tag:blogger.com,1999:blog-8739119308956180312024-03-12T19:56:06.431-04:00EscheatableThe Unclaimed Property Law Blog --
News, analysis, and commentaryMike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comBlogger410125tag:blogger.com,1999:blog-873911930895618031.post-13816681082594806702022-03-23T14:58:00.002-04:002022-03-23T14:58:36.529-04:00New York Unclaimed Property - Proposed "Electronic Contact" Rule<p> </p><div class="reader-article-content reader-article-content--content-blocks" dir="ltr">
<p class="reader-text-block__paragraph">
The New York Office of Unclaimed Funds ("OUF") has published a new
proposed administrative rule relating to “electronic contact” for public
comment.
</p>
<p class="reader-text-block__paragraph">
Under New York law, the dormancy period for abandoned property is
generally terminated and reset by owner-generated “contact” with the
holder. The OUF’s proposed regulation puts in writing something that
most unclaimed property holders are already doing – equating various
types of electronic events as owner "contact" for purposes of the
Abandoned Property Law. The new regulation expressly provides that
“[e]vidence of electronic contact or electronic account activity within
the relevant dormancy period . . . can be cited to prevent the property
from being deemed abandoned.”
</p>
<p class="reader-text-block__paragraph">
The regulation also specifies two types of electronic contact that
will suffice as such evidence: (1) the receipt of email from the
account holder “that matches the registered email address on record” and
(2) evidence that “the entitled account holder has accessed their
personal account through the electronic method made available by the
holder . . . .” (Vol XLIV N.Y. Register, Issue 9, p. 1 (Mar. 2, 2022)).
</p>
<p class="reader-text-block__paragraph">
A few observations about the proposed rule. First, there is no provision for the <strong><em>non-return</em></strong> of email from the holder. In other words, while evidence of e-mail contact <strong><em>from</em></strong> the owner will be sufficient to stop the dormancy period, e-mail sent by the holder <strong><em>to</em></strong>
the owner will not suffice (unless, of course, the owner replies). This
is generally in line with the unclaimed property principle that
“negative contact” (i.e., the termination of the dormancy period by the
failure of an action to happen) is generally not permitted except in
specially-defined circumstances (such as the non-return of account
statements for some types of property).
</p>
<p class="reader-text-block__paragraph">
Second, the e-mail rule presumes that the owner has an e-mail
address that is “registered” with the holder. In other words, an email
from the owner will not necessarily reset the dormancy period if the
holder has no indication that the owner’s email is legitimate or
correct.
</p>
<p class="reader-text-block__paragraph">
The electronic account access part of the rule is reasonably
straightforward. While there is no explicit requirement that the account
access be pursuant to a password or other security credential, such a
condition may be implied by requiring evidence that “the entitled
account owner” was the one who accessed the account.
</p>
<p class="reader-text-block__paragraph">
The public comment period is open until May 1, 2022.
</p>
</div>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-79699491124779474842022-02-04T12:57:00.004-05:002022-02-04T12:57:56.273-05:00New Brunswick Unclaimed Property Act Comes Into Force<p><span style="font-size: small;"><span style="font-family: georgia;"> <i>First Reports Due in 2023</i></span></span></p><p><span style="font-size: small;"><span style="font-family: georgia;">The new Unclaimed Property Act for the Canadian province of New Brunswick <a href="https://www.fcnb.ca/en/news-alerts/the-unclaimed-property-act-received-proclamation-on-january-1">received proclamation</a> on January 1, 2022, bringing it into effect. The enactment means that New Brunswick joins three other provinces -- Alberta, British Columbia, and Quebec -- in having custodial unclaimed property laws similar to those in the United States. </span></span></p><p><span style="font-size: small;"><span style="font-family: georgia;">The Act sets a reporting deadline of March 31 for property due as of the end of the preceding calendar year, with the first report under the Act will be due March 31, 2023. There is a three year dormancy period for most items. In addition, the Act also applies by its terms, to the preceding five years. In other words, in the first report, holders are directed to include property that became unclaimed in 2017 to 2021, as well as 2022 (i.e., property issued or last owner contact in 2014 and later). </span></span></p><p><span style="font-size: small;"><span style="font-family: georgia;"><span style="-moz-text-size-adjust: auto; -webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; display: inline !important; float: none; font-style: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; text-align: start; text-decoration: none; text-indent: -24px; text-transform: none; white-space: normal; word-spacing: 0px;"><span class="Apple-converted-space"> The Act also includes a due diligence requirement for property valued at $100 or more, with such notices to go out at least 90 days, but not more than 180 days, before filing the report. The notice must include the name of the owner, a statement that the holder may be holding unclaimed property in the owner’s name, a statement indicating that continued failure to communicate with the holder will result in delivery of property to the Director, the estimated<br />date of delivery to the Director, and instructions how the owner can claim the property from the holder.</span></span></span></span></p><p><span style="font-size: small;"><span style="font-family: georgia;"><span style="-moz-text-size-adjust: auto; -webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; display: inline !important; float: none; font-style: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; text-align: start; text-decoration: none; text-indent: -24px; text-transform: none; white-space: normal; word-spacing: 0px;"><span class="Apple-converted-space">A copy of the Act, the Rules, the Holder Reporting Guide and additional helpful information can be found website set up by the New Brunswick Financial and Consumer Services Commission, <a href="http://www.fundsfindernb.ca">www.fundsfindernb.ca</a>.</span></span></span></span></p><p><span style="font-size: small;"><span style="font-family: georgia;"><span style="-moz-text-size-adjust: auto; -webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; display: inline !important; float: none; font-style: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; text-align: start; text-decoration: none; text-indent: -24px; text-transform: none; white-space: normal; word-spacing: 0px;"><span class="Apple-converted-space"> </span></span></span></span></p><p><span style="-webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; display: inline !important; float: none; font-family: Calibri, sans-serif; font-size: 14.666666984558105px; font-style: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; orphans: auto; text-align: start; text-decoration: none; text-indent: -24px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px;"><span class="Apple-converted-space"><br /></span></span></p><p><span style="-webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; display: inline !important; float: none; font-family: Calibri, sans-serif; font-size: 14.666666984558105px; font-style: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; orphans: auto; text-align: start; text-decoration: none; text-indent: -24px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px;"><span class="Apple-converted-space"><br /></span></span></p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-68037207029379159522021-11-16T10:20:00.002-05:002021-11-16T10:40:37.587-05:00Wisconsin Passes Modified Version of 2016 Uniform Act<p>On November 5, 2021 Wisconsin Governor Tony Evers signed <b><a href="https://docs.legis.wisconsin.gov/2021/related/acts/87">Wisconsin Act 87</a></b> into law, which adopts a version of the 2016 Uniform Unclaimed Property Act. In a departure from some versions of the 2016 uniform act, the Wisconsin legislation keeps the old law's general 5 year dormancy period for unspecified general intangible property as well as the previous law's business-to-business exemption. Some of the changes imposed by the new legislation are as follows:</p><ul style="text-align: left;"><li>the dormancy period for money orders is shortened from 7 years to 5 years;</li><li>the definition of "property" subject to the Act now expressly <b><i>includes</i></b><i> </i>"virtual currency;"</li><li>the definition of "property" subject to the Act now expressly <b><i>excludes</i></b> 529A plan assets, game-related digital content, loyalty cards, in-store credits for returned merchandise, gift cards, and stored-value cards;</li><li>the law has clarified dormancy standards for securities, tax-deferred accounts, and UGMA/UTMA assets;</li><li>the Act now specifies the content of due diligence notices sent to holders; and</li><li>the aggregate reporting threshold is now limited to $5, and only if the apparent owner is unknown.</li></ul><p>The effective date of the Act is November 7, 2021 and will thus apply to next year's unclaimed property reports with the state. <br /></p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-67826265089013377112021-09-14T08:45:00.000-04:002021-09-14T08:45:04.914-04:00The Business Case For Taking Unclaimed Property Compliance Seriously<p> <em>Early Attention May Improve the Bottom Line</em></p><p>Posts
emphasizing the need for companies to take unclaimed property laws
seriously are increasingly common. Most of these articles, however,
focus on the potential ills arising from lax unclaimed property law
compliance. And justifiably so. The potential downsides are significant:
disruptive audits, excessive estimated liability assessments, and
harsh statutory penalties. But there is a more optimistic rationale as
well. Determining the causes of unclaimed property and taking steps to
avoid or promptly rectify those issues be good for business. </p><p> Fundamentally,
the appearance of unclaimed property on a company’s balance sheet means
that something went wrong—a customer lost, a liability not discharged, a
transaction unreconciled. A few years of dormancy later, the holder is
left with unclaimed property to be reported and remitted to the
state. But what if the holder doesn’t wait until the last minute to
analyze potential unclaimed property? There are some benefits.</p><p> <strong>Keeping Customers & Clients</strong></p><p> Many
types of unclaimed property result from losing touch with customers and
clients – the most valuable resources of your business. Shoppers with
unused gift cards, brokerage clients with dormant accounts, and
counterparties with stale credit balances can all represent valuable
relationships withering on the vine. Yes, you can find new
customers. But according to the <em>Harvard Business Review</em>,
“[d]epending on which study you believe, and what industry you’re in,
acquiring a new customer is anywhere from five to 25 times more
expensive than retaining an existing one.” Early attention to these
items can renew and maybe even reinvigorate these customer
relationships, allowing you to keep the business you already have.</p><p> <strong>Protecting Against Liability</strong></p><p> Assuming
that the payment or credit was properly generated in the first instance
(more about this in a minute), the existence of unclaimed property also
means that the holder has an undischarged liability. On the other side
of that undischarged liability might be an increasingly irate customer,
counterparty, or vendor wondering why they haven’t been paid. The result
can be strained relations, angry letters, or even a collection
lawsuit. An ounce of prevention in the form of following up on
outstanding payments is worth a pound of cure in settling lawsuits.</p><p> <strong>Preventing Phantom Debts</strong></p><p><strong> </strong>Sometimes,
payment obligations and/or credits are not “true” liabilities to begin
with. Many credit balances that are allowed to age – remain unreconciled
because they are accounting or bookkeeping errors such as double
payments, mistyped payable amounts, or contingent liabilities booked as
though currently due and payable. Generally, if money is not actually
due to the owner, then it is not unclaimed property that must be
reported and remitted to a state. Unfortunately, many credit balances
are left to sit until the information that might be used to reconcile
them become unavailable, or the sheer magnitude of credit balances makes
it impractical to perform research. By looking at these items early and
often, erroneous credit balances and be resolved and prevented from
ripening into erroneous unclaimed property.</p><p> In sum, unclaimed
property compliance is important for avoiding statutory liabilities and
disruptive state audits. At the same time, attention to unclaimed
property can also help maintain existing customer relationships and
avoid needless expense.</p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-39156152093240899022021-08-30T10:17:00.004-04:002021-08-30T10:17:33.824-04:00Washington D.C. Adopts Version of 2016 Uniform Unclaimed Property Act*<p class="MsoNormal"></p><p class="MsoNormal"></p><p class="MsoNormal"><i>* probably<br /> </i><br />Washington D.C. has become the latest jurisdiction to adopt
a version of the 2016 Uniform Unclaimed Property Act, by virtue of an <a href="https://lims.dccouncil.us/Legislation/B24-0373"><b>Emergency
Act</b></a> approved by the Mayor on August 23rd.<span style="mso-spacerun: yes;">
</span>For most property types, a three-year dormancy period applies (as with
prior law), and the revised Act contains many of the features of the 2016
Uniform Act, including:<span style="mso-spacerun: yes;"> </span></p>
<ul type="disc"><li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">securities are deemed abandoned three years after the
second instance of a communication being returned by the Post Office as
undeliverable (a change from previous law);<br style="mso-special-character: line-break;" />
<br style="mso-special-character: line-break;" />
</span></li><li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">there is a specific dormancy period for
"stored-value cards" – three years after December 31 of the year
of issuance, or three years since last activity (note that the prior law’s
five-year dormancy period for gift cards remains in place); <br style="mso-special-character: line-break;" />
<br style="mso-special-character: line-break;" />
</span></li><li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">the new law applies to “virtual currency,” such as most
cryptocurrencies; and<br style="mso-special-character: line-break;" />
<br style="mso-special-character: line-break;" />
</span></li><li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><span style="mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">there are specific dormancy standards for UTMAs and
other tax-deferred accounts.</span></li></ul>
<p class="MsoNormal" style="mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"><span style="mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The new law also provides additional
detail regarding notices to owners of unclaimed property. The legislation
includes specific language that must be included in holder due diligence
letters and provides for additional by the Administrator via first-class mail
and/or e-mail (instead of just relying upon notice by publication).</span></p>
<p class="MsoNormal" style="mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"><span style="mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The new law goes into effect on October
1, 2021.<span style="mso-spacerun: yes;"> </span>For a while.<span style="mso-spacerun: yes;"> </span>Here’s where the asterisk comes in.<span style="mso-spacerun: yes;"> </span>The status of Washington D.C. in our federal system
of government is unique.<span style="mso-spacerun: yes;"> </span>Article I of
the Constitution gives Congress the power to “exercise exclusive Legislation”
over the District of Columbia.<span style="mso-spacerun: yes;"> </span>Pursuant
to the 1973 District of Columbia Home Rule Act, the Mayor and the
elected District Council have the authority to write and pass legislation.<span style="mso-spacerun: yes;"> </span>But that power is subject to Congressional approval.<span style="mso-spacerun: yes;"> </span>Because this often takes a
long time, the Mayor and Council have the ability to pass “emergency
legislation” without the involvement of the federal government, but those
emergency measures can only be in place for 90 days.<span style="mso-spacerun: yes;"> </span><a href="https://lims.dccouncil.us/Legislation/B24-0373"><b>D.C. Act 24-159</b></a>, which includes the Unclaimed
Property Act revisions, is an “emergency” act and expires in November of this
year.<span style="mso-spacerun: yes;"> </span></span></p>
<p class="MsoNormal" style="mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"><span style="mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Does this mean that the D.C. Unclaimed
Property Act revisions are temporary?<span style="mso-spacerun: yes;">
</span>Probably not.<span style="mso-spacerun: yes;"> </span>The “permanent” version
of the bill is currently <a href="https://lims.dccouncil.us/Legislation/B24-0373"><b>making its way</b></a> through the legislative process.<span style="mso-spacerun: yes;"> </span>Upon approval by the District government, it
will be submitted to Congress.<span style="mso-spacerun: yes;"> </span><a href="https://dccouncil.us/how-a-bill-becomes-a-law/"><b>Only if both houses of Congress pass a Joint Resolution rejecting the law, and that Joint Resolution is approved by the President</b></a>, will the new law be
rejected.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span></span></p>
Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-13521694058667772482021-04-26T13:48:00.003-04:002021-04-26T13:48:30.638-04:00North Dakota Passes Revised Uniform Unclaimed Property Act<p>On April 20, North Dakota became the most recent state to enact a version of the Revised Uniform Unclaimed Property Act (2016). The <b><a href="https://www.legis.nd.gov/assembly/67-2021/bill-actions/ba2048.html">new law</a></b>, which takes effect on July 1 does not overhaul the state's general three year dormancy period, but does provide useful clarity on the reporting or remittance of many property types. Under the new legislation:</p><ul style="text-align: left;"><li>securities are deemed abandoned three years after the second instance of a communication being returned by the Post Office as undeliverable (a change from previous law that required unclaimed distributions);<br /><br /></li><li><span></span>there is a specific dormancy period for "stored-value cards" (three years after December 31 of the year of issuance, or three years since last activity, whichever is later); and<br /><br /></li><li>there are specific dormancy standards for UTMAs and other tax-deferred accounts.</li></ul><p>The new law also provides additional detail regarding notices to the owners of unclaimed property. The legislation includes specific language that must be included in holder due diligence letters and provides for additional mailed notice to the owner by the administrator (instead of just relying upon notice by publication). <br /></p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-64224969254761501782021-04-22T08:35:00.000-04:002021-04-22T08:35:18.140-04:00Unclaimed Property 101 - Part 1<p>Welcome to Unclaimed Property 101 - An Introduction to Unclaimed Property. For regular
unclaimed property professionals, this is just a refresher. Really,
these posts are intended for you if you are:<br />
</p><ul><li>An accounting or finance professional who has just been told that you will be responsible for unclaimed property compliance;</li><li>An in-house counsel who is dealing with a legal/compliance issue relating to your company's unclaimed property responsibilities;</li><li>The unlucky recipient of an audit notice from a state or private third-party auditing firm; </li><li>A reporter looking for an unclaimed property primer; or<br /> </li><li>Someone simply interested in learning more about unclaimed property (in which case, we'd suggest you get a hobby).</li></ul>
As a general rule, "unclaimed property law" refers to a statutory regime
in every state (plus the District of Columbia, Puerto Rico, the U.S.
Virgin Islands, and a number of foreign jurisdictions) whereby certain
dormant intangible property owned by an owner, but held by a holder, is
reported and remitted to the government for safekeeping. The
government, in turn, indemnifies the holder from further claims by the
owner, and holds the property (generally, forever) until such time as it
is claimed by the rightful owner. From the holder's perspective, there
are generally five steps of compliance:<br />
<ol><li> Determine what state's law applies to a particular owner's property.</li><li> Determine what the appropriate dormancy period for the item in question.</li><li> Try to contact the owner, to let them know that the property is in danger of going to the state.</li><li> Fill out an unclaimed property report for the applicable state.</li><li> Remit (e.g., turn over) the property to the applicable state.</li></ol>
While the foregoing covers the essence of what one needs to know about
unclaimed property laws, this set of articles will expand on these
issues in a little more detail. <br />
<br />
As with any good story, we want to start by covering the Who, What,
Where, When, and Why of unclaimed property law, regulation, and
compliance. Please be advised, that as with all articles on this blog,
this is not intended to be legal advice. You can (and should) consult
with the unclaimed property lawyer of your choice with any questions
about your particular situation. Let's start with the "Who" -- Who has
an obligation to report unclaimed property? Who is a "holder"? <br />
<br />
While the specific definitions and scope of state unclaimed property
laws vary from state to state, nearly every unclaimed property law
regime applies to a wide variety of companies, banks, brokers, joint
ventures, sole proprietorships, etc. For example, under the <a href="http://codes.ohio.gov/orc/169.01">Ohio Act</a><a href="http://ohio%20act/">,</a>
a "holder" is "any person that has possession, custody, or control of
moneys,
rights to moneys, or other intangible property, or that is indebted to
another." Notably, such broad definitions of holder would seem to
encompass almost everyone and anyone. So, generally, if your company or
business is holding property for another (and no state-specific
exemption applies), you're a holder.<br />
<br />
Similarly, who is an "owner"? Basically, anyone to whom money or property is owed. For example, as <a href="http://www.sco.ca.gov/Files-UPD/guide_upd_updlaw.pdf">California law</a>
explains, "owner" means "a depositor in the case of a deposit, a
beneficiary in case of a trust, or creditor, claimant, or payee in case
of other choses in action, or any person having a legal or equitable
interest in property subject to this chapter, or his or her legal
representative."<br />
<br />
In the next installment - tentatively scheduled for next week - we'll
cover the "What" of unclaimed property: What gets reported under the
laws? Checks, abandoned warehouses, stocks, old issues of <i>Sports Illustrated</i>, foreclosed properties, gold teeth? (Preview: yes, probably not, definitely, <a href="http://www.escheatable.com/search/label/Kansas%20City%20Royals">depends on where you find them</a>, probably not, and <a href="http://www.escheatable.com/2010/09/did-you-know.html">maybe</a>). <br />Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-36203107998907651232021-03-24T15:14:00.001-04:002021-03-24T15:14:36.403-04:00California Unclaimed Property Regulator Suffers Hack<p> As if there weren't enough reasons for businesses and individuals to proactively search for and recover their unclaimed property, add increased information security to the list....</p><p>According to an article by Wes Venteicher in <i><a href="https://www.sacbee.com/news/politics-government/the-state-worker/article250156680.html">The Sacramento Bee</a></i>, the California State Controller's Office, Unclaimed Property Division was recently the subject of a "spear phishing" attack, which may have exposed personally identifying information and unclaimed property details for more than 9,000 potential claimants. According to <a href="https://www.sacbee.com/news/politics-government/the-state-worker/article250156680.html">the article</a>, the hacker posed as an organization that the Controller's Office did business with in the past. </p><p>The Controller's office is in the process of notifying affected individuals about the breach and has buttressed security procedures relating to the properties at issue. Yet another reason to make those unclaimed property claims sooner rather than later. <br /></p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-280475898139727662021-02-15T17:29:00.003-05:002021-02-15T17:29:44.014-05:00Unclaimed Property Due Diligence - The Case for Doing More<p class="MsoNormal">In most companies and financial institutions, unclaimed
property compliance is treated as an ancillary operational responsibility unrelated
to the “business” of the firm.<span style="mso-spacerun: yes;"> </span>After
all, as with many regulatory obligations, unclaimed property compliance is not
a profit-generating activity.<span style="mso-spacerun: yes;"> </span>That said,
there is the possibility that paying prompt attention to certain unclaimed
property law requirements (or, at least, unclaimed property concepts) can make
good business sense and maybe even help the bottom line.</p>
<p class="MsoNormal"> One place where increased attention can pay off is customer
“due diligence.”<span style="mso-spacerun: yes;"> </span>Unclaimed property
holders are obligated to perform statutory “due diligence” before reporting and
remitting property to the state.<span style="mso-spacerun: yes;"> </span>In
practice, this requirement usually means mailing the customer of unclaimed
property a form letter a few weeks before turning the property over to the
state.<span style="mso-spacerun: yes;"> </span>Sure, a few states require
specific language to be in the form letter, or for the letter to be sent via
certified mail when the property is over a certain dollar amount.<span style="mso-spacerun: yes;"> </span>But for the most part, it’s nothing more than
a form letter in a corporate envelope, destined to be ignored, stuffed into a
drawer, or perched precariously on the customer’s stack of mail to look at
later.<span style="mso-spacerun: yes;"> </span>In most states, the relevant
statutory obligation looks like this:</p>
<p class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: .5in; margin-top: 0in; mso-layout-grid-align: none; text-autospace: none;"> <span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">The
holder of property presumed abandoned shall send written notice to the apparent
owner, not more than 120 days or less than 60 days before filing the report,
stating that the holder is in possession of property subject to this [Act], if:</span></p>
<p class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: .5in; margin-top: 0in; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">(1)
the holder has in its records an address for the apparent owner which the</span></p>
<p class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: .5in; margin-top: 0in; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">holder's
records do not disclose to be inaccurate;</span></p>
<p class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: .5in; margin-top: 0in; mso-layout-grid-align: none; text-autospace: none;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">(2)
the claim of the apparent owner is not barred by a statute of limitations; and</span></p>
<p class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: .5in; margin-top: 0in;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">(3) the value of the property is $50 or more.</span></p>
<p class="MsoNormal"> 1995 Uniform Unclaimed Property Act at Section 7(e).</p>
<p class="MsoNormal"> The intent here is laudable, and there are reasonable
limitations.<span style="mso-spacerun: yes;"> </span>Since most states’
unclaimed property laws have no de minimis threshold, it makes sense not to
require holders to send letters to customers where the cost of postage and
administration are more than the amount to be turned over.<span style="mso-spacerun: yes;"> </span>Likewise, the fact that the mailing is sent
close to the reporting deadline (usually after several years of inactivity)
means that holders are only required to send letters to those owners who have
been inactive for a significant period of time.<span style="mso-spacerun: yes;">
</span></p>
<p class="MsoNormal">However, there are a few reasons why these requirements are
perhaps not the best way to make sure people reclaim their funds.<span style="mso-spacerun: yes;"> </span>First, these communications are required to
be sent via first-class mail.<span style="mso-spacerun: yes;"> </span>The U.S.
Postal Service delivers approximately 54 billion items of first-class mail per
year.<span style="mso-spacerun: yes;"> </span>(If my house is any indication,
90% of these are takeout menus).<span style="mso-spacerun: yes;"> </span>In any
event, people get a lot of mail and many people ignore most of it.<span style="mso-spacerun: yes;"> </span></p>
<p class="MsoNormal"></p>
<p class="MsoNormal">Second, these mailings are generally sent three to five
years after the transaction that gave rise to the property or the
customer/counterparty’s last activity with the holder.<span style="mso-spacerun: yes;"> </span>In that time, corporate owners may have
moved, been bought or sold, or gone through significant personnel changes such
that even if someone opens the letter, they won’t know what it is about (or
might think it is a scam).<span style="mso-spacerun: yes;"> </span></p>
<p class="MsoNormal"></p>
<p class="MsoNormal">Third, the unclaimed property due diligence requirement
(unlike other regulatory requirements like SEC Rule 17Ad-17) don’t actually
require the holder to try and find the owner.<span style="mso-spacerun: yes;">
</span>In fact, if the holder knows that the owner is no longer at the address
listed on the holder’s books and records, there generally is no due diligence
requirement at all.</p>
<p class="MsoNormal"></p>
<p class="MsoNormal">For these reasons, holders sometimes ask whether they are
“allowed” to do more than the requirements set forth in the state’s due
diligence statute.<span style="mso-spacerun: yes;"> </span>The answer is a
resounding yes.<span style="mso-spacerun: yes;"> </span>Not only can a holder do
more than send a form letter three to five years after a customer becomes
inactive, but there is an argument that holders are well advised to do more. </p>
<p class="MsoNormal"></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">For one thing, most
of the people or companies who are the owners of unclaimed property held by a
firm are that firm’s customers and counterparties.<span style="mso-spacerun: yes;"> </span>Keeping in touch with them can keep your
business in mind when purchase/transaction decisions are made.<span style="mso-spacerun: yes;"> </span>For another, going above and beyond to remind
owners that you are holding their money (that they may have forgotten about)
shows that you are an honest steward of their funds.<span style="mso-spacerun: yes;"> </span>Finally, letting customers know early that
unused or unclaimed funds may ultimately have to be reported and remitted to
the state can help avoid consumers angry that their funds have been escheated.</span></p>
<p class="MsoNormal"></p>
<p class="MsoNormal"><b>What to do?</b></p>
<p class="MsoNormal"></p>
<p class="MsoNormal" style="margin-left: .5in; text-indent: -.5in;"><b><span style="mso-tab-count: 1;"> </span>Make contact early & often</b><span style="mso-bidi-font-weight: bold;"> – You don’t have to wait three years before
contacting a customer about an uncashed check or unused credit.<span style="mso-spacerun: yes;"> </span>Reminding customers that they have money to
spend with you, like other types of promotional incentives, may help drive sales.<br /></span></p>
<p class="MsoNormal" style="margin-left: .5in; text-indent: -.5in;"><span style="mso-bidi-font-weight: bold;"></span></p>
<p class="MsoNormal" style="margin-left: .5in; text-indent: -.5in;"><span style="mso-bidi-font-weight: bold;"><span style="mso-tab-count: 1;"> </span><b>Use
multiple points of contact </b>– Most state due diligence statutes require the holder to
send first-class mail.<span style="mso-spacerun: yes;"> </span>But nothing
prevents you from reaching out by phone, by email, through an app, or by other
available means.<span style="mso-spacerun: yes;"> </span></span></p>
<p class="MsoNormal" style="margin-left: .5in; text-indent: -.5in;"><span style="mso-bidi-font-weight: bold;"></span></p>
<p class="MsoNormal" style="margin-left: .5in; text-indent: -.5in;"><span style="mso-bidi-font-weight: bold;"><span style="mso-tab-count: 1;"> </span><b>Get
others involved</b> – Sometimes, an unclaimed property owner will have communications
with the holder, but no record is made of the contact.<span style="mso-spacerun: yes;"> </span>Make sure that processes are in place for
customer calls, emails, and other inquires to be leveraged to remind owners about
unclaimed items.</span></p>
<p class="MsoNormal" style="margin-left: .5in; text-indent: -.5in;"><span style="mso-bidi-font-weight: bold;"></span></p>
<p class="MsoNormal" style="text-align: justify;">Sending out required due
diligence notices is an important part of unclaimed property law
compliance.<span style="mso-spacerun: yes;"> </span>That said, sending out due
diligence letters may be the floor, not the ceiling, of successful
customer outreach.<span style="mso-spacerun: yes;"> </span></p>
Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-85629509462818272642021-01-29T14:58:00.003-05:002021-01-29T14:58:51.371-05:00Delaware Reporting Update: State Advises of Change to Bank Account Information for Remittances<p>The <a href="https://unclaimedproperty.delaware.gov/">Delaware Office of Unclaimed Property</a> recently announced that its wire and ACH payment instructions are changing in advance of the upcoming March 1, 2021 annual reporting deadline. Holders planning to remit payment via these means should contact the OUP's Receipts and Wires unit at <a href="mailto:DOF_holderreceiptsquestions@delaware.gov">DOF_holderreceiptsquestions@delaware.gov</a> for updated information.</p><p> </p><p> </p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-45835255386184412822020-12-08T14:12:00.004-05:002020-12-08T14:12:56.523-05:00New Jersey Unclaimed Property Regulations Up For Public Comment<p> Under New Jersey law, administrative regulations expire automatically after 7 years unless they are re-adopted. <strong><a href="https://law.justia.com/codes/new-jersey/2013/title-52/section-52-14b-5.1/">NJSA 52:14B-5.1</a></strong>. Pursuant to that rule, New Jersey’s administrative regulations relating to unclaimed property are now <strong><a href="https://www.nj.gov/treasury/proposed_rules/PRN%202020-111%20(52%20N.J.R.%202055(a)).pdf.">up for public comment</a></strong> as part of the readoption process. The current text of the regulations can be found at the website of the <strong><a href="https://www.state.nj.us/oal/rules/accessp/">NJ Office of Administrative law</a></strong>, Title 17, Chapter 18. Those wishing to comment have until January 15, 2021 to do so.</p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-40016907855845283282020-12-04T10:52:00.002-05:002020-12-04T10:52:40.160-05:00Finder. Keeper. <p> <b>Some Thoughts on Unclaimed Property Asset Recovery</b></p><p></p><p>An often overlooked aspect of unclaimed property law is the fact that most unclaimed property <em>holders</em> are also unclaimed property <em>owners</em>.
The same data glitches, human errors, and industry practices that
result in a company holding unclaimed property can also lead to that
company’s unclaimed property being held by the state. If you are
looking to get that money back, here are some considerations for
undertaking a corporate unclaimed property asset recovery program.</p>
<p><strong>1. You Have to Look</strong></p>
<p>The first step in recovering unclaimed property is to look for it.
While some states make meaningful outreach efforts to get unclaimed
property back into the hands of owners, not all do. Companies should
not assume that unclaimed property will be brought to their attention by
the state. Instead, companies should affirmatively look for unclaimed
property in each of the states where it has a payment address or
significant footprint. Searches can usually be conducted for free
through the website of the applicable state’s unclaimed property
program. A link to the unclaimed property programs for all 50 states is
available from the <strong><a href="http://www.unclaimed.org">National Association of Unclaimed Property Administrators</a></strong>, an affiliate of the National Association of State Treasurers. </p>
<p><strong>2. Don’t Forget About Your Past</strong></p>
<p>Some unclaimed property is caused by merger, acquisition, and
reorganization activity. The closing or moving of corporate offices,
change of company names, or personnel restructuring efforts can all lead
to unclaimed property. Checks can be sent to closed offices.
Transactions can fail to reconcile because they are in the “wrong”
name. Payments can be returned because a new employee does not know
what the payment is for or how to apply it. Accordingly, when searching
for unclaimed property, don’t just search under the company’s current
name at its current address. Search for assets held under former names,
for items belonging to corporate predecessors, and in states where the
company used to have offices.</p>
<p>Also, keep in mind that the information on the state’s search website
is the information provided by the holder during the reporting and
delivery process. So, when performing searches, think about what your
customers call your company. For example, if you work for the
Amalgamated Business Company of Delaware, but your customers all call
you “ABCDE,” make sure you check that name. Similarly, if you have a
prominent, well-recognized product or brand name that is not necessarily
your corporate name but is often used by customers, be sure to check
that as well.</p>
<p><strong>3.</strong> <strong>It’s Not As Hard As You Think</strong></p>
<p>Once unclaimed property has been located, the next step is to file a
claim. This process is usually straightforward if the funds are held in
the current corporate name and address. Many states allow claims to be
filed via the state website, or through an online form supported by
additional documentation. These forms are generally short,
self-explanatory, and can generally be done in minutes. If you do
decide to engage a finder firm, make sure that there is a written
agreement specifying precisely the scope of the finder’s authorization,
whether the company retains the right to file its own claims, and the
length of time the finder’s authorization is valid. </p>
<p><strong>4. Get Your Docs In A Row</strong></p>
<p>In addition to the claim form, the owner will generally need to
provide additional documentation in support of the claim to establish
the owner’s identity, the address of record, the relationship with the
holder, or that the corporate employee filing the claim has authority to
do so. For some types of property, additional information may be
required. For example, if the property is dormant account assets
escheated by a bank, the state will generally ask for a copy of an
account statement or other correspondence from the bank that has the
account number. </p>
<p>Things become more difficult where the owner’s name or address does
not match the information reported to the state. This is a common
occurrence; indeed, it may be the reason that the property never made it
to the owner in the first place. Keep records reflecting old corporate
names and addresses – These can come in handy when attempting to claim
property owned by a corporate predecessor or a payment associated with a
former address.</p>
<p>While searching for and recovering unclaimed property may be looked at as yet <em>another</em>
thing for busy professionals to track and address, it is one of the few
compliance initiatives that can actually result in the company
receiving, rather than paying, money. A modest investment of resources
can often pay for itself.</p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-17345988333979723882020-11-25T09:56:00.002-05:002020-11-25T10:05:24.776-05:00Delaware State Court Enforces Unclaimed Property Subpoena - Case Headed Back to Federal Court<h3><br /></h3>The unclaimed property saga arising out of the State of Delaware’s
unclaimed property audit of Univar, Inc. took another turn recently when
the Delaware Court of Chancery issued a ruling enforcing a subpoena
issued by the state. The case is now (probably) headed back to federal
court for a consideration of Univar’s constitutional claims.
<p>The story started nearly five years ago, in December 2015, when
Univar received notice that it was to be the subject of an unclaimed
property audit conducted by Kelmar Associates. After some procedural
wrangling back and forth among the state, the holder, and Kelmar, an
initial document request was issued in September 2016 seeking four
categories of documents: (1) tax returns and related information; (2)
apportionment schedules; (3) information relating to certain
shared-service and disbursement activity; and (4) information concerning
prior unclaimed property audits and voluntary disclosure proceedings. </p>
<p>In October 2018, after the holder failed to produce the requested
information, Delaware issued an administrative subpoena seeking to
compel production. (As those who follow unclaimed property closely may
know, in 2017, Delaware enacted a revised unclaimed property law (the
“New Law”) which expressly allowed the issuance of such subpoenas. See <a href="https://law.justia.com/codes/delaware/2018/title-12/chapter-11/subchapter-ii/section-1171/"><b>12 Del. Code 1171(3)</b></a>).
In response to the subpoena, Univar filed an action in federal court
in December 2018 challenging the audit on various constitutional
grounds. Delaware, for its part, filed its own action in Delaware state
court seeking to enforce the subpoena. </p>
<p>Thus, as of the beginning of 2019, there were two separate litigation
tracks concerning the audit; one in federal court, one in state court.
Those courts thereafter each issued decisions — primarily on procedural
and non-merits matters — seeking to unwind the knot of litigation. In
September 2019, the federal court considering the constitutional
challenges to the audit held that Univar could proceed with its claims
challenging the audit on due process and equal protection grounds, but
that the majority of Univar’s claims were not “ripe” for adjudication
unless and until the state court entered an order enforcing the
subpoena. The federal court thus decided to stay the action until
further proceedings took place in Delaware state court.</p>
<p>Those state court proceedings have now been completed. On October 29, the Delaware Court of Chancery issued a <a href="https://courts.delaware.gov/Opinions/Download.aspx?id=312560"><b>Memorandum Opinion</b></a>
enforcing the subpoena and directing Univar to comply. In doing so,
the Chancery Court considered, and ultimately rejected, three separate
challenges to the subpoena.</p>
<p>First, Univar argued that the Delaware Department of Finance did not
have authority to issue the subpoena because the 2017 legislation
explicitly authorizing the issuance of subpoenas was enacted after the
commencement of the Univar audit. The Court rebuffed that contention,
noting that the Delaware legislature appeared to contemplate that such
subpoenas could be issued in audits that predated the 2017 law, and that
the subpoena itself was issued after the law was enacted. More to the
point, the Court concluded that it was “indisputable that the State had
the power to issue administrative subpoenas before the New Law went into
effect . . . .”</p>
<p>Next, the Court held that Univar’s concerns about confidentiality,
though well founded, did not excuse its compliance with the subpoena
(though the door was left open for similar challenges in the future).
Here, Univar’s argument focused not on Delaware’s audit power, but
rather who was exercising that power: a contingent fee auditing firm
(Kelmar Associates) working on behalf of Delaware and several other
states. While acknowledging that Delaware’s New Law contained statutory
privacy protections (see e.g., <a href="https://law.justia.com/codes/delaware/2017/title-12/chapter-11/subchapter-ii/section-1189/"><b>12 Del. Code Sec. 1189</b></a>)
Univar argued that these protections would not prevent Kelmar from
sharing the information with other states that provided no such
protection. In order to avoid this fight, and “[a]pparently recognizing
the Court was inclined to impose confidentiality conditions whether the
State agreed or not,” Delaware instructed Kelmar to have a separate
audit team perform the Univar audit on behalf of Delaware, and to
refrain from sharing information with others. The Court concluded that
this procedure alleviated Univar’s concerns about confidentiality. </p>
<p>Finally, the Court analyzed Univar’s main substantive argument: that
the information requested in the subpoena was “unreasonably broad or
burdensome” under Delaware law. The Court began its analysis by setting
forth the test used to determine whether the subpoena is enforceable,
taken from the U.S. Supreme Court decision in <b><a href="https://caselaw.findlaw.com/us-supreme-court/379/48.html">United States v. Powell</a></b>. Under the Powell test, an administrative agency’s subpoena will be enforced where:</p>
<blockquote class="wp-block-quote"><p>(1) the investigation will be
conducted pursuant to a legitimate purpose; (2) the inquiry may be
relevant to the purpose; (3) the information is not already within the
[agency’s] possession; and (4) the administrative steps have been
followed.</p><cite>Delaware v. Univar, C.A. No. 2018-0884-JRS (Oct. 29, 2020) (quoting United States v. Powell, 379 U.S. 48, 57-58 (1964)).</cite></blockquote>
<p>The Court then applied the Powell test the the specific information
sought by the subpoena: tax returns, apportionment schedules, shared
service information, and information relating to prior unclaimed
property audits. The Court found that all of these requests passed the
Powell test, giving particular deference to the state in light of the
“early stage” of the audit. </p>
<p>Though the Court ultimately ordered that the subpoena could be
enforced, it indicated that it would stay (i.e., delay enforcement of)
the order until such time as Univar had its constitutional objections to
the subpoena and the audit adjudicated by the federal court. </p><p> </p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-79751660373758129522020-10-23T14:48:00.001-04:002020-10-23T14:48:06.518-04:00Unclaimed Property on the Ballot in Louisiana<h3>Constitutional Amendment Would Create Unclaimed Property Trust Fund to Pay Claims</h3>
<p>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. <a href="https://ballotpedia.org/Louisiana_Amendment_7,_Unclaimed_Property_Permanent_Trust_Fund_Amendment_(2020)"><strong> Louisiana Amendment 7</strong></a>
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.</p>
<p>The specific language on the ballot is as follows:</p>
<blockquote class="wp-block-quote"><p>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?</p><cite>2020 Louisiana Act 38, Section 4.</cite></blockquote>
<p>This amendment results from the settlement of a <a href="https://gov.louisiana.gov/index.cfm/newsroom/detail/2519"><strong>lawsuit</strong></a>
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.</p>
<p>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 <strong><a href="https://www.businessreport.com/newsletters/state-treasurer-unclaimed-property-program-low-on-money-due-to-budget-sweeps">happened again this year</a></strong>).
The Governor disagreed, arguing that the use of these funds was
expressly authorized by the state legislature. A lawsuit followed, in
which the <a href="https://gov.louisiana.gov/assets/JBE-DivNSec26.pdf"><strong>court ruled in favor of the Governor</strong></a>. Shortly thereafter, the two sides <strong><a href="https://www.usnews.com/news/best-states/louisiana/articles/2020-06-24/louisiana-governor-treasurer-reach-unclaimed-property-deal">reached a deal</a></strong> that provided Edwards with additional funds now in exchange for the creation of a trust to fund future claims.</p>
<p>If it passes, the amendment will go into effect on July 1, 2021. </p><p> </p>Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-26039846565572113622020-05-01T09:49:00.000-04:002020-05-01T09:49:28.953-04:00Holders: Don't Forget That You're Owners Too<h4>
<em>Unclaimed Property Holders Should Take Another Look at Potential Claims</em></h4>
<h4>
<em> </em></h4>
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.<br />
<br />
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<br />
to cash flow and liquidity. For
companies operating on a thin margin, every dollar in the door counts.<br />
<br />
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.Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-65271078480228394002020-04-24T16:27:00.004-04:002020-04-24T16:27:50.102-04:00Certain Spring Reporting Deadlines Automatically Extended Due to COVID-19Like 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:<br />
<br />
Arkansas – The May 1 annual reporting deadline for life insurance companies had been extended to<br />
June 1, 2020.<br />
<br />
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.<br />
<br />
Maryland – The April 30 annual reporting deadline for life insurance companies has been extended to July 31, 2020.<br />
<br />
Massachusetts – The May 1 annual reporting deadline for life insurance companies has been extended to July 1, 2020.<br />
<br />
New Jersey – The annual reporting deadline for life insurance companies has been automatically extended to June 30, 2020.<br />
<br />
North Carolina – The annual reporting deadline for life insurance companies has been automatically extended to June 1, 2020.<br />
<br />
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.<br />
<br />
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.Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-23862661017039189012020-03-02T09:30:00.001-05:002020-03-02T09:30:32.100-05:00An Offer You Might Not Want to Refuse<h3>
Delaware Secretary of State Issues VDA “Invitation” Notices</h3>
<h3>
</h3>
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?<br />
<br />
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 <em>not</em> unclaimed property, rather than the auditors demonstrating that items <em>are </em>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. <em>See Univar v. Geisenberger</em>, Case No. 18-cv-01909 (U.S. District Court, D. Del.); <em>AT&T Capital Services v. Geisenberger</em>, Case No. 19-cv-2238 (U.S. District Court, D. Del.); <em>Eaton Corp. v. Geisenberger</em>, Case No. 19-cv-2269 (U.S. District Court, D. Del).<br />
<br />
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.Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-4952883578132022032020-02-03T09:12:00.001-05:002020-02-03T09:12:30.690-05:00Maine Amends Unclaimed Property Act to Exempt Gift Obligations Beginning in 2022<h3>
Amounts deemed abandoned to reduce from 60% to zero over four year period.</h3>
On January 30, the Governor of Maine signed<strong><a href="http://legislature.maine.gov/LawMakerWeb/summary.asp?ID=280073495"> Public Law 553</a></strong>,
“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.<br />
<br />
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.Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-90902247896696689282020-01-10T10:40:00.000-05:002020-01-10T10:40:05.104-05:002020 Vision: A Look at the Year Ahead in Unclaimed Property<br />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.<br />
<br />
<strong>Audit Disputes</strong> <strong>& Litigation</strong> —
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<strong><a href="https://www.bizjournals.com/dallas/news/2019/12/19/at-t-delaware.html"> filed a lawsuit</a></strong>
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.<br />
<br />
<strong>Savings Bond Tug of War</strong> — Back in October, we <strong><a href="https://escheatableblog.mdmc-law.com/cases/states-lose-round-in-fight-with-federal-government-over-unclaimed-savings-bonds/">summarized</a></strong> the decision of the U.S. Court of Appeals for the Federal Circuit in <strong><em><a href="https://law.justia.com/cases/federal/appellate-courts/cafc/18-1509/18-1509-2019-08-13.html">Laturner v. United States</a></em></strong>,
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 “<strong><a href="https://www.congress.gov/bill/116th-congress/house-bill/5269/text?r=8&s=1">Unclaimed Savings Bond Act of 2019</a></strong>”
which would amend federal law to allow states to take custody of
unredeemed savings bonds and substantially undo the Federal Circuit’s
decision in <span style="text-decoration: underline;"><strong><em>LaTurner</em></strong></span>.<span style="text-decoration: underline;"></span> Unsurprisingly, the legislation is <strong><a href="https://nast.org/nast-commends-introduction-of-unclaimed-property-bill-returning-billions-back-to-rightful-owners/">strongly supported</a></strong> by the National Association of State Treasurers.<br />
<br />
<strong>More Adoptions of the 2016 Uniform Act</strong> — In 2019, <strong><a href="https://escheatableblog.mdmc-law.com/new-laws/colorado-passes-version-of-2016-uniform-unclaimed-property-act/">Colorado</a></strong> and <strong><a href="http://legislature.maine.gov/statutes/33/title33ch45sec0.html">Maine</a></strong>
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.<br />
<br />
<strong>IRA Activity</strong> — 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 <strong><a href="https://www.congress.gov/bill/116th-congress/house-bill/1865/text">Public Law 116-94</a></strong>,
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.<br />
<br />
<strong>Oh Canada? </strong>— 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, <strong><a href="https://www.cbc.ca/news/canada/new-brunswick/missing-money-unclaimed-property-1.5378547">New Brunswick proposed legislation</a> </strong>that might make it the fourth. The New Brunswick Unclaimed Property Act is<strong><a href="https://www1.gnb.ca/legis/bill/editform-e.asp?ID=1461&legi=59&num=3"> currently pending</a></strong> before the province’s Standing Committee on Economic Policy. Similarly, the Manitoba Law Reform Commission <strong><a href="https://www.thelawyersdaily.ca/articles/16932/agency-seeks-input-on-manitoba-s-lack-of-laws-on-unclaimed-property">has issued a report</a></strong>
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.Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-20048055423462748292019-07-03T11:07:00.002-04:002019-07-03T11:13:41.036-04:00It’s the Big White Building With the Ionic Columns and the Statue of Alexander Hamilton . . .<span style="font-size: large;"><i>An Exercise in Finding the Owners of Unclaimed Property</i></span> <br />
<br />
One of the theoretical policy justifications for state unclaimed
property laws is that the states will be conscientious about finding
missing owners and reuniting them with their property. Indeed,
according to the <a href="http://www.naupa.org/"><b>National Association of Unclaimed Property Administrators</b></a> (an affiliate of the National Association of State Treasurers) the <b><a href="https://www.unclaimed.org/what/">“purpose
of unclaimed property laws is to protect consumers by ensuring money
owed to them is returned to them, rather than remaining permanently with
financial institutions, business associations, governments, and other
entities.”</a></b><br />
<b> </b> <br />
Given that premise, the identities of “lost” owners with property
being held by the state never cease to amaze. Property is not just held
for those truly “lost,” or<a href="https://insurancenewsnet.com/oarticle/Abandoned-Property-Romney-Brownies-and-even-JD-Salinger-are-on-the-list-are-a-569280#.XRy3O_4pCCg"><b> famously reclusive authors</b></a>, or <a href="https://escheatableblog.mdmc-law.com/uncategorized/politicians-theyre-just-like-us-unclaimed-property-edition/"><b>politicians too busy to open mail</b></a>, or <a href="https://escheatableblog.mdmc-law.com/lost-found/friday-lost-found-4/"><b>those off in a galaxy far</b></a><b>, far away</b>. Some owners of unclaimed property are . . . <i>ahem</i>, presumably easier to find. As we pause the week to celebrate the <b><a href="https://en.wikipedia.org/wiki/Independence_Day_(United_States)">243rd birthday of the United States of America</a></b>,
note that California, New York, Illinois, Texas, Washington, D.C., and
no doubt others are all holding “abandoned” or “unclaimed”
property for the United States of America, United States Government
and/or United States Treasury (and probably hundreds of other
federal agencies).<br />
<br />
While Washington D.C. might get a pass here because of the whole “<a href="https://dcist.com/story/18/11/01/washingtonians-dont-love-taxation-without-representation-not-so-shocking-poll-finds/"><b>Taxation Without Representation</b></a>”
thing, for the other jurisdictions searching in vain for the United
States Treasury: try the big white building in Washington, D.C. with the
<a href="https://en.wikipedia.org/wiki/Treasury_Building_(Washington,_D.C.)"><b>ionic columns</b></a> and the statues of <a href="https://en.wikipedia.org/wiki/Alexander_Hamilton_(Fraser)"><b>Alexander Hamilton </b></a>and <b><a href="https://en.wikipedia.org/wiki/Albert_Gallatin_(Fraser)">Albert Gallatin</a></b> . . . or, you know, the<a href="https://money.cnn.com/popups/2005/pf/new_ten/frameset.2.exclude.html"><b> back of the $10 bill </b></a><br />
<br />
Happy Fourth Everyone!Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-41780119058481665242019-06-17T17:08:00.002-04:002019-06-17T17:08:15.630-04:00Nevada Passes 2016 Uniform Act AmendmentsOn June 7, 2019, Nevada Governor Steve Sisolak approved <strong><a href="https://www.leg.state.nv.us/Session/80th2019/Bills/SB/SB44_EN.pdf">Senate Bill 44</a></strong>
which incorporates certain provisions of the 2016 Uniform Unclaimed
Property Act into the Nevada Unclaimed Property Act. In particular, the
new legislation adds provisions relating specifically to payroll cards
and virtual currency and exempts game-related digital content and
loyalty cards. It also changes the dormancy standards for life
insurance policies and IRA accounts to more closely mirror the
provisions of the Uniform Act and allows for the use of electronic
communications.<br />
<br />
With regard to owner claims, the new law expressly permits the state
to deduct from such claims and amounts owed by the owner for outstanding
child support, civil or criminal penalties, or state and local taxes.
In an effort to combat fraudulent claims made for unclaimed property,
the new legislation also imposes criminal penalties for the filing of
false claims.<br />
<br />
The new law goes into effect on July 1. Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-26366582434593177252019-04-19T09:27:00.000-04:002019-04-19T09:27:31.525-04:00Colorado Passes Version of 2016 Uniform Unclaimed Property Act<h3>
New Legislation, Which Reduces Many Dormancy Periods To 3 Years, Is Effective July 1, 2020</h3>
<h3>
</h3>
On April 16, 2019, Colorado Governor Jared S. Polis signed <a href="https://leg.colorado.gov/sites/default/files/2019a_088_signed.pdf"><b>Senate Bill 19-088</b></a>
into law, which adopts a version of the 2016 Uniform Unclaimed Property
Act. Under the new law, the dormancy period for most property types
will drop to 3 years (down from 5). Certain bank accounts and gift
cards will still be subject to a 5 year dormancy period, and other items
like payroll and dissolution proceeds will continue to have a 1 year
dormancy period.<br />
<br />
With respect to securities, the new legislation imposes a 3 year
dormancy period, that now begins to run upon the second instance of
returned mail (as opposed to the former unclaimed dividend standard).
The new law also leaves in place certain Colorado-specific exemptions
that were in the prior Unclaimed Property Act, such as the exemption for
certain lawyer trust accounts, gaming chips or tokens, property held by
racetracks, and certain gift card proceeds held by small issuers.<br />
<br />
The new legislation keeps the current October 31 reporting deadline
for property deemed abandoned as of the previous June 30. The new law
goes into effect for the 2020 report.Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-38009918434063597102019-04-03T11:34:00.001-04:002019-04-03T11:35:13.045-04:00Is "True Escheat" The Future of Unclaimed Property?<a href="https://www.leg.state.nv.us/App/NELIS/REL/80th2019/Bill/6006/Text"><b>Nevada is considering a bill</b></a> "providing that all property rights and legal title to, and ownership of" of U.S. savings bonds would "vest in this State" after three years. After that three year period, the state could <i>choose</i> to pay the proceeds to the rightful owner of the bond, but the decision to do so would be left to the state's discretion. West Virginia is<a href="http://www.wvlegislature.gov/Bill_Text_HTML/2019_SESSIONS/RS/bills/HB2193%20SUB%20ENG.pdf"> <b>considering similar legislation</b>,</a> A law proposed in Hawaii <a href="https://www.legiscan.com/HI/bill/HB1130/2019"><b>goes even further</b></a> providing that all unclaimed property with a value of $100 or less shall immediately "escheat to the State and be transferred to the general fund."<br />
<br />
These are just a few examples of a new (and for unclaimed property owners, troubling) trend in unclaimed property legislation -- a shift from "custodial" escheat laws to "true" escheat laws. <br />
Currently, most state unclaimed property laws are "custodial" in nature -- meaning that the state takes possession of the unclaimed property on the rightful owner's behalf, but the state never actually takes "title" (i.e., ownership). Instead, the state holds the property in trust, and the rightful owner can always claim the property from the state when he or she becomes aware of it. To be sure, the state may use those monies for schools, roads, or other budgetary purposes in the interim, but the rightful owner retains the right to get his or her money or property back.<br />
<br />
The rationale for such "custodial" escheat laws is reasonably straightforward: given that the rightful owner is not in possession, someone is going to have the "free" use of the money. Better that it be the state for the use of all citizens than a private company. In the custodial paradigm, the owner theoretically is no worse off by the state, rather than a company, holding his or her property (<a href="https://escheatableblog.mdmc-law.com/securities/britons-blindsided-by-u-s-escheat-laws/"><b>at least if the property is cash, and not securities</b></a>).<br />
<br />
In a "true" escheat system, the state ultimately acquires not only custody of the property, but ownership. As a result, the rights of the original owner are deemed "cut off." As explained by 18th Century English jurist <a href="https://en.wikipedia.org/wiki/William_Blackstone"><b>William Blackstone</b></a> in his <i>Commentaries on the Laws of England</i>, the rationale for "true" escheat laws is that all property rights were ultimately derived from the sovereign: "The grand and fundamental maxim of all feudal tenure is this; that all lands were originally granted out by the sovereign, and are therefore holden, either mediately or immediately, of the crown." Accordingly, where something happens to the current owner, the property reverts back to the sovereign.<br />
<br />
While this rule may still make sense for "real property" (i.e., land) with the sovereign being the state, it is not for most "intangible" property. A share of stock you purchase from an issuer, a CD you deposit at a bank, a payroll check -- none of these items "originated" with the state. The potential for true escheat laws, along with the ever expanding scope of unclaimed property laws, and the apparently inexorable process of making dormancy periods shorter and shorter, could very well have a significant and negative impact on the owners of unclaimed property. <br />
<br />
While the current proposals appear to be modest (just a single property type here, a $100 limit there) it is not hard to imagine such laws being expanded. Owners should be wary. Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-60354590552552852032019-03-27T06:52:00.003-04:002019-03-27T06:52:29.528-04:00Arkansas Passes Law For Immediate Liquidation of Unclaimed Securities
Recently, <a href="https://escheatableblog.mdmc-law.com/securities/britons-blindsided-by-u-s-escheat-laws/"><strong>we posted an article</strong></a> addressing the potential pitfalls to owners arising out of certain state's treatment of "unclaimed" securities account. In that article, we noted a<a href="http://www.arkleg.state.ar.us/assembly/2019/2019R/Bills/HB1427.pdf"> <strong>bill</strong></a> pending in Arkansas legislature permitting the Administrator of unclaimed property in that state to sell escheated securities <em>immediately</em> upon receipt, instead of holding them for three years. <a href="http://www.arkleg.state.ar.us/assembly/2019/2019R/Pages/BillInformation.aspx?measureno=HB1427"><strong>That bill became recently became law.</strong></a><br />
<br />
The new law was also passed as an <strong><a href="http://www.arkleg.state.ar.us/assembly/2019/2019R/Acts/Act492.pdf">emergency measure </a></strong>meaning that the legislature made a determination that this new law was "immediately necessary for the preservation of the public peace, health, and safety." Accordingly, the law became effective immediately upon its approval by the Governor on March 15.<br />
<br />
Assuming that the state begins the practice of immediately selling securities reported to the state, it means that owners who later seek to recover their property from the state will not receive the securities -- nor any of the dividends, splits, or other compensation that may have accrued -- but rather just the value of the securities at the time of liquidation, less any fees incurred by the state. <br />
Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.comtag:blogger.com,1999:blog-873911930895618031.post-45976988471582218292019-03-22T09:48:00.001-04:002019-03-22T09:49:12.950-04:00Friday Lost + Found<b>IRS Holding $1.4B in Unclaimed Refunds</b> -- According to <a href="https://www.cbsnews.com/news/tax-return-2019-the-irs-is-sitting-on-1-4-billion-in-unclaimed-tax-refunds/"><b>CBS News</b></a> the Internal Revenue Service has announced that it has approximately $1.4 <i>billion</i> in unclaimed tax returns for more than a million taxpayers. In addition to background on how these amounts have gone unclaimed, the <b><a href="https://www.cbsnews.com/news/tax-return-2019-the-irs-is-sitting-on-1-4-billion-in-unclaimed-tax-refunds/">article</a></b> also has some tips for those who may have fallen behind on filings.<br />
<br />
<b>California Holding Over $9 Billion in Unclaimed Property</b> -- From time to time, states will publish estimates of the approximate amount of unclaimed funds being held at a given time. According to a recent <b><a href="https://sco.ca.gov/eo_pressrel_19941.html">press release</a></b> from the <a href="https://sco.ca.gov/upd_msg.html"><b>California State Controller's Office</b></a>, the Golden State holds over $9 billion dollars in unclaimed funds waiting for its rightful owners.<br />
<br />
<b>Former Mutual Fund Employee Convicted of Stealing from Dormant Accounts</b> -- Whenever any organization has a cache of dormant or otherwise unclaimed funds lying around (so to speak) there will be those who see the potential to take some of that money for themselves. According to the <b><i><a href="https://www.philly.com/business/vanguard-escheat-scott-capps-lance-tobin-us-attorney-bill-mcswain-stolen-dead-customers-20190315.html">Philly Inquirer</a></i></b>, a supervisor at a large mutual fund company has recently pled guilty to stealing more than $2 million "from dormant accounts that were slated for 'escheat.'" He then issued checks from these accounts to various family members. There is no information on how the scam was discovered, but according to the <i>Inquirer</i> "[s]entencing guidelines call for a potential 46 years in prison, $2.1 million in restitution and a $1.25 million fine."Mike Ratohttp://www.blogger.com/profile/10633679220253274654noreply@blogger.com