These interest assessment notices are the result of a recent internal review by the Controller’s office to identify “past due” property that had been reported and was included on the unclaimed property reports filed since 2007.

Essentially, companies receive the interest assessment notices if the State determines that the reports filed in those years contain property that should have been reported in prior years. The assessments are meant to reimburse the state for interest revenue that they were not able to earn because the property was not remitted to California in the proper time frame.

California unclaimed property penalties, reporting requirements, and escheat law has been a hot topic as of late and we’ve been following it extensively. You can find some of our reports on updates to California unclaimed property regulation below:

California Unclaimed Property Reporting Procedures Cause Confusion

California Issues Escheat Reporting Guidance To Corporate Holders

California Unclaimed Property Eclipses $6.1B

How To Avoid Unclaimed Property Penalties & Interest

Keane’s experience is that these assessments are not “property type-specific”, but rather they can be triggered by any property that was reported late to California, whether stemming from a company’s general ledger or their securities-related records.

These notices present several challenges for the recipient companies—namely response time and expense, plus the financial impact of the fines or penalties themselves. However, proper review and handling of the situation can ensure that the best possible outcome is achieved.

The first consideration should be to evaluate whether or not the assessment is correctly applied. If it is, and the abandoned property was in fact reported late, then there is no recourse. The interest assessment cannot be avoided or negotiated since it is statutorily mandated by California state unclaimed property law. (This is one argument for establishing reserve accounts for handling unanticipated unclaimed property issues).

Second, it is imperative that you properly calculate the potential penalties and interest assessment and book a proper reserve.  By California State Statute the state will calculate the interest at 12% per anum from the date the property was due and reportable (emphasis added).

However, in helping our clients navigate these issues, Keane has seen circumstances where fines, penalties, taxes and assessments were in fact avoidable.

For instance, in one situation we identified that the interest assessment was made in error. The confusion stemmed from the fact that the State report did not include a specific code for a particular property type (IRA) and as such the report was filed with the property categorized as a “security-related” item.   The misclassification resulted in the wrong date or last contact being applied, and consequently an incorrect conclusion that the property was reported late.

Another similar issue is when property types are miscoded either by the company or by the state. Reporting one type of unclaimed property, say gift cards or uncashed checks, can vary substantially from other reporting other property types.

The lesson to learn is that the the unclaimed property holder’s report should be matched against the state’s conclusions to ensure their accuracy. A review of the property types, the dates of last contact (which may have been picked up incorrectly based on your escheat system), the penalties and interest assessment details, and the applicable dormancy periods is essential.

Next, unless you’ve made significant changes to your internal unclaimed property accounting policies and procedures, it is very likely that mistakes that occurred in 2007-2008 continue to happen throughout 2010, 2011 and beyond. So it’s important to understand the specific regulatory mistakes that you’ve made (if any) so that you can use unclaimed property best practices and avoid mistakes, and a possible audit.

Evaluate the potential of amending your filings for 2009, 2010 and making adjustments prior to sending your next file this November. This could significantly reduce the impact of future interest assessment notices.

Lastly, you need to ensure that you do go through a process to firmly establish and/or confirm your unclaimed property policies and procedures. Failure to pay overdue assessments can trigger major penalties.

Keane has helped many clients identify all of the critical considerations — such as relevant property types, dormancy periods, source databases, systems restrictions, workflows, IT infrastructure, etc.— and then develop an appropriate strategy to minimize the volume and value of reportable property through extensive unclaimed property due diligence and remediation.   Often times, these items can be identified as accounting errors, intercompany disbursements or voided checks due to an incorrect account payable or dollar amount.

Developing the ability to mitigate the accounts by conducting thorough due diligence to locate the owner and to have them claim the property or properly re-code the item is critical. In the long run, there is great value beyond the financial investment to having a proactive and formal escheat process to make sure that all of your unclaimed property bases are covered.

Contact a Keane unclaimed property consultant for more guidance

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The proposed law exempts any "intangible property due or owed by a business association to, or for the benefit of, another business association resulting from a transaction occurring in the normal and ordinary course of business" from escheatment.

Missouri Unclaimed Property Reporting Statute of Limitations

In addition to this stipulation, a statute of limitations is proposed. If enacted, this bill will prevent the state treasurer from enforcing the Unclaimed Property Act for a given reportable period more than three years after 1) the holder filed a report, or 2) the holder gave notice of a dispute under the Act. If no report is filed, there is no limitation on the Treasurer.

Like other unclaimed property regulations, when it comes to statutes of limitations, it varies by state. There are currently 18 states, including Missouri, who have no statute of limitation. Another 23 states have statutes of limitation that stretch to ten years and beyond. Should this bill pass, Missouri would join a very small group of seven states operating with statutes of limitation of five years or less. In fact, if Missouri’s proposal of a three-year statute of limitation passes, it will join Idaho, one of two states with the shortest statute of limitations in the country. This would be a huge benefit to holders submitting unclaimed property reporting in Missouri – as it will not only limit how far the state can go back into an organization’s records via an audit more than three years after a report, but it also will essentially cap how much an organization may owe in fines and penalties so long as they remain in compliance with the Missouri escheatment law.

View all unclaimed property reporting news items

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In July, the Cayman Islands passed a law called the Dormant Accounts Law of 2010 that would allow for funds in dormant accounts to be transferred to the general revenue of the islands. Many of the characteristics of the law, such as dormancy periods and due diligence requirements, are similar to that of America’s unclaimed property laws. The general dormancy period for the Dormant Accounts Law is six years and applies to all monies including savings deposits, certified checks, intangible assets and safe deposit boxes in an account held by a financial institution that has been inactive for that period. Also, in addition to the standard due diligence requirement of mailing notices to owners, the Dormant Accounts Law would also require businesses to publish ads in the newspaper when the bank has been instructed not to send correspondence to the account holder.

Recently, however, The Financial Services Legislative Committee of the Cayman Islands (the Committee) sent a memo to the government stating that the law was “fundamentally flawed” as it has potentially dangerous consequences for the financial services industry.

In the eyes of the Committee, neither the financial industry nor the Committee were properly consulted before passage of the bill and the law itself is ambiguous in language. In fact, the scope of the types of accounts that could be seized is almost boundless and could make the Cayman Islands less attractive for financial institutions.

The memo, which included a list of suggested changes and even a rewritten version of the law, is currently in the hands of The Legislative Assembly and will hopefully be reviewed during November’s meeting.

Be sure to check back to see what changes, if any, will be made to the existing law.

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So just what does the law say? On July 1, 2010, New Jersey passed a revision to the Uniform Unclaimed Property law stating that gift cards – which were not previously covered by the unclaimed property act – are presumed abandoned after two years. This includes paper gift certificates and rebates cards. The law also reduces the time to redeem travelers’ checks and money orders from 15 years to three years and seven years to three years, respectively. Finally, the law forbids fees charged on stored value cards and limits the amount of dormancy fees businesses can charge on travelers’ checks.

The lawsuits involve American Express Travel Related Services Company, the New Jersey Retailers Association and the New Jersey Food Council, and are all seeking a preliminary injunction against enforcement of the law.

American Express

Having sued on September 23, American Express argues that New Jersey is the only state to change the abandonment period on travelers’ checks from 15 years to three years. It complains this law in no way benefits owners of travelers’ checks.

New Jersey Retail Merchants Association

The NJ Retail Merchants Association, on the other hand, states that the revised law does not align with New Jersey Superior Court, Appellate Division ruling, Matter of November 8, 1996 Determination of the State of New Jersey, Dept. of Treasury, 309 N.J. Super. 272, which holds that gift cards are not subject to escheatment.

New Jersey Food Council

The Food Council believes another portion of the revised law, which applies only to retailers selling more than $250,000 worth of gift cards a year, is unfair since individually owned businesses operating under a common trade name are treated as a single issuer.

In the eyes of some members of New Jersey Legislature, the revised law will protect consumers from dormancy fees and bring order to the state’s unclaimed property laws. However, Assemblymen Patrick Diegnan Jr. and Paul Moriarty are in disagreement. On September 20, they introduced A-3250 in an effort to reverse the new law, as they believe that it has caused uncertainty for both businesses and consumers. Stay tuned to see how this all unfolds.

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A one-time only “Amnesty” program to help holders of unclaimed property regain compliance.

What does an Unclaimed Property Amnesty Program Mean Exactly?

Well, a lot of companies continue holding unclaimed property on their books – either intentionally, or more often, simply because they are unaware of the state unclaimed property laws.

This is not very surprising considering the vast number of state escheat laws that apply to holders across the 50 states, and the break-neck pace with which they change. But this type of program allows holders to voluntarily come forward to comply with the laws without the threat of paying hefty interest and penalty payments. That is, however, only if they enroll in the program by October 31st and file their reports by November 1st of this year.

Many states offer some form of voluntary disclosure like Indiana’s amnesty program, and more states seem to be jumping on the band wagon, as evidenced by this recent announcement made by the state of Indiana.

States have a clear incentive to offer these programs as it helps them collect escheated funds and revenue. Simultaneously, it can help major unclaimed property holders like financial institutions, insurance companies, retail organizations, manufacturers, and others to regain unclaimed property compliance.

Seems like a win-win to a lot of people, but what do you think?

Leave a comment below, or get more information about Indiana unclaimed property law and the new Amnesty Program.

Contact Info for Indiana Attorney General’s Office

Indiana Attorney General’s Office
Unclaimed Property Division
402 West Washington, Suite C-531
Indianapolis, IN 46204
1-317-232-6348
1-800-447-5598

Other Indiana Unclaimed Property Law Resources

Indiana Unclaimed Property Information

Let Us Help You Stay Compliant With State Abandoned Property Law

Do you need help with unclaimed property compliance? Contact one of our unclaimed property consultants and get personalized assistance today!

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New Jersey state treasurer, Andrew P. Sidamon-Eristoff, has been hit with two law suits concerning a measure approved back in June of 2010 which was part of the budget recommended by Governor Christie. The budget called for changes to when a travelers check or gift card could be considered as abandoned, resulting in an estimated $80 million for the state. Gift cards alone are estimated to generate $33-55 million.

The recent amendment included gift cards for the first time ever in the New Jersey Uniform Unclaimed Property Act. The adjustment declares cards that have been unused for two years as unclaimed property.

The same amendment addressed travelers checks, stating that the previous 15 year period would be reduced to 3 years concerning when a check may be “presumed abandoned”. This cleared the treasury to seize proceeds from as far back as 1994 according to the American Expresss suit which also openly identifies New Jersey as the only state that does not adhere to the standard, 15-year period.

American Express believes that the amendment interferes with the power of Congress to regulate trade amongst states, which is granted through the Constitution’s commerce clause. Mainly, American Express views the new 3 year period as a threat to their business in the state because they typically generate a return by investing the unused money until the check holder spends or cashes the balance. As a result of a September 13th hearing of the Assembly Consumer Affairs committee where merchants expressed concern, two Democratic Assemblymen introduced a bill on September 20th that would revert the amendment as it applies to travelers checks.

John Holub, president of the NJ Retail Merchants Association, said “We recognize the challenges New Jersey faces in achieving a balanced budget.” But the amendments “are in conflict with the federal system, which is binding on all states,” he added.

The NJRMA also disagrees with the section of the amendment requiring record keeping by retailers for the names and addresses of the “purchaser or owner” of every card. The intent was for there to be proof that a purchase took place within borders of New Jersey.

A clarification document was released from the NJ treasurer stating that only the zip codes of the purchaser must be recorded and that the recent amendment does not prevent a holder from reclaiming their money back from the state.

This article was inspired by this article in The Record concerning NJ Gift Cards and Travelers Checks.

Contact a Keane Unclaimed Property for more information

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For most states, these new regulations give consumers five years as opposed to one year to use the balance on most gift cards, but they will still have to pay fees for not using them. One major key improvement is that card issuers must wait a year before charging an inactivity fee. However, in a recent Associated Press interview, Laura Lane, vice president of unclaimed property services here at Keane Unclaimed Property, indicated that this could be both good and bad for consumers.

“It could be good for consumers in that they have a year before fees are charged,” she says. “However once that year is up, who knows how good for consumers that will be.”

In addition, the new rules don’t apply to all gift cards and this includes reloadable prepaid cards from MasterCard, Visa, American Express and other lenders, and reward cards or rebates. In fact, Lane says that more and more companies—such as phone companies—are giving rebates in the form of electronic cards because it’s easier for them to track how much is yet to be used.

Some states, however, do not follow this five-year standard. Take for instance New Jersey where Assembly Bill 3002, which was signed into law and went into effect on July 1, 2010, (but has recently been extended to October 1, 2010), requires that gift certificates, gift cards, and stored values cards be turned over to the state after just two years of dormancy. Legislation is on the table, however, to reverse these changes and eliminate the state’s claim on unused store values and eliminate the requirement that businesses gather contact information from customers buying gift cards. Michigan, as well, is expected to pass legislation this month that will reduce dormancy periods across the board – including gift cards – to 3 years of inactivity.

Moving forward, companies will soon be required to print expiration dates on gift cards. However, this new gift card escheatment law does not take effect until January 31, 2011 meaning that consumers must pay attention this holiday season. If they receive gift cards, they should use them as soon as possible in order to avoid escheatment or complications with the state.

Contact a Keane Unclaimed Property consultant for more information

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This page gives you key information pertaining to New York State escheat laws including reporting & compliance.

If you have specific questions that are not addressed here, we can certainly help with that as well. For immediate assistance, contact a New York unclaimed property consultant today at (800) 848-8896. To contact us electronically, click here.

Key Concepts In New York Escheatment Unclaimed Property Law

The following are just a few concepts that, when not followed, could be costly to your organization:

• If you are late delivering abandoned property, NY State charges 10% interest per year from the date payment or delivery was due to the date you make payment or delivery.
• The New York unclaimed property tax law is one of the oldest in the country and was enacted in part to protect individuals from losing their assets to businesses who were conveniently lax in their notifications to debtees.
• If you have more than 25 items to report, you need to submit a report on electronic media (CD, diskette) and a verification checklist.
• An amendment was made to Section 1315 of the Abandoned Property Law  reducing the dormancy period for negotiable instruments (outstanding checks) from five (5) years to three (3) years. This went into effect in on April 1, 2006. (Source: New York State Handbook for Reporters of Unclaimed Funds.)

Contact Info For New York State Unclaimed Funds Administration

New York Office of Unclaimed Funds
Alfred E. Smith Building, 9th Floor
Albany, NY 12236
1-518-474-4038
1-800-221-9311

Other New York Unclaimed Property Law Resources

New York Office of Unclaimed Funds Website

New York State Unclaimed Funds Fact Sheet

Frequently Asked Questions About Unclaimed Funds In New York

Still Have Questions?

Do you have other questions that weren’t answered here? Want advice pertaining to your specific situation?

Call (800) 848-8896 or click here to complete the contact form and one of our consultants will get back to you quickly.

All submissions are kept completely confidential. Your information will never be shared, rented or otherwise exchanged with any third parties.

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Other California Unclaimed Property blogs include:

• California Unclaimed Property Penalties & Notices Catching Many Companies Off-Guard
• California Unclaimed Property Reporting Procedures Cause Confusion
• California Issues Escheat Reporting Guidance To Corporate Holders
• California Unclaimed Property Eclipses $6.1B

California Escheatment At A Glance

With an eye-opening 6.1 billion dollars in unclaimed property, the State of California has in its possession a substantial chunk of tangible and/or intangible property that you’ve likely turned over year after year. John Chiang, the Controller for the State of California, is the state’s fiscal officer responsible for, among other tasks, overseeing that 6.1 billion—and trying to return the property to its legal owner or heir.

The following are some key terms that facilitate understanding of California escheatment law:

□  Escheatment: A process whereby unclaimed property is rendered to the state.
□  Apparent owner: The individual who is believed to be the owner of the property in question based on the holder’s records.
□  Holder: The entity either in possession of property that belongs to another individual or a trustee if the property is a trust.

What Is Covered Under The Escheatment Law?

There are more than 100 property types that could be reportable. Some common property types and their respective dormancy periods are shared in the table below. (Note: This information is provided for reference only. Keane updates the matrix and makes every effort to ensure the accuracy of the information reflected, however unclaimed property laws, regulations and administrative rules are dynamic and often change with short notice. Please consult Keane’s Compliance office or contact specific states to obtain the most current information before reporting unclaimed property.)

The Process of Escheatment

After two and a half years of reasonable efforts made by the holder to contact the rightful owner, the holder is required to send a written notification to the apparent owner’s address , indicating that abandoned or unclaimed property will be turned over to the state. California unclaimed property reporting procedures are unique. Click here for more details.

Examination of Records

At any given reasonable time, the State of California may authorize a licensing or regulating agency or auditors to inspect the records of a holder believed to have neglected to report escheatable property. In addition, the State may enter into an agreement with another state to investigate claims that escheatable property was not reported in that state.

Violation of California Escheatment Law

If a holder is found to have not reported unclaimed or abandoned property, a fine of $100 per day is assessed to the violating holder for each day such report is not delivered to the State, up to a maximum of $10,000. A fine is assessed only after a reasonable amount of time has passed since the delivery of notice from the Controller’s office to the holder notifying them that a report is required. Intentionally neglecting or refusing to deliver escheated property to the State results in a minimum fine of $5,000, up to a maximum of $50,000.

Contact Info for California Division of Collections

California Division of Collections

Bureau of Unclaimed Property
PO Box 942850
Sacramento, CA 94250-5873
1-916-445-8318
1-800-992-4647

Other California Unclaimed Property Law Resources

California State Comptroller Unclaimed Property Main Page

California Unclaimed Property Status

Let Us Help You Stay Compliant With State Abandoned Property Law

We hope that you found this information helpful, but likely, you need some more specific guidance. Don’t take chances. Improperly reporting & managing unclaimed property can result in costly fines and penalties.

Contact an unclaimed property specialist at Keane Unclaimed Property and turn your company’s escheat program from an expense into an opportunity. Just pick up the phone and call (800) 848-8896.

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Here you will find valuable knowledge pertaining to Arizona State escheat and unclaimed property laws.

Should there be a specific question that we fail to answer here, we’re ready and willing to provide our insight.  To submit your inquiry and get more information, fill out this brief form below or get in touch directly with the Arizona Unclaimed Property Unit.

Aspects of Arizona Unclaimed Property and Escheatment Law

Listed here are several aspects of Arizona unclaimed property and escheatment law to keep in mind in order to avoid interest and penalties:

• Failure to pay or deliver property in the proper time period (scroll down) results in interest at 1.5% per month or fraction of a month from the date which the property should have been paid or delivered.
• The end result of failure to pay or deliver property altogether is a civil penalty of 25% of the value of abandoned property.
• If no report is submitted, there will be a $100 fee each day late up to $5,000.

Recent Adjustments to Arizona Escheatment Law

Unclaimed property laws in Arizona have been subject to some changes recently:

• On December 23, 2009, SB 1003 went into effect and shortened many of the dormancy periods enumerated in the Arizona Unclaimed Property Act.
• On April 23, 2010, HB 2111 was signed to revert the dormancy period for traveler’s checks back to 15 years.
• Effective July 20, 2010, the HB 2453 will return the dormancy period for securities property from the recently passed 2 year dormancy period to 3 years.  Bond property dormancy period will remain at 2 years, but the interest on that debt changes to 3 years.

Other Links & Resources

Arizona Department of Revenue: About Unclaimed Property

Arizona Revised Statutes on Unclaimed Property

Contact Information for Delaware State Bureau of Unclaimed Property

ARIZONA
Department of Revenue
Unclaimed Property Unit
PO Box 29026
Phoenix, AZ 85038-9026
1-602-364-0380
1-877-492-9957

Still Have Questions?

Did you find the answer to your questions here?  Is there a particular scenario which you would like us to evaluate?

Submit a complete contact form below for a personal consultation.

Every submission we receive remains absolutely confidential. The information you provide will under no circumstances be shared, rented or otherwise exchanged with any third parties.

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