What is unclaimed property (UP)?
Unclaimed property is any unpaid liability owed to a person who can’t be located and where there has been no owner-initiated activity for a period of time, known as a dormancy period. Examples of unclaimed property include uncashed checks, savings accounts, checking accounts, accounts payable, accounts receivable credits, unpaid wages, stocks, refunds, money orders, paid-up life insurance policies, utility or safety deposits, and the contents of safe deposit boxes.
After the dormancy period has passed, a notice must be sent to the owner of the unclaimed property, this is called due diligence. If there is no response to the due diligence letter, the property must be reported to the appropriate state. After it’s been reported, owners seeking the return of the property must make a claim directly to the state.
All states require companies holding unclaimed property to report it on an annual basis. Reporting deadlines vary by state and property type.
To learn more about Unclaimed Property, read the UPPO FAQ, or visit the NAUPA website.
What are your compliance and reporting obligations?
Compliance with state unclaimed property laws generally consists of 3 steps:
- Identification of unclaimed property
- Attempting to contact the property owner (due diligence)
- Reporting and paying the unclaimed property to the state
No two states have the same requirements for unclaimed property compliance. As a result, understanding how state laws dictate when property is considered abandoned, how and when to send due diligence letters, and how and when to report unclaimed property is important for staying compliant.
Where should you report unclaimed property?
The United States Supreme Court has established the following priority rules dictating where to report unclaimed property:
- Unclaimed property is reported to the state of the owner’s last known address.
- If there is no known address for the owner, unclaimed property is reported to the state of incorporation of the business holding the property.
What happens if you don’t comply with UP requirements?
Failure to adhere to the state requirements and report and remit unclaimed property in a timely manner can result in substantial penalties, fines, and interest charges. Additionally, non-compliant companies might be subject to onerous and costly audits administered by third-party contract auditors on behalf of multiple states.