Article

Trends in the unclaimed property compliance space

Nov. 5, 2024 · Authored by Matthew Chenowth, Cathleen Bucholtz

Unclaimed property compliance can be complex, especially when jurisdictional reporting requirements have been consistently changing in recent years. To help companies get a better understanding of the evolving compliance landscape, outlined below are many of the notable trends that our team has seen relating to unclaimed property compliance, as well as a few we would like to see in the future.

States adopting RUUPA

The Revised Uniform Unclaimed Property Act of 2016 (RUUPA) was created by the Uniform Law Commission (ULC) to increase uniformity in unclaimed property laws among the states. In addition to RUUPA, the ULC created and modified earlier versions of the act in 1954, 1966, and 1995 ( Acts). The result?

• 10 jurisdictions have their own, non-uniform unclaimed property laws
• Six jurisdictions have adopted versions of the 1954 and 1966 Acts
• 11 jurisdictions have adopted versions of the 1981 Act
• 13 jurisdictions have adopted versions of the 1995 Act
• 13 jurisdictions have adopted versions of the RUUPA

In addition to U.S. jurisdictions adopting various versions of ULC model acts, most do not adopt the model Act as written. Key provisions are often modified, including dormancy periods and triggers, owner notification requirements, reporting requirements and others. In some cases, a jurisdiction will completely replace their prior statutes and may not always be aware of some of the changes that they have enacted, which creates further reporting difficulties for companies looking for state guidance regarding new provisions.

Finally, some jurisdictions adopt a “transitional provision,” which has the effect of retroactively applying the new law to older reporting periods. Issues of fairness aside, these provisions often have the effect of requiring a company to report property going back as much as 10 report years for items that were exempt in prior years.

Electronic compliance processes

One of the more burdensome aspects of compliance with unclaimed property reporting requirements is sending U.S. mail First Class letters to the owners of property that is presumed abandoned within a set time-period prior to the reporting deadline. This process is known as due diligence, and most states have a dollar threshold (typically between $50 to $100) below which a company does not have to mail a letter. Overall, the introduction of electronic due diligence is a positive step, but may be of limited benefit to companies, as there can be difficulties in putting it into practice, including:

• Few statutes allow for due diligence via email
• Often requires owner’s consent to receive email notifications, but does not state what constitutes “consent” for this purpose
• Often requires email notifications and due diligence sent by mail – which doesn’t really simplify the process for companies

In addition, in recent years most states have allowed companies to file unclaimed property reports electronically, significantly simplifying the reporting process. While there are several platforms that the states use to facilitate electronic reporting, and these continue to evolve from year to year, overall, the process is a net win for companies reporting unclaimed property. This process also provides a mechanism for companies to remit payments to the state electronically versus mailing checks to the state. Once set up, remitting payments to the state electronically is easier and provides a company with confirmation that payments have been received by the state.

Expanding property types specifically addressed in unclaimed property statutes

Historically, many states relied on a “catch-all” style statute in their laws to address items of potential unclaimed property that were not specifically included or excluded from their unclaimed property laws. Whether through the adoption of RUUPA style legislation or more general unclaimed property legislation, states have begun to specifically include, or exclude, certain property types, often to reflect changing technology.

For example, game related digital content, which is defined as “digital content that exists only in an electronic game or electronic-game platform,” is often specifically excluded from the definition of unclaimed property. In contrast, virtual currency is now specifically identified as an item that can be considered unclaimed property, and many states are adopting specific dormancy and reporting statutes to address the reporting of virtual currency.

Possible future trends

Based on recent proposed legislation, some trends that we are likely to see in the future include:

• Continued adoption of RUUPA stye legislation. While the push for states to adopt the full RUUPA has significantly declined in the past few years, we are still likely to see more RUUPA style legislation in the future.
• Additional legislation aimed at specifically addressing virtual currency and other property types that historically were not included in many states’ unclaimed property statutes.
• Historically, most states required that mail be returned as undeliverable (RPO) before securities could be deemed abandoned. Recently, there has been a trend to repeal the RPO standard for securities, with states arguing that the standard is outdated as many owners now access their accounts and receive statements electronically. Given the nature of these accounts, and the great risk of loss to an individual, this is a trend we would like to see reversed and see the RPO standard retained.
• One trend we hope to see continue is states adopting new options to implement updated reporting and remittance mechanisms, many of which were put into place during the 2020-2021 reporting season as a result of the Covid-19 pandemic. Unfortunately, a few jurisdictions are still slow to adopt newer methods, and some even still require reports to be notarized with reports filed on CDs.

To learn more about recent trends in unclaimed property impacting your company, or any other unclaimed property questions, reach out to a Baker Tilly unclaimed property specialist for guidance and assistance.

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.