While unclaimed property is not a tax, the requirement to remit unclaimed items to the states has become a focus during these hard economic times. Revisions to the abandonment periods and expansions to the definition of what constitutes unclaimed property have led to challenges in reporting. In addition, states have increased their audits of businesses that do not report and the look-back period can be up to 25 years.
Unclaimed, or abandoned, property consists of property held during the course of business that the owner has not claimed for a certain period of time. This usually includes items such as uncashed vendor and payroll checks, accounts receivable credit balances, gift cards and certificates, customer refunds and contents of safe deposit boxes. Recently, states have also focused on unclaimed employee benefits and situations where companies have received goods but not been billed for the items (unbilled payables). Abandonment periods can range from 1 year to 15 years depending on the particular item.
Normally, a business is required to perform due diligence in trying to locate the owner of abandoned property. This includes sending a letter to the owner's last known address. If no response is received, the item is remitted to the state of the individual's last known address. If no address is known, the item is remitted to the state where the business is located. Due to these provisions, a company may need to file in more than one state.
Reporting for most states is now done electronically with the use of a NAUPA (National Association of Unclaimed Property Administrators) format. Items are often aggregated into categories for ease of reporting. Proper record keeping is important to identify items that have been reported and those that are being held until the abandonment period is met.
Washington, Oregon, Idaho, California and several other states require filings by November 1st. Additional information is available in each state's unclaimed property website or you may contact Chris Laine, State and Local Tax Director, at email@example.com or (425) 289-7609 for assistance.