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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 Advocacy Update: April 2018

Posted By Administration, Thursday, April 26, 2018

 

To help members remain aware of UPPO’s advocacy activities, the Unclaimed Property Focus blog will now include a monthly Advocacy Update when state legislatures are active. Following are recent activities and trends from UPPO’s Government Relations and Advocacy Committee (GRAC).

 

Top Priority Issues

To continue refining and improving the organization’s advocacy work, GRAC recently 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.

We will provide more details regarding UPPO’s work on each of these issues in future blog posts.

 

California VDA Program

UPPO recently 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 has since expressed some concerns with the bill’s language, leading Assemblyman Dante Acosta, the bill’s author, to pull the bill from consideration. 

 

UPPO intends to work closely with Acosta and the Controller’s Office to address these concerns with the goal of the bill’s reintroduction during the next legislative session.

 

Custody of Escheat Trend

Recent legislation in three states indicates a potential trend related to limits on property owners’ ability to claim funds that have been escheated. 

  • Hawaii S.B. 2921 specifies that claims would be invalid for funds totaling less than $250 and filed more than 10 years after the funds were deposited into the state’s unclaimed property trust fund. This is a change from the current amount of less than $100. The bill is expected to pass soon. 
  • Arizona S.B. 1097 limits unclaimed property claims to 35 years after the final day of the fiscal year in which the state receives the unclaimed property. The governor signed this bill into law on March 23, 2018.
  • Louisiana H.B. 851 limits unclaimed property claims to 30 years from the date the state receives the property. The state treasurer is reportedly opposing the bill, as he was not consulted about it. 

UPPO will continue to monitor this issue and report on developments as warranted. UPPO members can track the progress of these bills and all active unclaimed property legislation nationwide via our govWATCH service.

 

 

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 network. Responses will give us the ability to mobilize UPPO members when we are faced with legislative and regulatory challenges and opportunities.

 

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The Four Phases of Delaware’s VDA Program

Posted By Administration, Thursday, April 19, 2018

As part of recent changes to Delaware’s unclaimed property statute, the state must give holders the opportunity to enter into its voluntary disclosure agreement (VDA) program before initiating audits. In addition, holders that were already under examination had the option to convert to a VDA by Dec. 11, 2017. Expectedly, interest in Delaware’s VDA process is high. 

 

To provide UPPO members with insight into Delaware’s VDA process, Delaware Unclaimed Property VDA Administrator Alison Iavarone outlined the program and responded to questions during a recent UPPO webinar. 

 

“The VDA program is not an examination—it’s not an audit—but the holder is expected to conduct a comprehensive and detailed self-review of its books and records to determine whether the holder has past-due abandoned or unclaimed property reportable to Delaware,” she said.

 

Once enrolled, qualified unclaimed property holders accepted into Delaware’s VDA program will proceed through a four-phase process.

 

Phase 1: Scoping

During the initial phase of the VDA, the participating holder analyzes its organizational history, accounting functions and records to determine areas of potential unclaimed property exposure and underreporting. 

 

“The review should be customized to the holder,” Iavarone said. “In order to determine how it’s customized, you need to understand the corporate activity, whether companies were acquired during the VDA review period and how they were rolled into the company for accounting purposes, for example. Another big thing to address during the scoping phase is the compliance history—whether they have been filing and what property types they have been filing. This could help minimize the review you need to do.”

 

The holder determines the entities and property types where unclaimed property exposure exists and submits a Scoping Worksheet and Information Request to the VDA administrator assigned by the secretary of state’s office—either Drinker Biddle or TL2Q. 

 

The administrator reviews the holder’s submission and responds to any questions the holder may have about the process. The Delaware Department of State communicates with the administrator throughout the VDA process and remains available to address holder concerns. 

 

At the conclusion of this phase, the administrator and holder will agree on the scope of the VDA and establish a timeline for completion of the other phases. 

 

Phase 2: Quantification

During the second phase, the holder will review its books and records to quantify past-due unclaimed property reportable to Delaware for the entities and property types established during the scoping phase. The methodology for the quantification of amounts due to Delaware will generally be based on whether an entity is domiciled in Delaware and the records availability for each entity and property type. 

 

The holder and administrator periodically complete status updates to ensure the process is proceeding. The holder provides preliminary quantification schedules or other documentation for the administrator’s review and feedback. 

 

Phase 3: Submission and Validation

During the third phase, the administrator reviews the holder’s work and conclusions with the goal of establishing a settlement agreement, including the amount reportable to Delaware. The holder presents its VDA Submission to the administrator. It should include:

  • Entity or company background information (in narrative form). 
  •  Summary of the work performed (in narrative form). 
  •  Summary of findings (in narrative form). 
  •  Supporting schedules. 
  •  Supporting documents. 
  •  Other applicable documentation (e.g., legal opinions, management representation letters, etc.).

“This is the nuts and bolts of the VDA,” Iavarone said. “It should include is a summary of what was done in narrative form and then quantification schedules summarizing how you came up with the numbers, along with supporting documentation.” 

 

Upon receipt and review, the administrator responds with questions and follow-up items needed to proceed. Depending on the request, the holder may respond with supporting documentation and/or edits and updates to calculation spreadsheets. The holder also provides a management representation letter from its chief financial officer, describing what records are available for property types and for which years. 

 

The administrator presents the VDA Submission to the secretary of state’s office for review and approval. The Department of State reviews the VDA Submission and the administrator’s recommendations.

 

Phase 4: Closing and Documentation

Upon acceptance of the VDA Submission, the holder and secretary of state’s office work together to close the VDA. An officer or authorized representative completes and submits Form VDA-2 – Voluntary Self-Disclosure Agreement, along with several attachments:

  • Exhibit A: List of Entities: This attachment includes a list of entities include in the VDA and their federal identification numbers. Dates and states of incorporation are also requested but not required.
  • Exhibit B.1: Summary of Amounts Due: This attachment includes a table summarizing reportable amounts by property type. 
  • Exhibit B.2: Line Item Owner: This attachment, provided in a printable format should include the name, address, property type and amount that will be included in the NAUPA file that will be uploaded by the holder after receiving the VDA Demand Letter. 
  • Exhibit C: SOS VDA Submission: This attachment may consist of many documents and should include: the narrative summarizing the VDA analysis; a summary and detailed schedules quantifying amounts; copy of VDA-1 and any applicable amendments; management representation/records availability letter; legal opinions/memoranda related to the VDA; and any other relevant documents. 

After the holder and secretary of state have signed Form VDA-2, the Department of State will issue a Demand Letter, requesting payment and providing instructions for uploading the necessary NAUPA file. The holder will have 10 days to make payment of the amount due. 

 

Following completion of the VDA process, the holder is required to file unclaimed property reports electronically to the Department of Finance for the next three years. 

 

For additional information regarding Delaware’s VDA program, including forms, sample documents and answers to frequently asked questions, visit http://vda.delaware.gov.

Tags:  Delaware  VDAs  voluntary disclosure agreements 

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California Legislature Considers Voluntary Disclosure Program

Posted By Administration, Thursday, April 5, 2018

A.B. 2773, a bill under consideration by the California Assembly, would establish a voluntary disclosure program in the state. If passed, the statute would require the state controller to create a program following several requirements similar to those in other state voluntary disclosure programs. They include:

  • The program would be open to holders out of compliance with applicable unclaimed property reporting deadlines if they are not already under audit when applying to participate.
  • Participating holders would be expected to review their records and report obligations to the state for the previous 10 years. 
  • The controller would waive interest and penalty charges for holders completing the program in good faith and coming into compliance.
  • The holder would not be subject to audit for the period covered by the voluntary disclosure agreement (VDA) unless the controller reasonably determines the holder has made a fraudulent or willful misrepresentation. 
  • Payment to the state for outstanding liabilities would occur within 12 months from the VDA filing date or another date determined by the controller. 

If adopted, the program would begin on Jan. 1, 2019, and would remain in effect until Jan. 1, 2024, unless extended by statute. 

 

On March 15, 2018, UPPO notified bill author Assemblyman Dante Acosta of its support for the bill and availability to provide expert testimony or other assistance regarding the legislation and its subsequent implementation. 

 

A.B. 2773 is scheduled for an April 10 hearing by the assembly’s judiciary committee. UPPO members can track the progress of this bill and all active unclaimed property legislation nationwide via our govWATCH service

Tags:  California  legislation  VDAs  voluntary disclosure agreements 

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Unclaimed Property News Roundup

Posted By Administration, Thursday, March 29, 2018

Unclaimed property continues to make headlines. Following is a recap of some recent stories getting news coverage from local and national media outlets.

 

Illinois bill raises debate about contingency fee audits

On March 12, The State Journal-Register discussed arguments for and against Illinois S.B. 2901, a bill that would, among other things, prohibit the state from hiring auditors on a contingency fee basis.

 

Minnesota Supreme Court tackles the state’s efforts to find owners and treatment of interest-bearing property

On March 7, 2018, Minnesota Public Radio’s NewsCut blog covered a Minnesota Supreme Court decision regarding the state’s handling of unclaimed funds. The court ruled that the state takes adequate steps to reunite owners with their property, but that it owes owners the interest they would have earned from property originating from interest-bearing accounts.

 

Bitcoin lawsuit raises issues about virtual currency as unclaimed property

In early March, numerous online publications, including Ars Technica, covered a series of lawsuits against cryptocurrency exchange Coinbase. One of the cases claims the company pocketed unclaimed virtual funds rather than escheating them to California.

 

New PBGC program provides new option for sponsors of terminating 401(k) plan

On Jan. 31, 2018, Bloomberg discussed a new program from the Pension Benefit Guaranty Corporation aimed at reuniting property owners with funds from terminated 401(k) plans.

 

Looking for your missing Donovan McNabb jersey?

Spurred by state treasurers’ efforts, local news outlets often remind readers to search unclaimed property lists for funds they may be owed. Using this year’s Super Bowl as an angle for drawing attention to unclaimed property, Pennsylvania’s treasurer received coverage in The Inquirer by focusing on unclaimed Philadelphia Eagles memorabilia, presumably from abandoned safe deposit boxes.  

 

Tags:  audits  cryptocurrency  retirement accounts  safe deposit boxes 

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Class Action Takes on Unclaimed Cryptocurrency

Posted By Administration, Thursday, March 22, 2018

Cryptocurrency has been plagued by negative headlines throughout its rise to prominence. Its volatility, ties to black market transactions on the “darknet,” and substantial thefts from cryptocurrency exchanges lead many to doubt proponents’ claims that cryptocurrency is the future of payment transactions.

 

Cryptocurrency’s latest foray into the news comes from its treatment – or lack thereof – as unclaimed property. On March 2, 2018, plaintiffs filed a class action lawsuit against Coinbase, a popular cryptocurrency exchange, for violating California’s Unclaimed Property Law.

 

At issue is Coinbase’s practice of allowing users to send cryptocurrency, including bitcoin, to email addresses rather than limiting transactions to exchanges between cryptocurrency wallets. Recipients of transactions sent to email addresses received instructions for creating Coinbase accounts and accessing their cryptocurrency. The complaint alleges that some recipients did not complete this process and, thus, never claimed their virtual funds.

 

Rather than advising senders that the funds were not claimed or escheating them to the state, Coinbase allegedly kept the cryptocurrency, violating California’s unclaimed property statute.

 

The lawsuit filing explains, “Imagine writing a cashier’s check to a friend. The bank withdraws funds from your account, but your friend never cashes the check. Does the bank get to keep the funds? The law clearly says no. But this is exactly what has happened with cryptocurrencies sent through Coinbase.com.”

 

The class action seeks to recover and return unclaimed cryptocurrency to the intended recipients. In the case of email addresses that are no longer active, the property would be escheated to California.

 

Recognizing the potential for such conflicts as nontraditional currencies become more popular, the Uniform Law Commission included virtual currency within the definition of “property” in the Revised Uniform Unclaimed Property Act of 2016. As states have introduced and adopted new unclaimed property statutes based on RUUPA, virtual currency holders face the same requirements as holders of other property types.

 

Although California’s Unclaimed Property Law does not specifically mention virtual currency, a 2017 analysis, “Treatment of Bitcoin Under U.S. Property Law” by Perkins Coie LLP, suggests cryptocurrency meets the state’s definition of “intangible property” covered by the law.

 

As more people and companies recognize bitcoin and other cryptocurrencies as legitimate forms of payment, more unclaimed property issues will likely arise. UPPO will continue to monitor and report on the Coinbase class action and other noteworthy cases. 

Tags:  bitcoin  cryptocurrency  unclaimed property  virtual currency 

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