Posted on Thursday, 14th April 2011 by Keane Unclaimed Property Team

We’ve seen the word “escheatment” achieve a new level of notoriety over the past several months, and it’s largely due to the recent wave of unclaimed property penalties and notices that have been sent out by the State of California Controller’s office.

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. Read More »

Posted on Thursday, 19th November 2009 by Keane Unclaimed Property Team

The first story is from The Times Picayune in New Orleans, LA. Benny Spann, director of the Unclaimed Property Division of the state’s  Treasury Department details Louisiana’s escheatment audit and unclaimed property efforts.

“Collections are coming in at a record clip because of the state’s stepped-up efforts to audit companies that might have been withholding payments and not turning them over as state law requires. Companies talk, even competitors talk…that the state is auditing more.”

The other story is regarding the Fed’s planned overhaul of the rules governing gift card escheatment. Essentially the Fed is proposing that, “consumers must have at least five years to use the gift cards before they expire,” and that, “service or inactivity can be imposed only under certain conditions.” A number of outlets covered the news, including the Wall Street Journal.

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Posted on Wednesday, 21st October 2009 by Keane Unclaimed Property Team

An interesting article regarding state escheatment rules is circulating today. It is just the latest front in the States’ continuing battle to collect unclaimed and abandoned property.

Covered here by the Los Angles Times, the short version of the story is this – there are some $16.7 billion in war bonds from World War II that are classified as “unclaimed property.” Right now, those assets reside with the Treasury Department at the Federal level. The States believe that these assets should escheat to be held at the state level, and six states are suing to claim these unclaimed assets as their own.

Move past the significant issues here regarding State versus Federal power. The core issue here is money.
As I’ve discussed in past posts, unclaimed property offers an attractive source of revenue for states, particularly as many of them face budget issues through the economic downturn. The State of Delaware even lists abandoned property as its third largest revenue source in its budget projections.

Not surprisingly, the unclaimed assets represented by the war bonds are just as attractive to the cash strapped Federal Government.

This situation is a vivid illustration of how states are willing to go to great lengths to collect unclaimed and abandoned property. From auditing businesses and organizations for how and what they report (and levying fines in a number of cases), to pursuing legal action, they remain very driven.

The lawsuit is a strong reminder to businesses to review their unclaimed property and reporting, ensure they are in compliance with all state escheatment rules, and protect themselves from unnecessary risk and compliance issues.

Be sure of one thing, these assets are an attractive form of revenue right now, and in this case, both the Federal and State Governments are willing to do legal battle over it.

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Posted on Tuesday, 29th September 2009 by Keane Unclaimed Property Team

I recently learned about some interesting statistics regarding Delaware’s abandoned property law that helps illustrate what unclaimed property means to state budgets. It also shows why companies are facing an increased risk of unclaimed or abandoned property audit.

This is an issue I have discussed in the past - as the states face tighter budgets and decreasing revenue, they have looked to other sources, like unclaimed property reporting and audit proceeds, to help make up the difference. It is a risk that can have a material impact on your company’s cash flow and financial well-being.

My colleague at Keane Unclaimed Property, Laura Lane, shared with me the information that was recently disclosed by the Delaware Economic and Financial Advisory Council (DEFAC). DEFAC meets six times a year to set forecasts for the State’s finances and shares the minutes of those meetings online.

The minutes of the the June 15, 2009 meeting were recently posted and contain some interesting insights into how the abandoned property law impacts the state budget. For example, for the fiscal year ended June 30, 2010, the forecast for “Abandoned Property” increased from $330 million to $350 million. Additionally, the minutes indicate that the $20 million increase is attributable to the settlement of ONE large case. Large indeed!

This makes unclaimed property or abandoned property the third largest source of revenue for the State of Delaware. It is not just a large contributor to the state’s revenue – its one of THE largest and most significant.

It’s a harsh reality for companies that are incorporated in Delaware – the ones that are most at risk. It’s not clear exactly where the state thinks the money will come from, but it is difficult to imagine that they could maintain and grow the amount of money collected year-over-year without continuing to aggressively enforce their statutes through audits (and assessing fines and penalties). This is a clear illustration of why companies must be well prepared by reporting properly on an annual basis and ensuring that they have identified and corrected any accounting practices that would raise the eyebrows of the auditors.

While you may not be aware of your vulnerabilities, the states are. They’re so confident that it’s in the budget.

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