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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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NAUPA Provides Additional Guidance for Reporting IRAs and Tax Withholding

Posted By Administration, Thursday, January 16, 2020

The National Association of Unclaimed Property Administrators has provided additional guidance regarding reporting of unclaimed IRAs and their tax withholdings within the NAUPA II format under IRS Revenue Ruling 2018-17. 

 

As UPPO previously reported, NAUPA issued preliminary guidance to holders in November 2019. It advised holders to use the NAUPA Standard Deduction and Withholding code “TW” in the PROP-DEDUCTION-TYPE field of the Property record to represent “Income Tax Withheld.” In addition:

  • The amount of federal tax withheld should be stored in the PROP-DEDUCTION-AMOUNT field. 
  • The value of the property before the deduction should be stored in the PROP-AMOUNT-REPORTED field.
  • The amount remitted to the state after federal tax withholding should be stored in the PROP-AMOUNT-REMITTED field. 

UPPO questioned how holders should handle situations when they have multiple deductions, as the PROP-DEDUCTION-AMOUNT field only accommodates one. For example, a holder may have a deduction for mailing costs and the income tax withheld. UPPO also asked NAUPA to clarify whether federal and state tax withheld would be combined and recorded as one amount within the NAUPA file. 

 

On Dec. 5, 2019, NAUPA issued follow-up guidance to include, “In the event of multiple deductions, the Tax Withholding code should take priority,” and the state and federal withholdings should be totaled for inclusion. 

 

In response, UPPO requested additional clarification regarding how holders should populate the file when the property is a security and part of that security must be liquidated to pay the 10% tax withholding, as there is only one property record on the file. 

 

NAUPA responded on Dec. 17, 2019, with the following example of escheating 100 shares with each share worth $1.

 

PROP-AMOUNT-REPORTED              10.00

PROP-DEDUCTION-TYPE                   TW

PROP-DEDUCTION-AMOUNT             10.00

PROP-AMOUNT-REMITTED                0.00

 

PROP-NUMBER-OF-SHARES             100.0000

PROP-DEL-SHARES                            10.0000

PROP-REM-SHARES                           90.0000

 

The description field will indicate the sale:

PROP-DESCRIPTION                   PARTIAL SALE OF SECURITIES FOR TAX WITHHOLDINGS

 

NAUPA has stated that typically most states instruct holders to use separate properties for cash and securities, but this would be a valid reason for an exception.

 

Some holders have expressed concerns that not all states will abide by the guidance. Although NAUPA cannot regulate whether states adopt its guidance, it is educating them on the issue and the benefits of doing so. 

Tags:  IRAs  IRS  NAUPA  taxes 

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UPPO Advocacy Year in Review

Posted By Administration, Wednesday, January 8, 2020

UPPO’s Government Relations and Advocacy Committee (GRAC) had another busy year in 2019. 

Following is a review of key highlights of the advocacy work by GRAC and the Holders Coalition, a group of organizations, including and administered by UPPO, whose members hold or represent owners of property.

 

January

The GRAC Priority Issue Workgroups developed talking points and single-page position papers about key issues. These materials were designed to help consistently demonstrate support or opposition of state legislation that is likely to affect unclaimed property compliance. 

 

March

On March 31, 2019, UPPO along with organizations representing life insurers, bankers, shareholder services professionals and transfer agents submitted a letter regarding RUUPA-inspired legislation to the Minnesota Department of Commerce. The coalition raised several concerns with Article 13 of H.F. 2208 and companion bill S.B. 2611. The Minnesota legislature adjourned without action on these bills.

 

April

Seeking to refine its processes and operate as efficiently as possible, GRAC implemented a new structure consisting of four sections. The committee established responsibilities for each section and a process for section leaders to report to the GRAC co-chairs. The four GRAC sections are:

  • Issue Identification: Identifies important issues and determines legislative, regulatory and legal issues to address.
  • Strategy Implementation: Determines and ensures the execution of the strategy for addressing identified issues, working with legislators, regulators and other officials to promote UPPO’s position.
  • Position and Policy Drafting: Creates work product to support the strategy to promote UPPO’s position.  
  • Communication: Works with UPPO staff to update members and other stakeholders about advocacy initiatives.

 

June

With most state legislatures recessing or adjourning for the year, GRAC and the Holders Coalition continued to work on federal issues, including the Internal Revenue Service’s position on individual retirement account escheatment, the tax treatment of unclaimed 401(k) accounts highlighted by the recent GAO report, and the SECURE Act. GRAC also continued its work promoting introduction of a voluntary disclosure program in California

 

September

To make it easier for members to submit ideas and issues for the committee’s consideration, UPPO has added a form to the advocacy web page. Please use this form to share advocacy suggestions, ideas and issues for GRAC to consider. 

 

October

On Oct. 3, 2019, Bloomberg Tax published an article outlining potential unclaimed property issues that could result from a whistleblower case brought against JPMorgan Chase & Co., regarding the company’s unclaimed property practices. UPPO shared its concerns in the article about unintended consequences that could harm unclaimed property holders.

 

On Oct. 15, 2019, UPPO sent a letter to Texas Director of Unclaimed Property Joani Bishop and Assistant Director of Unclaimed Property Bryant Clayton, requesting clarification from the state regarding issues related to controlling interest, third-party vendors and combined reporting implementation contained in H.B. 3598. 

 

UPPO received a prompt response, accepting a request to discuss UPPO’s concerns. A subsequent call was held on Oct. 30, 2019, and additional email follow-up discussions have occurred, with Texas soliciting UPPO’s insight regarding its new unclaimed property holder website.

 

November

The Holders Coalition submitted comments on Nov. 19, 2019, to Internal Revenue Service and Department of Treasury officials regarding IRS Revenue Ruling 2018-17. The comments seek clarification and guidance regarding compliance with the ruling, issued by the IRS on May 29, 2018.

 

The Minnesota ULC commissioners convened a work group, including representatives from the Commerce Department, the unclaimed property administrator and stakeholders, to explore a state RUUPA bill. Holding discussions with all affected parties in this manner before an unclaimed property bill is introduced is rare. UPPO appreciates Minnesota taking this action and will continue to participate in these meetings.  

 

December

In response to California’s adoption of S.B. 109, UPPO submitted comments to the comptroller’s office regarding the law’s provision requiring development of a “one-time unclaimed property amnesty, or other options to increase compliance with unclaimed property law in lieu of an amnesty program, and options for increasing the return of unclaimed property to rightful owners.” UPPO spelled out reasons the state would benefit from an ongoing voluntary disclosure agreement program.

 

On Dec. 12, 2019, the Holders Coalition submitted comments to Colorado officials, highlighting practical issues and recommendations regarding implementation of S.B. 88, RUUPA-inspired legislation that goes into effect on July 1, 2020.

 

Let Your Voice Be Heard

As more and more legislatures and regulatory agencies take on issues affecting unclaimed property compliance, advocacy has become an increasingly important role for UPPO. Please take a few minutes to complete our Government Relations and Advocacy Survey to help us build our grassroots advocacy network. 

 

Responses will give us the ability to better provide you with the information you want and need, and will allow us to mobilize UPPO members when we are faced with legislative and regulatory challenges and opportunities. 

Tags:  advocacy 

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Practical Knowledge and Industry Insights Highlight Annual Convention Sessions

Posted By Administration, Thursday, January 2, 2020

Unclaimed property professionals face a myriad of compliance challenges as they manage their companies’ escheatment responsibilities. This year’s UPPO Annual Conference agenda offers a wide variety of sessions designed to help navigate that maze and keep up with the latest trends.

 

Audits and VDAs

Always hot topics, unclaimed property audits and voluntary disclosure agreements will take center stage in several sessions. 

 

Unclaimed property professionals who haven’t experience the audit process firsthand can gain an understanding of the concepts, timelines and expectations at the Audit 101 session. This introduction to audits will explore the scope and methodologies used by states and their third-party auditors. 

 

After completing a voluntary compliance review, holders often face a decision about how to resolve past-due liabilities. The VDA or Wait? Session will discuss how gaps in compliance can be resolved, including through state voluntary disclosure programs, and the pros and cons of different approaches. 

 

While a lot happens in between, actions taken at the beginning and end of an audit can have significant impacts to the outcome of the exam. The Audits: The Beginning & The End will feature an in-depth discussion on NDAs, audit kick-offs, scoping, settlement agreements and closing discussions. 

 

Getting through an unclaimed property audit can take a team that includes holders, lawyers and consultants. During the Audit Perspectives general session, an expert panel will discuss recent audit experiences, significant issues and resolutions, and suggested tips and tricks. 

 

Processes and Practices

Several annual conference sessions will focus on the practical considerations for effective unclaimed property compliance.

 

Exemptions provide holders with the ability to reduce their unclaimed property liability. The Exemptions and Deductions session will explore how to identify and correctly apply exemptions and deductions, and the role of FASB standards. 

 

Maintaining and documenting contact with property owners plays a vital role in unclaimed property management. The Contact and Activity Standards session will examine the ways companies interact with owners, the importance of properly recording activity and the effects on compliance. 

 

Due diligence is required in all jurisdictions. During the Due Diligence on Dormant Property session, gain insight into calculating dormancy, increasing response rates, notifying owners efficiently, locating hard-to-find owners, structuring the due diligence letter, and identifying exceptions to the general due diligence requirements. 

 

Unclaimed property professionals communicate with several different audiences, each with varying degrees of insight and interest regrading unclaimed property. Having conversations with staff, management, third parties and states can be challenging. The Effective Communication Strategies session will explore real-life conversations encountered by unclaimed property professionals. 

 

Industry Focus

One of the great benefits of attending an event with hundreds of other unclaimed property professionals is the ability to “talk shop” about the specific challenges in the industry in which your company does business. 

 

The Annual Conference features industry-specific breakouts and educational sessions for:

  • Banking/FinTech
  • Securities/Mutual Funds/Broker Dealers/Transfer Agents
  • Life Insurance
  • P&C Insurance
  • Manufacturing
  • Retail/Hospitality
  • Oil & Gas/Energy
  • Telecommunications & Technology
  • Healthcare Providers and Insurers 
  • Claimant’s Representative/Asset Recovery

This blog post provides a mere snapshot of a few UPPO Annual Conference sessions. View complete details about educational sessions and other 2020 UPPO Annual Conference events. The early-bird registration deadline is Jan. 27, so register today for the best rate.

 

 

 

Tags:  Annual Conference  UPPO Annual Conference 

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Two Canadian Provinces Consider Unclaimed Property Legislation

Posted By Administration, Wednesday, December 18, 2019

The Canadian provinces of New Brunswick and Manitoba are in different stages of considering legislation to formalize unclaimed property processes. Alberta, British Columbia and Quebec are the only provinces that currently have unclaimed property programs currently in place. 

 

In New Brunswick, the legislature is considering Bill 22, the Unclaimed Property Act, introduced on Nov. 29, 2019. The proposed legislation would require holders to send notices to owners’ last known address for any unclaimed property valued at more than $100, between 90 and 180 days before submitting a report to the provinces director of unclaimed property. 

 

Bill 22 sets a reporting deadline of April 1, and the director may request extensions if satisfied that there are reasonable grounds. Upon the legislation’s implementation, holders would be expected to report any property presumed to be unclaimed five years or less before it took effect. Failure to report subjects holders to interest and late fees.

 

Although Manitoba has not yet introduced legislation, the Manitoba Law Reform Commission issued a report in October examining a possible unclaimed  property program for the province. Abandoned and Missing Money: Establishing a Process for Unclaimed Intangible Personal Property explores unclaimed property programs in Alberta, British Columbia and Quebec, as well as the Uniform Law Conference of Canada’s Uniform Unclaimed Intangible Property Act, draft legislation established in 2003 to promote uniformity between provinces.

 

The report includes 10 questions for consideration and invites interested parties to comment by the end of 2019. Questions include: 

  1. Do you think that an unclaimed personal property regime should be established in Manitoba? 
  2. What types of property should be included or excluded in an unclaimed property regime in Manitoba? 
  3. Are there any types of intangible personal property that pose unique challenges in terms of adapting to an unclaimed property regime? 
  4. How should “holder” be defined? 
  5. Should it be mandatory for some or all holders to remit property to the administrator? 
  6. What responsibilities should holders have in relation to unclaimed property? 
  7. What administrative structure would best serve the purposes of an unclaimed intangible property regime? 
  8. What should the responsibilities of the administrator of unclaimed property be? 
  9. Should Manitoba adopt a similar claim process to the process set out under the ULCC Act and the enacting jurisdictions?  
  10. How can the process for escheated corporate property under The Corporations Act together with The Escheats Act be improved? 

“The Commission believes there are advantages to adopting unclaimed personal property legislation in Manitoba,” the report concludes. “In reaching this conclusion, the Commission emphasizes that an unclaimed personal property scheme is appropriate only for uncontested types of property. In other words, the intention is to allocate funds where there is no dispute as to the rightful owner and the apparent owner is able to establish a legal claim. The purpose of the scheme, therefore, is to facilitate the process so that owners are reunited with their property is a way that is efficient for the government to administer and accessible for apparent owners to use.” 

 

Tags:  Canada  Manitoba  New Brunswick 

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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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