States continue to look towards unclaimed property as a source of revenue and as a result, enforcement of escheatment laws continues to increase.
The laws of each state continue to evolve include reducing the dormancy period or broadening the definition of what qualifies for unclaimed property. States are also continuing to utilize contract auditors to aggressively go out and track down unclaimed property.
What is unclaimed property?
- Intangible personal property that has gone unclaimed by the rightful owner after a specified period of time.
- Unclaimed property is not a tax.
- Governed and enforced at the state level.
- Intended to be consumer protection.
- Additional source of revenue for the states.
Common Audit Triggers
- Payment of other taxes with no unclaimed property compliance history.
- Claiming property with no state compliance.
- Merger & acquisition history.
- State of Incorporation.
- Media event/publicity.
Importance of Unclaimed Property Compliance
- Increasing number of audits.
- Interest and penalties being assessed.
- Use of contract auditors increasing.
- Potential risk could have material impact on financial statements.
- Reputational risk.
Why Issuers Should Care
- Fines and Penalties for non-compliance
- Increase risk of Audit
- Shareholder Dissatisfaction