The Allure of Unclaimed Property
Passion is not a word normally associated with taxes and business compliance responsibilities. But passion is evident when people talk about abandoned and unclaimed property compliance.
State government regulators are passionate about returning property to its rightful owner. Third-party contingent fee auditors are passionate about the yields of their audits — particularly the yields where a “rightful owner” cannot be located. Companies are passionate about the aggressive enforcement of abandoned and unclaimed property compliance requirements by the states. And CPAs are passionate about AUP because it isn’t really a tax, there is no statute-of-limitations protection generally, and clients or employers who are audited are often disappointed with the CPA if the CPA didn’t at least warn them about the risks.
Abandoned property (or unclaimed property) is intangible property and, in some situations, tangible property that has gone unclaimed, or without activity initiated, by the owner for the length of a prescribed abandonment or dormancy period. Generally, AUP must be returned to its rightful owner or turned over to the appropriate state agency so it can locate the rightful owner after the required dormancy period lapses. The process of returning property to a rightful owner/heir or reversion of the property to the state is called escheat. Each state has its own version of an AUP statute, and compliance requirements vary. Most states, however, have adopted some form of one of the versions of the Uniform Unclaimed Property Act.
According to the National Association of Unclaimed Property Administrators’ Web site, about 2.5 million claims totaling $2.25 billion were remitted to rightful owners in fiscal year 2011 via state unclaimed property programs. That site also reports there is another $41.7 billion of assets waiting to be returned to owners in those state programs.
AUP coverage is extensive, and assets are generally subject to escheat unless exempted.
One of the basic concepts in AUP law is the concept of activity. Activity is an action taken by the owner that has the effect of tolling, or restarting, the running of the applicable abandonment period under the law of the relevant jurisdiction. Activity generally includes actions such as a deposit or withdrawal, receipt by the holder of a written communication from the owner, or use of a debit, credit, or stored value card. Read more on Accounting Today.