FinanceRegs.com » Unclaimed property & escheatment

Unclaimed property: Which states will hit you hardest?

Carol Katarsky — Fri, 30 Jan 2009 11:00:44 +0000

Dealing with escheatment is never easy, but which states you report to can make a big difference in just how big of a headache it is. The Council on State Taxation (COST) put together a list of the best — and worst — states for holders of unclaimed property. The study “graded” each state based on key criteria that can make compliance more difficult for companies such as whether:

B-to-B transactions are escheatable
there is an independent administrative appeals process
gift certificates are escheatable, and
the state uses fee-based auditors.

According to the study, 8 states ranked a B+ or higher. They are:

Kansas (A)
Arizona and Wisconsin (A-)
Indiana, Maryland, Massachusetts, North Carolina, and Virgina (B+).

The nine least business friendly states rated a D+ to F. They are:

New Hampshire, Utah, Wyoming (D+)
Pennsylvania (D)
Georgia, Mississippi, New York, Oregon (D-)
Delaware (F).

Visit COST’s site to download the entire results.

Poor due diligence: How to make unclaimed property much more costly

Carol Katarsky — Mon, 12 Jan 2009 11:00:03 +0000

You’d think contacting an employee to say you don’t have his home address would be enough to cover your tail when it comes to escheatment. But you might be wrong. In a current case, a worker sued his former employer for not doing enough to find him and notify him of the status of property it was holding on his behalf.

The employee had purchased company stock through an employee purchase plan. Even though he later moved, he maintained the home address that he used for the stock purchase.

Nearly 20 years after he purchased the stock, without having heard from him, the company assumed it no longer had his correct address and escheated the funds to the state.

Normally companies get immunity from lawsuits once they transfer the property to the state. But in this case, the employee was able to prove the firm wasn’t entitled to immunity because it had his correct home address on file the entire time.

The case is still wending its way through the courts, so it’s too soon to say how much the company could be on the hook for. But between legal costs and a potentially large reward, chances are it’ll be costly.

What better reminder that the frustrating task of trying to contact each and every owner of unclaimed property is well worth doing — and worth doing well.

New regs en route for gift cards

Carol Katarsky — Wed, 07 May 2008 10:00:06 +0000

Heads up for accounting pros dealing with unclaimed property and escheatment: New rules and regs are on their way for one state.

The state of Nebraska recently enacted legislation impacting any companies that deal with unclaimed property. Previosuly, retailers were required by law to remit funds from any unused Nebraska gift cards/certificates (if $100 or under in value) to the state treasurer once they crossed a three-year threshold.

But after L.B. 688 (enacted March 10, 2008), regulations are now changed so that any unused gift cards/certificates which are over $100 in value and don’t contain any post-sale finance charges or fees are exempt from becoming unclaimed property.

One important note: If a gift card has an expiration date or fees associated with it, businesses are still required to report it as unclaimed property after 3 years of inactivity (regardless of the amount). The exemption only qualifies for cards/certificates without fees or exemption dates.