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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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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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NAUPA Offers Guidance for Reporting IRAs and Tax Withholding

Posted By Administration, Thursday, December 5, 2019

On May 29, 2018, the Internal Revenue Service issued Revenue Ruling 2018-17, clarifying the agency’s position on traditional individual retirement account escheatment. Specifically, the ruling states that IRA holders – or trustees – must withhold 10 percent federal income tax and issue form 1099Rs when reporting unclaimed IRAs to the states. Holders are expected to comply by Jan. 1, 2020.  

 

The Holders Coalition – a group of organizations, including UPPO, whose members hold or represent owners of property – submitted comments on Sept. 4, 2018, and Nov. 19, 2019, to IRS and Department of Treasury officials regarding implementation concerns about the ruling. 

 

In November 2019, the National Association of Unclaimed Property Administrators issued the following guidance for retirement plan administrators to foster the uniform reporting of unclaimed IRAs and their tax withholding under IRS Revenue Ruling 2018-17 within the NAUPA II format. 

 

On January 1, 2020, The Internal Revenue Service’s Revenue Ruling 2018-17 will go into effect concerning withholding and reporting taxes with respect to payments from Individual Retirement Accounts (“IRAs”) to state unclaimed property programs. Holders reporting these properties should make use of the NAUPA Standard Deduction and Withholding code “TW” to represent “Income Tax Withheld.”

 

The value “TW” should be recorded in the PROPERTY record in the PROP-DEDUCTION-TYPE field. The amount of Federal Tax Withheld should be stored in the PROP-DEDUCTION-AMOUNT field. This code should be used for any taxes withheld from remitted properties.

 

The value of the property before the deduction should be stored in the PROP-AMOUNT-REPORTED field. The amount remitted to the state after the Federal Tax Withholding should be stored in the PROP-AMOUNT-REMITTED field. 

 

It is imperative that all withheld taxes are reflected in reports of unclaimed property, so that the claimants may be so advised and address this in conjunction with their tax reporting.

 

In the event of multiple deductions, the Tax Withholding code should take priority. Since only one deduction field is available, the state and federal withholdings should be totaled for inclusion. We hope that holders would consider providing additional information to the states for the detail of the deductions.

 

For more information related to the NAUPA reporting standard, please visit:

https://unclaimed.org/wp-content/uploads/NAUPAStandardElectronicFileFormat-11.20.19.pdf.

 

Companies who withhold taxes should report and remit those taxes to the Internal Revenue Service or other taxing agency. Contact your legal or tax advisor for reporting and remittance instructions. For more information on the Revenue Ruling 2018-17, visit: https://www.irs.gov/pub/irs-drop/rr-18-17.pdf.

 

UPPO will continue to monitor and report on developments related to IRS Revenue Ruling 2018-17. 

Tags:  IRAs  taxes 

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Understanding Delaware’s Verified Report Request and Compliance Review Process

Posted By Administration, Thursday, November 21, 2019

As part of the sweeping changes to Delaware’s unclaimed property law resulting from the passage of S.B. 13, the state created a new verified report and compliance review process. This process is intended to give both the state and holders the ability to review and correct any errors or oversights in annual filings without escalation to examination.

 

Unlike full-fledged unclaimed property examinations, the verified report and compliance review process does not require an invitation to participate in the voluntary disclosure program to proceed. 

 

“With the verified report and compliance review process, we are looking at holders who are already filing or who have filed reports in the past, reviewing their most recent report, making sure it’s accurate and giving them a chance to remedy any errors,” said Delaware State Escheator Brenda Mayrack. 

 

Verified Report Request

Delaware primarily sends verified report requests to holders who previously filed unclaimed property reports but did not do so in the most recent year, or holders who had a significant variance compared to previous filings. Variances may include property types dropping off or reappearing, significant changes in the amount reported, or noteworthy differences compared to other holders in the same industry. 

 

Holders receiving a verified report requests are asked to provide a copy of their unclaimed property policies and procedures and given the option to certify that the report was correct and complete, under penalty of perjury, or to identify and report/remit additional property and correct errors. 

 

“Because many [holders receiving a verified report request] are nonfilers, we want to know the determination that no liability was due to Delaware came after a deliberate process that was informed by robust policies and procedures,” Mayrack said. “Particularly for holders that have gone through a VDA or exam, it’s important for us to know they have implemented appropriate and robust policies and procedures for unclaimed property going forward.”

 

Compliance Review

Holders who fail to provide a sufficient response to Delaware’s verified report request, or who filed a negative or $0 report, may receive a compliance review request. 

 

“The verified report is not a prerequisite to a compliance review, but the compliance review does serve as the first step in escalation if there is a nonresponse or insufficient response to the verified report request,” Mayrack said.

 

Like the verified report request, a compliance review looks at variances compare to previous filings and compared to holders in the same industry. The compliance review also is not a prerequisite to a voluntary disclosure program invitation and subsequent exam notice.

 

Compliance reviews are a more abbreviated review of filings than unclaimed property examinations. Like verified report requests, they provide holders an opportunity to correct errors. Holders are given one year to complete the review, so the state expects a prompt response to compliance review notices.  

 

“The state is not going to have much patience for a nonresponse,” Mayrack said. “We do send follow-up reminders, but if we don’t seem to be getting the holder’s attention, it will be escalated.”

 

Compliance reviews include a more thorough request for documents supporting the most holder’s most recent unclaimed property filing than the verified report request. Information and document requests may include:

  • Supporting federal tax returns, financial statements, chart of accounts, trial balances.
  • Holder’s affiliated and related legal entities information.
  • General ledger reconciliations, check registers, voided check lists, aging/credit reports, etc., supporting Delaware annual report.
  • Third-party administrator information (if applicable) for securities, payroll, stored value cards, rebates, etc.
  • Proof of owner outreach (due diligence) efforts performed.
  • Unclaimed property policies and procedures.

If there is a finding of deficiency in the compliance review, the state can either collect and enforce that deficiency or, if the findings suggest a potentially larger compliance issue, refer the holder for a voluntary disclosure program invitation and subsequent exam (if the holder declines VDA participation).  

 

“If you receive a letter under this program, respond promptly,” Mayrack said. “A nonresponse is the quickest way to be escalated for additional enforcement measures, which means an invitation to the VDA program and, subsequent examination notice if the holder does not opt into the VDA program.”

Tags:  compliance  compliance review  Delaware  unclaimed property  verified report request 

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Unclaimed Property News Roundup

Posted By Administration, Thursday, November 14, 2019

Unclaimed property often makes news headlines beyond the frequent reports of states trying to return money to their citizens. Following is a recap of some recent stories getting news coverage from local media outlets. 

 

Finders keepers? Not so fast

“Find a penny, pick it up. All day long, you'll have good luck.” That may work if you find a penny, but you may not be so lucky if you find a wad of cash. An Oct. 22, 2019, WWBT TV story discussed who gets possession of found money in Virginia. Although several county sherrif’s departments had different policies, they all suggested Virginia’s unclaimed property statute determined the money should eventually make its way to the state. 

 

You can’t take it with you

Uncashed checks, forgotten 401k accounts and abandoned safe deposit boxes may be common sources of unclaimed property, but what about items people are carrying when they pass away? On Nov. 6, the Indianapolis Star reported on the findings of a Marion County, Indiana, coroner’s office audit. The “culture of mismanagement” detailed in the audit report included concerns that coroners were simply storing belongings unclaimed by families of the deceased rather than turning them over to the county. 

 

Another day, another scam

Several news outlets, including Idaho’s Times-News and WFMY in Greensboro, North Carolina, recently reported on the latest consumer scam involving unclaimed property. According the Better Business Bureau, unwitting individuals receive a postcard, email or social media message alerting them that they have an unclaimed reward of $100 or more from a major retailer, and the deadline for redeeming them is just a few days away. Upon calling the phone number, the scam victims are asked for personal information to confirm their identity, along with payment information to cover mailing fees. The scammer than uses the payment card information and personal information to make fraudulent charges. 

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UPPO Survey Examines State Unclaimed Property Return Rates

Posted By Administration, Thursday, November 7, 2019

State unclaimed property officials often promote their goal of reuniting citizens with their property. They use a variety of tactics to educate the public about unclaimed property and encourage people to search their unclaimed property databases. They perform their work under a patchwork of laws and policies that vary by state.

 

The Unclaimed Property Professional Organization Claimants’ Representative Committee is examining how these laws and other factors affect unclaimed property return rates. Its objective is to apply a data-driven approach to identify, organize and share existing laws and policies that maximize reunification while preserving balanced consumer protection.

 

The committee’s first step was establishing individual state return rates. Using data gathered through a Freedom of Information Act request, the committee reviewed the total dollar amount of unclaimed property received and paid annually for fiscal years 2013-17 from all states. The following return rate results are organized into four descending groups of 12 states each by percentage returned. The states within each group are listed alphabetically and do not reflect any return rate order within the group.

 

Three states – Indiana, Nebraska and Wisconsin – are not included in the following results. Their committee is reviewing the methodology used by the states to determine their results, which varied significantly from the other states, making them subject to question. 

 

Group #1

Average Return Rate: 48.25%

Return Rate Range: 58.75% – 43.14%

  • Connecticut
  • Florida
  • Illinois
  • Iowa
  • Maine
  • Mississippi
  • Nevada
  • New York
  • Rhode Island
  • Utah
  • Vermont
  • Washington

 

Group #2

Average Return Rate: 40.12%

Return Rate Range: 42.56% – 38.83%

  • Alaska
  • California
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • Missouri
  • Montana
  • Oregon 
  • South Carolina
  • Tennessee

 

Group #3

Average Return Rate: 36.02%

Return Rate Range: 38.74% – 33.14%

  • Arizona
  • Arkansas
  • Hawaii
  • Idaho
  • Louisiana
  • Maryland
  • New Jersey
  • Oklahoma
  • Pennsylvania
  • Texas
  • West Virginia
  • Wyoming

 

Group #4

Average Return Rate: 19.44%

Return Rate Range: 31.18% – 8.59%

  • Alabama
  • Colorado
  • Delaware
  • District of Columbia
  • Georgia
  • New Hampshire
  • New Mexico
  • North Carolina
  • North Dakota
  • Ohio
  • South Dakota
  • Virginia

 

The committee is now analyzing state statutes and policies governing claims, private sector service provider restrictions, and unclaimed property account information restrictions to compare return rates with legislative and policy frameworks. This information will be the subject of a future committee report. 

 

Tags:  return rates  unclaimed property 

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