Key takeaways from the 2024 NACM Credit Congress & Expo

Once again, Baker Tilly was excited to be part of the 2024 NACM Credit Congress & Expo! As we return from the 128th Credit Congress, we look back at the many hot topic discussions surrounding escheatment within the accounts receivable (AR) and credit departments, which we summarize here and hope you find it useful for learning more about unclaimed property.

Where to report unclaimed property

There are some misconceptions that companies report unclaimed property to the state in which they are located, but that is not the case. The Priority Rules were set by the Supreme Court back in the 1980s and the property should be reported to the state of the last known address of the customer/payee. If the address is unknown or is a foreign address, the property is reported to your state of incorporation/formation. There are a few exceptions, such as in the case of money orders and travelers checks which are reported to the state in which they were purchased. So yes, you can have a filing obligation in up to 54 different reporting jurisdictions, but don’t worry, we can help you with setting up policies, or even better, you can outsource your reporting obligations to us.

Self-audits

The good news is that the days of the more than 30 multistate audits are slowing fading away (but not going away completely), but that just means states are looking at other alternatives to increase compliance. As such, many states have now enacted self-audit programs where they invite companies, usually located/headquartered in their state, to do a self-review of their records and self-report any unreported property. If it sounds too good to be true, it is, as these self-audits are still typically reviewed by a third-party contractor, go back 15 transaction years, and if the invitation is ignored, could result in a full audit. We have seen all industries and from small to mid-market companies receiving invitations, so if your company receives one of these invitations, make sure to take it seriously to avoid further scrutiny. We can also help you navigate the record gathering and exposure quantification.

Terms and conditions

Many companies offer rebate and incentive programs, which can lead to credit balances sitting on accounts that do not get used. This can lead to companies taking large write-offs, but are these balances unclaimed property? Unfortunately, that answer is, it depends. How detailed are your terms and conditions? Do you have a contract with the customer detailing the program and what they are entitled to? Do you issue checks for unused balances? The answers to all these questions need to be analyzed to determine if you may have a reporting obligation. So, make sure to discuss with your internal and external legal counsel when creating these programs, and we can also assist in helping to set up proper documentation procedures to avoid any resemblance of doubt about whether to report these credits.