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Unclaimed Property Focus
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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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IRS Guidance Presents Challenges for Securities Holders

Posted By Contribution from Mike Ryan, 2018/19 UPPO eastern vice president, Thursday, August 16, 2018

On May 29, 2018, the Internal Revenue Service published Revenue Ruling 2018-17 – Withholding and Reporting with Respect to Payments from IRAs to State Unclaimed Property Funds. The ruling, which clarifies that property in an IRA that is escheated to the state meets the definition of a designated distribution under Section 3405 of the Internal Revenue Code (IRC) and therefore is subject to applicable tax withholding and reporting to the IRS.  

 

The ruling appears to be the result of guidance requested from the Information Reporting Program Advisory Committee (IRPAC), which provides an organized public forum for discussion of tax information reporting issues between IRS officials and representatives of the public.

 

According to the ruling, the payment of an individual’s interest in a traditional IRA to the state unclaimed property fund is a payment from an IRA that is treated as includible in gross income. The analysis in the ruling concludes that under Section 3405(e)(3), a nonperiodic distribution is a designated distribution that is not an annuity or similar periodic payment. Therefore, the payor shall withhold 10 percent of the distribution unless the IRA owner has previously established a different withholding rate or opted out of withholding.  

 

Because the escheatment of an IRA account is to be treated as includible in gross income and therefore subject to applicable withholding rules, it is also required that the distribution and withholding be reported on Form 1099, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 

 

Although the position presented in the revenue ruling implies that escheated IRAs have always been considered includible in gross income and subject to withholding and reporting, the ruling provides for an effective date of the earlier of Jan. 1, 2019, or the date it becomes reasonable practicable for the holder/trustee to comply with the requirements.  

 

The release of this Revenue Ruling has left many in the unclaimed property industry scratching their heads with concerns of how to execute a distribution for the IRA account, particularly those in the securities industry. This is because holders in the securities industry (broker dealers, equity stock, mutual funds, etc.) where IRAs are not held in a cash position are faced with concerns of liquidating a customer’s assets without their consent in order to fulfill the IRS reporting obligations. For these holders, compliance with the Revenue Ruling may not be possible without creating compliance issues with other federal regulations. 

 

Internal and/or external legal counsel should be consulted before liquidating securities to satisfy the IRS reporting requirement to determine what, if any, Securities and Exchange Commission (SEC) and/or Financial Industry Regulatory Authority (FINRA) violations may be present.  

 

Since most banks and financial organizations have already been withholding when reporting IRA assets in cash positions, this ruling will likely not have an impact on their process. If holders in the securities industry determine they will make the distribution from the IRA in order to fulfill the IRS withholding and reporting requirements, extensive system enhancements may be necessary. Systems will need to have capability to execute the distribution from the IRA, withhold the applicable tax, and report the distribution and withholding to the IRS and the owner by using IRS Form 1099-R.  

 

Holders will also be faced with decisions on how to report the distributions to owners when there is a bad address on the account. Generally, holders cease sending first class mailings to customers who have bad addresses.

 

The IRS has provided transition relief by providing a compliance date of “January 1, 2019, or the date it becomes reasonably practicable for the person to comply with those requirements,” however, it may take holders a more substantial amount of time to adequately update and test systems. 

 

In light of the new revenue ruling and pending tax implications to IRA customers, holders should consider enhancing owner location efforts as a means of reducing the number of IRAs escheated and subject to the ruling. 

Tags:  1099  IRA  IRS 

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UPPO Asks: What has been the most noteworthy change within the unclaimed property profession during your career?​

Posted By Administration, Thursday, August 9, 2018

Occasionally, UPPO asks members to respond to a question, sharing their ideas, insights, and experience. The recurring UPPO Asks feature is a compilation of their responses. 

 

We recently asked several members: What has been the most noteworthy change within the unclaimed property profession during your career? 

 

“In an effort to raise revenue and balance their budget, states have been actively initiating audits, shortened dormancy periods, and use third-party auditors with aggressive audit practices. However, the most noteworthy change during my career is the landmark Temple-Inland, Inc. v. Cookcourt case, which challenged the state of Delaware’s unclaimed property audit practices. Not only did the case shed light on Delaware’s estimation methodology, but it also challenged its constitutionality.  

 

“Everyone in the unclaimed property community remembers where they were, when they first read the U.S. District Court for the District of Delaware’s opinion holding Delaware’s executive action of auditing and assessing a multistate corporation’s unclaimed property, violated substantive due process because the states action when taken together, ‘shock the conscience.’ Those words reverberated throughout the unclaimed property community for several months. 

 

In finding that the audit assessment ‘shock the conscience’ the court relied on six factors including the fact that the state waited 22 years to conduct the audit and circumvented the typical three- to six-year statute of limitations period. As a result of the court’s decision, Delaware overhauled its unclaimed property statutes and among other things reduced the look back period and limit the statute of limitations. This is a landmark case, because the court decision significantly impacted the future of unclaimed property audits not only by Delaware, but other states as well.”—Zenith Lewis, manager, federal taxes, Southwest Airlines Co.

 

 

“In my 15-year career, there have been significant changes from online reporting, vast amount of resources such webinars, conferences, and – most importantly for me – I was tasked by my current employer to find an organization that would allow me to grow in my position and I came across UPPO. UPPO has been that noteworthy change. I have formed many friendships within this wonderful organization, joined committees, gained a multitude of knowledge and taken advantage of the certificate program.”—Rolita Brownlee, supervisor, policy management, Geico Marine Insurance

 

 

“The most noteworthy change in my opinion is the unclaimed property voluntary disclosure program (VDA), which gives holders an opportunity to come into compliance with their legal responsibilities. It’s also a great tool to use for mitigating the risk associated with premerger due-diligence and post-merger remediation. The benefits of the VDA program are a limited look-back period, and waived or reduced penalties and interest on past due items.  

 

“We recently used the VDA program to report past due property picked up from an acquisition. In this instance, the unclaimed property reports were filed in a timely manner, but there were other issues such as a lack of complete records that were at a greater risk of being noncompliance. Fortunately, working with a third-party vendor, we were able to reduce both the initial obligation and interest penalties. 

 

“Now, that I’ve had that experience, I’m excited about the latest changes in Delaware that revise the earlier guidelines and no longer permit the state to initiate audits without first giving a company the opportunity to enter into the VDA program. Hopefully, this change will benefit holders, especially since the potential for a state audit is higher after a M&A.”—Alicia Douglas, unclaimed property specialist, business development, Ocwen Financial Corporation

 

 

“The change to online filing and the requirements has been a huge change. It remains a constant struggle to be up to date on the all compliance changes.”—Susan Greulich, unclaimed property administrator, GFSS–Global Financial Services and Systems, Eaton

 

 

“The most noteworthy change in unclaimed property over the course of my experience would be the impact of audits. They have not only brought unclaimed property to the table for consumers/clients, but for companies overall. When I began in unclaimed property, there were so few policies, procedures and best practices in place, as well as hardly anyone who could share their experience or guidance in the process. Now we are seeing unclaimed property commercials on TV, online advertisements, and conversations among those not directly involved, and that is such a good thing. The newfound awareness will not only help to create more effective procedures, policies, best practices, etc. but will also lend itself to more individuals that know what unclaimed property is, as well as how it should be handled. I think the industry will continue to grow and expand and we are just beginning to break the surface. I look forward to staying tuned to what is in store in the future and beyond!”—Jessica Rogers, analyst, treasury consultant, Lincoln Financial Group

 

 

Now it’s your turn. What do you think are the most important personality traits for an unclaimed property professional? Add a comment to this post to share your response.

 

Tags:  unclaimed property  UPPO Asks 

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2018 Fall Reporting Guide Part 4 (South Carolina – Wyoming)

Posted By Administration, Tuesday, July 31, 2018

Fall reporting season is again fast approaching. Most U.S. states require holders to file reports by either Oct. 31 or Nov. 1. Following are reporting deadlines for these states, along with helpful links. This list is not exclusive to a specific holder industry, so please check the states’ websites for information on industry-specific reporting information and deadlines. Because of the amount of information included, this guide will be published in four parts:

 

Part 1 covers Alabama through Hawaii.

Part 2 covers Idaho through Minnesota.

Part 3 covers Mississippi through Rhode Island.

Part 4 covers South Carolina through Wyoming.

 

South Carolina

Report due: Nov. 1, 2018
Extensions: Extensions may be requested by email before the report due date.

 

Contact: unclaimed@sto.sc.gov or (803) 737-4771

South Carolina holder resources

 

South Dakota

Report due: Nov. 1, 2018
Extensions: Extensions may be requested in writing before the report due date.

 

Contact: holders@sdtreasurer.gov or (605) 773-3379

South Dakota holder resources

 

Utah

Report due: Nov. 1, 2018
Extensions: Extensions may be requested in writing before the report due date.

 

Contact: holders@utah.gov or (801) 715-3300, ext. 2

Utah holder resources

 

Virgin Islands

Report due: Oct. 31, 2018
Extensions: No details provided.

 

Contact: (340) 774-7166

Virgin Islands holder resources

 

Virginia

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.

 

Contact: William.Dadmun@trs.virginia.gov or (804) 225-2142 

Virginia holder resources

 

Washington

Report due: Oct. 31, 2018
Extensions: Extensions may be requested in writing before the report due date. Include company name, holder number, reason for extension request and amount of time requested.

 

Contact: ucp@dor.wa.gov or (360) 534-1502 or (800) 435-2429

Washington holder resources

 

West Virginia

Report due: Oct. 31, 2018
Extensions: Extensions may be requested.

 

Contact: UP-ReceiptsGroup@wvsto.gov or (800) 642-8687

West Virginia holder resources

 

Wisconsin

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.

 

Contact: Email formor (608) 264-4594

Wisconsin holder resources

 

Wyoming

Report due: Nov. 1, 2018
Extensions: Extensions may be requested in writing before the report due date.

 

Contact: upreports@wyo.gov or (307) 777-5590

Wyoming holder resources

 

For detailed information about reporting deadlines, dormancy periods, due diligence requirements, exemptions and deductions, electronic filing and much more, UPPO members can refer to the Jurisdiction Resource Guide

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Title: 2018 Fall Reporting Guide Part 3 (Mississippi – Rhode Island)

Posted By Administration, Thursday, July 26, 2018

Fall reporting season is again fast approaching. Most U.S. states require holders to file reports by either Oct. 31 or Nov. 1. Following are reporting deadlines for these states, along with helpful links. This list is not exclusive to a specific holder industry, so please check the states’ websites for information on industry-specific reporting information and deadlines. Because of the amount of information included, this guide will be published in four parts:

 

Part 1 covers Alabama through Hawaii.

Part 2 covers Idaho through Minnesota.

Part 3 covers Mississippi through Rhode Island.

Part 4 covers South Carolina through Wyoming.

 

 

Mississippi

Report due: Nov. 1, 2018
Extensions: No details provided


Contact: UPReporting@treasury.ms.gov or (601) 359-2513

Mississippi holder resources

 

Missouri

Report due: Nov. 1, 2018
Extensions: Extensions may be requested in writing at least 30 days before the reporting due date.


Contact: Email form

Missouri holder resources

 

Montana

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: UnclaimedProperty@mt.gov or (406) 444-6900

Montana holder resources

 

Nebraska

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: Email form

Nebraska holder resources

 

Nevada

Report due: Oct. 31, 2018
Extensions: Extensions may be requested.


Contact: nvholder@nevadatreasurer.gov or (702) 486-4140

Nevada holder resources

 

New Hampshire

Report due: Nov. 1, 2018
Extensions: No details provided


Contact: ap@treasury.state.nh.us or (603) 271-2619

New Hampshire holder resources

 

New Jersey

Report due: Oct. 31, 2018
Extensions: Extensions may be requested.


Contact: Email form or (609) 292-9200

New Jersey holder resources

 

New Mexico

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: (505) 827-0767 or (505) 827-0668

New Mexico holder resources

 

North Carolina

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: upreports@nctreasurer.com or (919) 814-4200

North Carolina holder resources

 

North Dakota

Report due: Nov. 1, 2018
Extensions: Extensions may be requested in writing before the report due date.


Contact: Email form or (701) 328-2800

North Dakota holder resources

 

Ohio

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: UnfdClaims.UnfdClaims@com.ohio.gov or (614) 466-4433

Ohio holder resources

 

Oklahoma

Report due: Oct. 31, 2018
Extensions: Extensions may be requested in writing on company letterhead before the report due date.


Contact: holderinfo@treasurer.ok.gov or (405) 521-4273

Oklahoma holder resources

 

Oregon

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.

 

Contact: holder@state.or.us or (503) 986-5200

Oregon holder resources

 

Rhode Island

Report due: Nov. 1, 2018
Extensions: No details provided

 

Contact: ups@treasury.ri.gov or (401) 462-7676

Rhode Island holder resources

 

For detailed information about reporting deadlines, dormancy periods, due diligence requirements, exemptions and deductions, electronic filing and much more, UPPO members can refer to the Jurisdiction Resource Guide

Tags:  fall reporting  unclaimed property 

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2018 Fall Reporting Guide Part 2 (Idaho – Minnesota)

Posted By Administration, Tuesday, July 24, 2018

Fall reporting season is again fast approaching. Most U.S. states require holders to file reports by either Oct. 31 or Nov. 1. Following are reporting deadlines for these states, along with helpful links. This list is not exclusive to a specific holder industry, so please check the states’ websites for information on industry-specific reporting information and deadlines. Because of the amount of information included, this guide will be published in four parts:

 

Part 1 covers Alabama through Hawaii.

Part 2 covers Idaho through Minnesota.

Part 3 covers Mississippi through Rhode Island.

Part 4 will cover South Carolina through Wyoming.

 


Idaho

Report due: Nov. 1, 2018
Extensions: Extensions may be requested before the report due date. 


Contact: UCPBusinessQuestions@sto.idaho.gov or (208) 332-2942 or (877) 388-2942
Idaho holder resources 


Illinois 
Report due: Nov. 1, 2018, for all banking and financial organizations, insurance companies (other than life insurance) and governmental entities
Extensions: Extensions may be requested at least 15 business days before the reporting deadline.


Contact: Email form, (800) 961-8303
Illinois holder resources

 

Indiana

Report due: Nov. 1, 2018
Extensions: Extensions may be requested at least 30 days before the reporting due date.


Contact: updholder@atg.in.gov, (800) 447-5598 or (317) 883-4520
Indiana holder resources

 

Iowa

Report due: Nov. 1, 2018
Extensions: Extensions may be requested at least 30 days before the reporting due date.


Contact: upreport@tos.iowa.gov or (515) 281-7546 
Iowa holder resources

 

Kansas

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: KSHolder@treasurer.ks.gov or (785) 291-3173
Kansas holder resources

 

Kentucky

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: Unclaimed.property@ky.gov or (800) 465-4722

Kentucky holder resources

 

Louisiana

Report due: Oct. 31, 2018
Extensions: Extensions may be requested before the report due date.


Contact: (888) 925-4127

Louisiana holder resources

 

Maine

Report due: Nov. 1, 2018
Extensions: Extensions may be requested before the report due date.


Contact: up.holderinquiry@maine.gov or (207) 624-7470

Maine holder resources

 

Maryland

Report due: Oct. 31, 2018
Extensions: Extensions may be requested by mail or email before the report due date.


Contact: upholder@comp.state.md.us or (410) 767-1700 or (800) 782-7383

Maryland holder resources

 

Massachusetts

Report due: Nov. 1, 2018
Extensions: Extensions may be requested.


Contact: UCPReporting@tre.state.ma.us or (617) 367-0400

Massachusetts holder resources

 

Minnesota

Report due: Nov. 1, 2018
Extensions: Extensions may be requested at least 30 days before the reporting due date. 


Contact: holder.unclaimed@state.mn.us or (651) 539-1545

Minnesota holder resources

 

For detailed information about reporting deadlines, dormancy periods, due diligence requirements, exemptions and deductions, electronic filing and much more, UPPO members can refer to the Jurisdiction Resource Guide

Tags:  fall reporting  unclaimed property 

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