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Insights from the NAST Symposium, Part 2

Posted By Contribution by Christa DeOliveira and Michael Unger, Thursday, July 11, 2019
Updated: Thursday, July 11, 2019

The National Association of State Treasurers’ (NAST) Annual Treasury Management Training Symposium held during May 2019 in Providence, Rhode Island, was engaging and enlightening. The National Association of Unclaimed Property Administrators (NAUPA) is affiliated with NAST and led the well-attended unclaimed property track of educational workshops and sessions. This blog post is part two in a series about the topics discussed in the symposium sessions. Read part one here.

 

Legislation 

Discussion about RUUPA-inspired legislation characterized it as not following a one-size-fits-all approach. Some jurisdictions, including Colorado, the District of Columbia and Vermont, have repealed their unclaimed property statutes and enacted new versions of RUUPA that have been largely modeled after the Uniform Law Commission’s version. Others, including Maine, South Carolina and Washington, introduced amended versions of RUUPA.

 

Still other states, including Minnesota, maintained their existing statute with expansive modifications incorporating RUUPA-like designs. These bills keep significant portions of current law, including examination of records, release and holder indemnifications, associated periods of limitation, and owner claims. They also add many amended RUUPA provisions. 

 

Another approach is to limited the scope of changes by keeping existing law and incorporating RUUPA-inspired provisions. Nevada took this approach, as most of the current law remains intact, but it proposes several dormancy periods like RUUPA, allows for electronic owner outreach under specified conditions, and makes some adjustments to included property types.

 

Direct payments to owners were dubbed as the ultimate outreach. This is where the state issues a payment to the owner in the absence of a claim. Naturally, states conducting this type of direct payment have certain criteria, such as comparing the address on reported property to the address on tax records (or other state/government databases), and the dollar value of the payment. Colorado enacted this option as part of its RUUPA bill and Florida has pending legislation related to state and local governments on specified small-value claims. California, District of Columbia, Maine and Vermont were also cited for considering similar pending bills.

 

South Dakota enacted a reduction in aggregate reporting from $50 down to $10. There was pending legislation to eliminate aggregate reporting altogether in Connecticut, Nebraska and Nevada.

 

Time limits on claims was a hot topic again at this year’s symposium. Georgia has enacted narrow “pure” escheat legislation to terminate an owner’s right to claim property for unclaimed excess proceeds from the sale of abandoned vehicles. Hawaii had two such bills that failed. S.B. 978 would have property with a value of less than $250 escheat to the state, if not claimed within five years. H.B. 1130 would have had property less than $100 automatically escheat to the state upon being reported and remitted. In both Hawaii bills, the owners’ property rights would be fully terminated.

 

Notably, participants expressed concern about enacting time limits on claims. It was described as bad policy and in contrast to the purpose of unclaimed property laws existing to protect the property rights of owners. The shift from the state assuming title, rather than a custodial role, may cause due process violations and be constitutionally problematic, according to the discussion. It was also noted GASB accounting rules already have provisions for setting up reserves for the amount expected to be claimed and taking the rest into income. Again this year, NAUPA discussed drafting a resolution about preserving owner rights to claim unclaimed property from states in perpetuity.

 

It was reported that, at the time of the symposium, DMF matching requirements exist in 33 states, in some form. Colorado, Kansas and Wyoming added this requirement since last year’s symposium, and there was pending legislation in California, D.C. and Massachusetts.

 

Litigation

Litigation was also discussed. Several cases related to disputes in holders producing records were noted: Texas v. ClubCorp Holdings Inc.Commonwealth, Treasury Department. v. PPL Corporation.Delaware, Department of Finance v. Univar Inc., and Univar Inc. v. Geisenberger. Current active cases discussed were: Faasse v. Coinbase Inc. as a cryptocurrency case; Weinbach v. Boeing Company as a case asserting wrongful escheat; and United Insurance Company of America v. Patronis, appealing a prior insurance ruling in Florida. 

 

Cases related to the treatment of class action proceeds were cited: McLeod v. Bank of America, N.A. and Rodriguez v. Danell Custom Harvesting, LLC, and Tennille et al. v. The Western Union Co. et al. Two qui tam (whistleblower) cases were touched on: Total Asset Recovery Services, LLC v. MetLife Inc. and Delaware ex rel. French v. Overstock.com Inc.         

 

More expansively, Kolton v. Frerichs and Goldberg v. Frerichs deal with not paying interest on claims. In Goldberg v. Frerichs, loss of the time value of money on property can be compensated for by giving owners the benefit of interim earnings. In Goldberg, the court cited an example of a rare coin being reported and remitted as unclaimed property. If the coin is sold, the owner loses out on the opportunity of appreciation. As such, it is insufficient to compensate the owner simply with the sale proceeds when the owner claims his property. Instead, upon claiming, the owner would be entitled to the earnings on the invested proceeds as the best substitute for the loss of appreciation. In the Goldberg case, the court made the caveat that low value properties may be treated differently and are most unlikely to be entitled to earn interest where the administrative cost exceeds the interest. In April 2019, the plaintiffs’ in Goldbergsought to renew a class certification; therefore, this litigation is ongoing.

 

Based on this case the following questions were raised in the session: Will this lead to other litigation? Will this ruling be constrained to the 7th Circuit? Will states change their unclaimed property statutes to proactively address questions about interest? If states do decide to determine what will qualify as the threshold for accounts where the interest exceeds the administrative costs to preserve the account? If new statutes on interest are enacted what proxy will be used to determine the time value of money?

 

Time Bars

Currently there is not uniformity amongst state laws regarding the period of time after which a state cannot enforce its unclaimed property law. Such time bars can encompass periods of limitation, statutes of limitation, periods of repose or lapsed periods of enforcement. 

 

The different approaches include a set number of years; the number of years contingent on filing or notice; a hybrid of both; a limitation based on years to be examined under audit; some other form of limitation; or no time bar limitation at all. Also, states enacting RUUPA have followed different approaches, including following RUUPA language, maintaining provisions in current law or following other approaches.

 

The various versions of the Uniform Law Commission’s Uniform Unclaimed Property Acts contain different time bars, with the 2016 version listing five years from the date of a report and 10 years if no report was filed. In the presentation, it was noted this approach was not required and, instead, this was promulgated as an accommodation to holders.

 

The session equated time bars to an all-encompassing reporting exemption. It was noted that time bars regularly do not receive the deliberation they merit when drafting or considering new unclaimed property legislation. Further, the importance of weighing public and private interests when setting a time bar was raised.

 

While NAUPA succeeded on many controversial issues, it did not prevail on the matter of time bars, according to the discussion. NAUPA recommendations to the Uniform Law Commission were discussed as being 10 years, generally, but 15 years for either nonreporting or underreporting. The caveat to this was that if the holder’s books and records showed acknowledged liabilities that are presumed unclaimed, even if they were reportable prior to the time bar, it would not qualify. NAUPA communicated to the ULC it strongly opposed the ULC time bar provision.

 

Panelists discussed with certainty that shorter and more absolute time bars will result in less property being collected. The following recommendations were made related to enacting or revising legislation: do not include a time bar, but rather address look backs administratively; if a time bar is included, follow the 1995 Act provisions or what NAUPA proposed to the ULC; at minimum, follow the 1981 Act of 10 years plus the corresponding dormancy period; and consider the lessons of matured, unpaid life insurance.

 

The NAST Symposium unclaimed property track included important insights on legislation, suggestions on drafting legislation, court cases and time bars. While the topics covered may not directly or indirectly impact all property type holders, it is worthwhile to remain aware of NAUPA developments. It is also important to be informed of opportunities to work together with states, where our expertise and needs are aligned, and we can share our respective unique expertise and insights, and related unclaimed property challenges or issues.  

 

More information on this symposium will be available in future blog posts.

 

Christa DeOliveira is chief compliance officer with Linking Assets Inc. Michael Unger is a senior manager with Crowe LLP’s unclaimed property practice. 

 

Tags:  legislation  litigation  NAST  NAUPA  time bars  unclaimed property 

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