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UPPO Discusses H.B. 3598 Concerns with Texas

Posted By Administration, Thursday, December 12, 2019

Earlier this year, the Texas legislature passed H.B. 3598, which the governor subsequently signed into law. Among other things, the legislation outlines requirements for combined reporting of unclaimed property for affiliated companies. The new law raises many questions for holders and service providers.


Organized by UPPO’s Government Relations and Advocacy Committee (GRAC), Texas Director of Unclaimed Property Joani Bishop and Assistant Director of Unclaimed Property Bryant Clayton accepted a request to discuss issues raised by H.B. 3598, and a conference call was held on Oct. 30, 2019. 


Clayton explained that the overall goal of H.B. 3598 is to better identify who is reporting unclaimed property to Texas and the relationships between entities. The state plans to offer two options for reporting:

  1. Affiliated group: Submission of one NAUPA file including separate Federal Employer Identification Numbers for the parent company and its affiliates. 
  2. Each affiliate group reports independently: The report must identify the reporting affiliate and parent FEINs. 

The state plans to include instructions on its website and in its unclaimed property reporting manual. The new Texas reporting website is scheduled for introduction in July 2020.


Bishop and Clayton responded to several other questions generated by GRAC representatives:


Regarding the definition of “controlling interest,” if entities are equal partners, how would the controlling corporation be determined? Holders would self-identify the controlling corporation.


Will the new Texas reporting website allow third parties to report on holders’ behalf? Yes. The advocate will be able to report and provide the parent FEIN to indicate the holder.


What happens when there are different types of stock, such as common stock and employee stock? When considering securities and transfer agents, trying to identify the parent FEIN for stocks could require outreach to thousands of companies. Similarly, payroll and rebate processors would have only the FEIN for the company with which it is doing business, and extensive outreach could be necessary to identify the parent FEIN. Texas will need to review this type of situation. 


How will indemnification apply? Indemnification will be afforded all of the entities identified via FEIN in the report.


What are the possible penalties for noncompliance? Holders must comply. Texas will reject and return noncompliant reports.


How will negative reports be handled? The holder could file the negative report separately, or the new NAUPA file format would allow for a negative report to be included in the consolidated file (using the one and nine records).


How will insurance companies with a holding company and insurers be handled? Would holders report the holding company as the parent and then the insurers? Also, how would life insurance companies handle non-life-insurance property? Reporting is based on the nature of the property rather than the nature of the holder. Life insurance companies with non-life-insurance property will report that property in July and report its life insurance property on Nov. 1 with the holder company as the parent FEIN.


Should due diligence letters be sent by the individual members of the affiliated group or by the affiliated group? Texas prefers that the letter be sent from each individual entity because they would have knowledge of the property when it comes to questions or claims.


Which entity in the affiliated group is required to sign the report? Does each member of the affiliated group have to sign? Some corporations can have many owners and principles who would know little, if anything, about the report. Texas needs to research this question. 


How should holders handle scenarios in which the parent corporation is in Texas but the subsidiary and actual property are in another state? Property should go to the state where it resides. The NAUPA file format (record 1) allows for each FEIN to indicate the state of incorporation. 


Texas plans to send UPPO a mockup of its proposed website redesign for comment. The new website will allow more than one FEIN to be uploaded. The state is also working to complete website instructions and its updated Unclaimed Property Holder Reporting Manual as quickly as possible. UPPO offered to review this information and provide feedback and additional questions for clarification before the July 2020 filing requirements.


UPPO thanks Joani Bishop and Bryant Clayton for their cooperation and their clarification of issues raised by H.B. 3598. We will continue to provide additional updates to UPPO members as more information becomes available. 



Tags:  consolidated reporting  H.B. 3598  Texas  unclaimed property 

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