Breaking down the property puzzle: Essential insights between unclaimed property and property tax

Our Baker Tilly team recently hosted a webinar to address the question: What exactly are the differences between unclaimed property and property tax? Baker Tilly unclaimed property professionals were joined by property tax specialists from Cantrell McCulloch, Inc. (CMI) to take on this question and were able to provide attendees with an overview of the similarities and differences, as well as useful information to help companies make sure that they are compliant with both.

While both are subject to annual reporting requirements and audits, for most companies, that is where the similarities end.

Unclaimed property

Unclaimed property (UP) is any intangible property that is held, issued or owed in the ordinary course of business and has remained unclaimed by the apparent owner for a specified period after it becomes payable or distributable is presumed abandoned. All industries and companies have the potential to generate transactions that can become UP if unresolved.

UP is NOT a tax – so nexus rules do not apply. Unlike property taxes, which are payable to the jurisdiction in which the property is located, determining which state gets UP is more complex. In general, the state with the primary claim to UP is the state in which the owner’s (or payee’s) last known address is located. If the owner is unknown or the address is unknown, the state of formation or incorporation of the company that has the liability to the owner can claim the UP. UP laws are custodial in nature whereby the jurisdiction “holds” the property in custody for the owner until it can be claimed.

When specific types of property are due also varies by property type and state, and there are also some state reporting exemptions. In addition, before reporting UP, a company must perform state specific “due diligence” to notify the owner that their property may be reported to the state if it remains unclaimed.

All U.S. states and certain territories require annual UP reporting, resulting in 54 jurisdictions with annual reporting requirements. Most states require companies to report and remit property in the Fall, with Oct. 31 or Nov. 1 deadlines. Other require companies to file in the Spring, between Mar. 1 and May 15, with a few requiring reports to be filed in July. In addition, certain Canadian provinces have established reporting requirements as well.