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What Is Abandoned Property?
Because not complying, or just being partially compliant, can lead to complications and audit risk, here’s what you should know to stay out of trouble.
Abandoned property is considered by common law as “that to which the owner has voluntarily relinquished all right, title, claim and possession, with the intention of terminating his ownership, but without vesting ownership in any other person, and with the intention of not reclaiming any future rights therein.”
In other words, abandoned property concerns items apparently given up by the owner who apparently has no intention to reclaim it. More importantly, in the eyes of the laws of each state, a company may NOT be compliant with state law, abandoned property, and compliance requirements if:
- It has NOT reported unclaimed property
- It does not report unclaimed property on an annual basis to all required jurisidictions
- It reported some but not all of the required abandoned property types
- It has not appropriately performed state-required due diligence
Due to the drive to increase state revenues, more unclaimed property audits are being conducted and at more rapid pace. Therefore, not complying (or not being in complete compliance) with the rules may just spark an audit.
Because some states add penalties and/or interest on top of the past-due amounts, a non-compliant company can find itself having significant exposure. See a recent blog article about a company that recently had to pay $17.6 million to Delaware.
What To Do To Ensure Abandoned Property Compliance
Conduct a Review
Thoroughly examining accounting records is an important process that needs to be undertaken to determine a company’s potential liabilities. Only then can measures for mitigating the potential liabilities be appropriately planned.
Engage Professional Advice
Keane’s unclaimed property consulting experts have vast experience in state negotiation and unclaimed property audit defense, often successfully reducing companies’ liability by hundreds of thousands of dollars.
Consultants will coordinate with your company to gather abandoned property data, generate reports, and analyze the relevant data to determine the escheat status of each balance or outstanding check that is in question.
File For Compliance Reporting
Consultants can also help the company with accurate annual reporting to the states to ensure that appropriate reports and remittances have been handled.
For companies that have not gone through reporting unclaimed property in the past, a process known as Voluntary Initial Compliance may be required to achieve compliance quickly and avoid serious fines and penalties that might result from an audit.
Why You Should Pay Attention To Law, Abandoned Property, And New Developments
Paying attention to abandoned property issues is not just for penalty avoidance.
Just as “Company A” reports funds owed to other entities (such as vendors, business partners and affiliates) those other firms may also be reporting property to the states that belongs to Company A. Asset recovery services are designed to research and recover unclaimed funds on behalf of Company A to identify funds that they may claim.
Consultants use a range of tools and research teams and databases to help companies realize these opportunities to recover assets and drive cash flow directly to the bottom line. Only compliant firms should do this or else there is the risk that claiming property will make the company “more visible” to the states and therefore cause the risk of audit to rise.
Complying with abandoned property law, therefore offers double-edged benefits. It helps a firm to avoid penalties and it gives firms a potential boost to cash flow.
Did That Answer Your Question?
Other information that may interest you:
Check out the Keane Unclaimed Property Blog
Sign-up for an abandoned property educational summit or roundtable discussion
Click here and contact one of our consultants to get personalized recommendations.
You can also call (800) 848-8896 x3132.
