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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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Litigation Update: Univar Takes on Delaware

Posted By Administration, Thursday, January 24, 2019

Univar Inc. v. Geisenberger, et al.

 

On Dec. 3, 2018, Univar Inc. filed a lawsuit against Delaware Department of Finance officials, alleging that several aspects of an unclaimed property audit initiated by third-party auditor Kelmar in 2015 on Delaware’s behalf are unconstitutional. Among the issues at play in the Univar case are:

  • Delaware’s retroactive application of amendments to the Delaware Abandoned and Unclaimed Property Law (DUPL), amended on Feb. 2, 2017. 
  • The state’s estimation methodology.
  • The state’s use of a third-party auditor that simultaneously represents other states in a multi-state audit.
  • The state’s contingent-fee arrangement with its third-party auditor.

 

On Dec. 11, 2015, Delaware notified Univar it would be subject to an unclaimed property examination, conducted by Kelmar. Upon receiving document requests from Kelmar, Univar objected, citing confidentiality concerns, Kelmar’s self-interest, the estimation process and other aspects of the audit. According to Univar’s complaint, Delaware rejected or ignored the objections and continued to do so for more than two years. On Oct. 30, 2018, the state issued a subpoena for the records Kelmar had previously requested. 

 

The Univar case includes several issues that have been part of other recent cases, including Temple-Inland v. CookPlains All American v. Cook and Marathon Petroleum v. Cook. However, unlike those lawsuits, the Univarcase was filed after the February 2017 DUPL amendments and, thus, questions the state’s ability to retroactively apply those amendments to audits that were initiated earlier.  

 

“The subpoena power that Delaware is relying on to force production of records from Univar was not effective until February 2017,” said Jameel Turner, one of the attorneys with Bailey Cavalieri who is representing Univar in this case. “The February 2017 amendments also created a 10-year record retention requirement for unclaimed property records. Prior to that time there was no record retention requirement. Delaware is using estimation for holders that did not comply with a record retention requirement that did not exist until February of 2017. So, they are using estimation when holders do not have records for periods when the law did not require records to be kept. It simply does not make sense.”

 

Univar also picks up the challenge to Delaware’s estimation methodology where Temple-Inland left off. The Temple-Inland court ruled that the state’s estimation methodology was unconstitutional. Univar argues that Delaware merely added a 10-year look-back period but otherwise continues to rely on estimation practices already declared invalid.

 

Delaware and Kelmar also allegedly responded to Temple-Inland by rescinding its requests to holders for prior unclaimed property filings for all states because the court took issue with the practice. However, after the case was settled, these requests were reinstated and the state incorporated the right to request such prior filings into the 2017 DUPL amendments. 

 

“Delaware and Kelmar use prior unclaimed property filings for states not participating in the audit to increase the potential liability due and payable to Delaware,” Turner said. “Univar is asking a judge to confirm that the way they are using those prior filings is unconstitutional and that prior filings in nonparticipating states are not relevant to whether a holder has liability due and payable to any participating state.”

 

One of the issues in the Univar case that was also a factor in other recent litigation is the concept of ripeness. The Plains All American case also questioned Delaware’s use of estimation. The court said Plains may have valid complaints, but because the state had not yet formally taken steps to request records or force Plains to comply with the audit, the case was not yet ripe. 

 

“One of the reasons the Plains All American case was dismissed was because Delaware had not made a formal demand for compliance with the audit request,” Turner said. “Univar has been served with a subpoena, so Delaware has taken steps to formally compel Univar to provide records. That’s a significant factor that distinguishes Univar’s situation from that of Plains All American.”

 

Ultimately, a decision in the Univar case may provide clarity for unclaimed property holders regarding the state’s audit and estimation practices. 

 

UPPO will continue to monitor and report on the progress of the Univarcase as noteworthy developments occur.  

Tags:  audits  Delaware  estimation  litigation  Plains All American  Temple Inland  Univar 

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Unclaimed Property News Roundup

Posted By Administration, Wednesday, January 16, 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 and national media outlets. 

 

Unclaimed property: It’s not just for individuals and companies

On Dec. 19, 2018, KMBC news in Kansas City, Mo., reported that the Kansas and Missouri unclaimed property owner lists included many schools and municipalities. In addition to the news story, reporter Matt Flener tweeted that more than 900 schools in Kansas are owed more than $143,000; more than 500 Kansas cities are owed more than $195,000; and Missouri has undetermined amounts owed to more than 600 schools and more than 1,400 cities.

 

Fraudsters hit Arkansas unclaimed property coffers

On Dec. 15, 2018, several Arkansas outlets reported that the state auditor’s office paid out at least $40,000 in fraudulent unclaimed property claims. The scammers used stolen identities to claim the funds. In response to the discovery, Auditor Andrea Lea told state officials her office had enhanced its verification process.

 

It’s not easy retrieving green

On Nov. 29, 2018, NBC Connecticut reported on challenges one of its viewers had claiming $138 in unclaimed property despite following the state’s instructions. The television station’s consumer reporter intervened and successfully helped the fund owner get her money.

 

Fame, fortune and uncashed checks

A popular, recurring unclaimed property news story highlights celebrities who appear on state unclaimed property lists. One of the latest examples of this appeared in the Nashville Tennessean on Nov. 21, 2018. The newspaper discovered that Tennessee’s unclaimed property list included two checks totaling $179 owed to musician Keith Urban, a $100 manufacturers rebate owed to singer Trisha Yearwood, and $150 in telecommunications payments waiting to be claimed by hockey player Pekke Renna.

Tags:  Arkansas  fraud  Kansas  Missouri  municipalities 

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Practical Insights and Deeper Dives Highlight Annual Conference Sessions

Posted By Administration, Wednesday, January 9, 2019

 

 

Unclaimed property continues to provide a maze of compliance challenges for the professionals charged with managing 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.

 

Managing Relationships

If your company is using third-party agents for employee benefits, payroll, equity or other services, understanding the roles of each party and ensuring everyone is properly fulfilling their responsibilities is essential to the unclaimed property reporting process. The Managing Your Third-Party Administrator session will offer tips for managing this important relationship.

 

The Bridging the Gap session looks at another key relationship – the one between holders and the states. This session will help attendees gain insight into building positive relationships with state administrators and maintaining a compliance program that is mutually beneficial to the holder, the state and property owners.

 

Emerging Property and Account Types

Unclaimed property compliance involves much more than uncashed payroll checks and customer credits. Dive into the specific requirements and considerations for unique account types in the unclaimed property process during the Unique Accounts with Unique Requirements session. Attendees with explore developments related to traditional and nontraditional retirement/IRA accounts, beneficiary accounts, HSAs and FSAs, and the effects of linking activity between customer accounts. 

 

Another rapidly evolving area of unclaimed property compliance is the world of virtual currencies. The Virtual Reality, Real Unclaimed Property session will look at issues arising from virtual currencies, blockchain technologies and modern incentive programs. Attendees will get insight into regulatory changes and practical considerations related to cryptocurrencies, virtual wallets and customer loyalty programs. 

 

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 yet been fully exposed to the audit process 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. 

 

Holders under examination or participating in a VDA may be subject to estimated liability. The Estimation Under Audits and VDAs session will explore estimation methodologies and considerations and examine how states differ in their estimation practices. 

 

With so many companies incorporated in Delaware, that state spends a lot of time in the unclaimed property spotlight, but other states can’t be neglected. The Non-Delaware Voluntary Compliance session will look at VDAs in other states and when an informal approach may be more beneficial than a formal VDA. 

 

Not all third-party auditors were created alike. In fact, their processes and procedures vary greatly. The Third-Party Auditor Differences session will walk through the many different document requests that holders can expect throughout the audit process and will examine conflicting auditor requests when under audit by multiple states using different firms. 

 

View complete details about educational sessions and other 2019 UPPO Annual Conference events. The early-bird registration deadline is Jan. 28, so register today for the best rate.

 

 

 

 

 

Tags:  audits  cryptocurrency  IRAs  state administrators  TPAs  UPPO Annual Conference  VDAs  virtual currency 

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UPPO Advocacy Year in Review

Posted By Administration, Thursday, January 3, 2019

UPPO’s Government Relations and Advocacy Committee (GRAC) had another busy year in 2018. 

Following are some of the most noteworthy highlights from the committee’s advocacy work.

 

January

UPPO submitted comments to New Jersey regarding proposed unclaimed property regulations. The comments raised issues related to the regulation’s stored-value card liability, exemptions and definitions, as well as bank cards and non-escheat-related consumer protections.

 

The comments encouraged New Jersey to revise the proposed regulations, thus avoiding potential conflicts with existing requirements and providing clarity for unclaimed property stakeholders. 

 

February

The Government Relations and Advocacy Committee compiled an issue-by-issue comparison of the Revised Uniform Unclaimed Property Act and the American Bar Association’s Unclaimed Property Model Act.  

 

In response to deviations from RUUPA included in Washington House Bill 2486, UPPO submitted comments to Rep. Paul Graves, voicing concern and suggesting changes to several important provisions.

 

April

To continue refining and improving UPPO’s advocacy work, GRAC established its top five priority issues. This list was developed using results from a membership-wide survey. Responding to the needs and desires of members, GRAC refined and prioritized the survey results. Establishing these priorities will help UPPO take a strategic, focused approach to important issues affecting unclaimed property holders. The priorities are:

  1. Record retention, statutes of limitations and use of estimation.
  2. Rules for taking custody of abandoned property and foreign property. 
  3. B2B exemptions.
  4. Derivative Rights Doctrine.
  5. Presumed abandonment of securities.

 

UPPO signed on as a sponsor of California A.B. 2773, a bill to establish a voluntary disclosure program in the state. The California State Controller’s Office subsequently expressed concerns with the bill’s language, leading Assemblyman Dante Acosta, the bill’s author, to pull the bill from consideration. 

 

May

After establishing its top five priority issues this spring, GRAC formed workgroups to establish goals for each priority issue. All of the workgroups discussed the need for focused outreach to educate key audiences – specifically legislators and unclaimed property administrators – about these issues and UPPO’s position on them. 

 

June

The biggest issue arising in June was the IRS Revenue Ruling stating that traditional IRA holders must withhold 10 percent tax and issue a 1099-R when reporting unclaimed property to the states. This ruling appears to be written with banks in mind, but it presents significant issues for the securities industry. UPPO is working with the Holders Coalition and other organizations whose members are likely to be affected by this ruling to formulate a strategy for raising these issues with the IRS and other agencies, such as the SEC and FINRA, which may have conflicting opinions on the practice. 

 

As GRAC’s priority issue workgroups’ work continued, they began identifying the messages and methods for most effectively discussing key issues, as well as materials the UPPO staff can develop to support these efforts. 

 

August

Preston Rutledge, assistant secretary of labor for the Labor Department’s Employee Benefits Security Administration, said the EBSA will work with businesses and trade groups to develop best practices regarding employers’ responsibilities to contact plan participants regarding their benefits. In response to this announcement, UPPO sent a letter to Rutledge, offering its support and assistance. 

 

September

The Holders Coalition – a group of organizations, including UPPO, whose members hold or represent owners of property – submitted comments  to Internal Revenue Service and Department of Treasury officials regarding IRS Revenue Ruling 2018-17. The comments sought clarification and guidance regarding compliance with the ruling, issued by the IRS in May.

 

Subsequently, Holders Coalition members, including UPPO members Jennifer Borden and Dana Terry, ICI and SIFMA representatives, met with IRS and Treasury officials. The meeting was productive, and the government representatives seemed to understand that the implementation timeline is tight and may consider delaying implementation. Discussion of other issues from the revenue ruling resulted in meeting participants agreeing to conduct additional research and reconvene. 

 

These efforts contributed to an extension of the compliance deadline from Jan. 1, 2019, to Jan. 1, 2020. In November, the IRS issued Notice 2018-90 announcing the extension.

 

During a U.S. Chamber of Commerce event focused on retirement, a Department of Labor benefits regulator announced that work is underway to develop guidance for employers who no longer have contact with former employees who remain enrolled in company retirement plans. 

 

UPPO also surveyed state unclaimed property administrators, requesting information about a variety of possible changes affecting holder reporting. Twenty-five states responded. The information they provided has been compiled and is now available. View the survey results

 

November

GRAC and other members of the Holders Coalition submitted comments regarding concerns with Illinois proposed rules developed as a result of the state’s RUUPA-inspired legislation, which passed in 2017. Among the noteworthy areas of concern for holders are issues related to treatment of tax-deferred retirement accounts, due diligence, audit practices and the state’s voluntary disclosure agreement program.

 

December

GRAC submitted comments to District of Columbia Council member Jack Evans, regarding bill B22-0654, the district’s version of the Revised Uniform Unclaimed Property Act. Introduced in January, the bill sat idle throughout much of the year until an October public hearing. As with many of the bills introduced nationwide in the wake of the RUUPA’s adoption by the Uniform Law Commission, the D.C. bill contains potential issues. GRAC’s comments addressed areas of concern, including provisions related to taking of custody, derivative rights and securities. 

 

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. 

 

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Holiday Season Signs You’re a True Unclaimed Property Professional

Posted By Administration, Wednesday, December 19, 2018

For many UPPO members, managing unclaimed property isn’t just a job. It’s a significant part of who they are. You may not even realize how much the unclaimed property mindset has worked its way into all aspects of your life. The holiday season, however, is a perfect time to reflect, look inward and embrace that you are an unclaimed property professional through and through.

 

Following are several holiday season signs that you are a true unclaimed property professional.

 

Your relatives have begun making excuses why they can’t attend your traditional holiday address, “What Happens to the Value of Unredeemed Gift Cards.”

 

 

You refuse to let your kids open gifts until the end of the designated dormancy period.

 

 

You inadvertently sing, “RUUPA the Red-Nosed Reindeer.”

 

 

You view sending holiday cards to acquaintances you haven’t heard from all year to be a due diligence best practice.

 

 

You’ve implemented and followed detailed policies and procedures to ensure a successful “naughty or nice” audit.

 

 

You keep escheating unclaimed eggnog to your liver.


 

Happy holidays from UPPO!

 

All images from giphy.com

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