuit against Delaware, challenging the state’s audit practices as a violation of the company’s constitutional rights. Similar challenges were recently filed by Fruit of the Loom and Eton Corporation, both of which are challenging the state’s estimation and extrapolation practices. Substantive decisions in any of these cases will be significant for those undergoing Delaware unclaimed property audits.
Savings Bond Tug of War — Back in October, we summarized the decision of the U.S. Court of Appeals for the Federal Circuit in Laturner v. United States, in which the Court held that the federal government had no obligation to turn over the proceeds of matured, but unredeemed U.S. Savings Bonds to the states as unclaimed property. In particular, the Court ruled that state unclaimed property laws were preempted by federal laws allowing bondholders to keep the bonds after maturity, and that states (like owners) could not redeem savings bonds without presenting either the bond itself, or identifying information relating to the bond. In response, Congressman Ron Estes (who, as a former State Treasurer, knows a thing or two about unclaimed property) has proposed the “Unclaimed Savings Bond Act of 2019” which would amend federal law to allow states to take custody of unredeemed savings bonds and substantially undo the Federal Circuit’s decision in LaTurner. Unsurprisingly, the legislation is strongly supported by the National Association of State Treasurers.
More Adoptions of the 2016 Uniform Act — In 2019, Colorado and Maine joined the ranks of states adopting a variant of the 2016 Uniform Unclaimed Property Act. A number of states have similar legislation in the works which may become law during the upcoming year.
IRA Activity — Securities industry holders will also need to take a look at their programming and practices relating to assets held in Individual Retirement Accounts. In most states, the triggering event for IRA escheatment is “the date . . . specified in the income tax laws of the United States by which distribution of the property must begin in order to avoid a tax penalty.” Previously this was age 70.5, but Public Law 116-94, which was signed into law on December 20, 2019, changes the so-called “Mandatory Distribution Date” (MDD) to age 72. The new rule applies to distributions required to be made after December 31, 2019. Holders will have to update their procedures accordingly.
Oh Canada? — 2020 may also see increased unclaimed property activity outside of the United States. The Canadian provinces of Alberta, Quebec, and British Columbia all have unclaimed property regulations of varying sorts that have been in place for some time. In 2019, New Brunswick proposed legislation that might make it the fourth. The New Brunswick Unclaimed Property Act is currently pending before the province’s Standing Committee on Economic Policy. Similarly, the Manitoba Law Reform Commission has issued a report containing recommendations for an unclaimed property regulatory structure similar to those in other provinces. We will see if any of this proposed legislation develops. Of course, the main event in potential Canadian escheat laws is whether or when Ontario will enact such a law. Perhaps this is the year.