While state unclaimed property laws have been in existence dating back to the early 1900s, there are companies of all sizes, in all industries, that have never reported unclaimed property.  A typical business entity — or “holder,” for unclaimed property purposes — is obligated to report outstanding, uncashed, and inactive accounts to the state on an annual basis.  Reporting unclaimed property is a multi-step process that requires the holder to: 

Types of unclaimed property include:

Why Be Concerned About Unclaimed Property Reporting?

Every company generates unclaimed property, which, in essence, is any intangible property owed by a company to another party unclaimed for a specific time by the rightful owner. Once a business has held the property for the dormancy period without receiving any communication from the owner, the property becomes subject to escheat, and the holder has an obligation to report the property to the appropriate state.

Not correctly reporting and remitting unclaimed property may result in a material misstatement of a company’s financial statements by improper classification of unclaimed property liabilities.  It can lead to a multi-state unclaimed property audit, penalties, and/or interest assessments that go far beyond the value of the property, potential whistleblowers, and negative publicity for the company. 

What First-Time Filers Should Consider

A first-time filer should start by understanding what areas of the business have the potential to generate unclaimed property. The next step is to determine what remains outstanding, uncashed, or inactive according to the company’s books and records. To make this determination, companies should review the following:

How Can a First-Time Filer Report Past-Due Unclaimed Property?

Before reporting past-due property,  first-time filers are required to notify their customers they are holding unclaimed property that will be reported to the state if no action is taken.  This notification process is referred to as due diligence. Additionally, companies should ascertain whether the state has an unclaimed property Voluntary Disclosure Agreement (VDA) program. While terms and conditions of VDAs vary from state to state, in general, a VDA is an agreement between the holder and the state that outlines the terms under which they agree to settle past-due liabilities. VDAs will generally waive penalties and interest on the past-due property. 

Why First-Time Unclaimed Property Filers Should Turn to a Professional Advisor

An advisor can be instrumental in bringing your business into compliance. The specialists at Dunbar can assist in identifying potential sources of unclaimed property your business may be generating, as well as create or update applicable policies and procedures. These experienced consultants understand how overwhelming filing unclaimed property can be — especially for first-time filers, no less — and have the expertise to standardize your unclaimed property process, negotiate VDAs, and assess your audit risk.

If you’re a first-time filer and have questions about the unclaimed property process, don’t brave the storm alone; turn to the professionals at Dunbar who can help you adhere to reporting requirements with ease. For more information about first-time unclaimed property reporting or help with finding unclaimed property owners, turn to our team today.