Article

California Voluntary Compliance Program and summer reporting in play

May 8, 2024 · Authored by Matthew Chenowth, Cathleen Bucholtz

The California VCP

The California Voluntary Compliance Program (VCP) became effective in 2023 to incentivize companies that have unclaimed property (UP), including first-time filers, to come into compliance with California’s UP law without the fear of examination, penalty or interest assessments. The program has had initial success with companies participating in the VCP, stating that the program has met their expectations so far.

If companies meet certain criteria, such as not currently being under a California UP examination or having unpaid or unresolved interest assessments, they can join at any time. Although the VCP has preexisting timelines that companies need to consider, the Controller’s office states that due dates have some flexibility, taking into account the level of a company’s participation and readiness.

Summer UP reporting

The summer filing season is underway, and companies should be getting ready for their summer UP filings. Fortunately, unlike the multiple states with fall and spring UP reporting seasons, only two states require their reports to be filed in summer: Texas and Michigan.

The Texas and Michigan UP reports are due July 1. In addition to the reporting deadlines, companies should also be aware of potential reporting exemptions and deductions that may be available to them. While both states exempt gift cards from the UP reporting requirements if specific conditions are met, Michigan has a de minimis exemption for most property with a value of $25 or less and wages with a value of $50 or less, and Texas allows for the deduction of postage costs associated with sending the required notices to the owners of UP.

California Remit Reports

Unlike other jurisdictions, California has a two-step reporting process for UP. Six months to a year before the property is due, companies are required to send letters to the property owners to try to return the property (due diligence) prior to reporting. A Notice Report is filed in fall letting the state know what UP may be reportable, and a final, or Remit Report, is filed the following summer, after any items that have been claimed by owners as a result of the due diligence process have been removed. The 2024 Remit report and payment are due on June 15.

Preparing for fall

As a reminder, fall reporting is around the corner, and companies should begin to review their records for potential UP in order to prepare letters notifying vendors and customers of potential unclaimed funds held by the company. Many states require that notice letters be sent to owners no more than 120 days and no less than 60 days before the report is filed. As fall reports are due Oct. 31 or Nov. 1, the notice mailing for most states should be completed no later than August.

Companies wanting to learn more about the California VCP program, the UP compliance process or any other UP related questions should reach out to a member of the Baker Tilly UP management team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. Baker Tilly US, LLP does not practice law, nor does it give legal advice, and makes no representations regarding questions of legal interpretation.