Unclaimed Property Reporting
Annual Spring Compliance Deadlines
This time of year is commonly associated with tax season. However, this is also an important time for corporations to file their unclaimed property reports. Unclaimed Property includes intangible personal property (e.g. uncashed checks, outstanding customer credits or deposits, unredeemed gift cards, etc.) that has gone unclaimed by its rightful owner after a specified period of time. When the owner cannot be located, each states' Unclaimed Property Laws require companies to report the personal property to the state of owner's last known address, or if there is no last known address, to the company's state of incorporation.
There are two filing periods, Spring and Fall. Often, corporations tend to focus on the Fall unclaimed property reporting cycle, however, it's important to remember that nine states are Spring reporting states. This can result in some confusion amongst companies trying to comply with the state unclaimed property laws. Abiding by the states' schedule can help prevent penalties and is actually in the best interest of all parties.
The nine states involved in the Spring reporting cycle consist of Michigan, New York, Illinois, Pennsylvania, Delaware, Tennessee, Connecticut, Florida and Vermont. The filing deadlines for the aforementioned states range from the beginning of March until the first of July in a given year. There are also a few states such as California, Hawaii and Maine that require special reporting. California and Hawaii are the only two states remaining that require an initial report in the previous year and a remittance report in the following year. In the case of California, California utilizes various databases such as motor vehicle, voter registration and property tax records in an attempt to locate the owner of the funds. Located owners are then referred to the corporation for payment and in June, the remaining funds are remitted. Hawaii requires a preliminary filing by November 1st and a final filing with the remittance by May 1st. In an attempt to locate the owners, Hawaii publishes the owners' names in March of the following year. Maine's unclaimed property law is also unique in that it requires companies reporting unredeemed gift cards to file a completely separate report.
Due to increased state enforcement of unclaimed property laws, corporations need to know how to navigate through complicated regulations, potential audit assessments and other inherent accounting issues related to unclaimed property compliance. An expert unclaimed property consultant can assist in navigating the convoluted state laws. Hiring an expert unclaimed property consultant is often the best way for a corporation to ensure that they are operating within the guidelines and are compliant with each individual state's unclaimed property laws.
Corporations sometimes are tempted to report all their unclaimed property to the states in the Fall and ignore the Spring filing deadlines all together. However, the approach of ignoring the Spring filing is not recommended. While it may seem inconvenient to have Fall and Spring reporting cycles, it is an important factor when considering that most states require due diligence to be performed before turning the funds over to the states.
Due diligence is mandated by state law and is the process of a holder attempting to contact the true owner of dormant unclaimed property. This process is utilized to give the owner a last opportunity to claim the property from the holder before it is turned over to a state as unclaimed property. If a company neglects to perform the due diligence, it will result in an increase in claims that the state will have to pay when owners later come forward to collect or claim their unclaimed property from the state. Not performing due diligence could result in the states assessing penalty or selecting the company for an audit. In addition, if the due diligence was not performed, there could be other state unclaimed property requirements that were neglected by the company.
Reporting the funds early in the previous Fall cycle would cause the funds to be reported before the states' Spring cut-off deadline of December 31st and before due diligence can be performed. Reporting the funds late in the current Fall cycle could result in the assessment of interest and penalties due to late reporting. The risk is simply too great to warrant skirting the reporting deadlines. Our advice is to comply with the respective state's unclaimed property laws. First, by performing your due diligence and second, by reporting according to each state's reporting schedule to ensure timely reporting.
For more information about Moyer & Osibodu's services, please visit the website at www.MoyerOsibodu.com or call 813-986-7192.