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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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2018 Unclaimed Property Legislative Roundup

Posted By Administration with contribution by Marcella Easly, senior compliance advisor at UPCR, Thursday, July 12, 2018

Unclaimed property continues to be a popular topic for state legislatures. Although a handful of state legislatures are still in session, most have completed their work. Following is a brief summary of some of the noteworthy unclaimed property bills that became law during the 2018 session. 

 

Arizona

Effective on July 1, 2018, Arizona S.B. 1412 revises provisions concerning unclaimed property credits of electric cooperatives. Among its provisions, it allows a cooperative to use all unclaimed capital credits or fees for any lawful purpose that is consistent with the cooperative’s bylaws and authorized by the cooperative’s board of directors. Additionally, the bill exempts unclaimed capital credits and fees from the state’s Unclaimed Property Act. It also prohibits an individual, corporation, business association or other organization from diverting personal property to circumvent the unclaimed property process.

 

Effective on April 17. 2018, Arizona S.B. 1264 prohibits a gift card from being subject to a fee, except as noted. It also states that the underlying monies on a gift card may not be subject to an expiration date, though a gift card, code or device associated with a gift card may contain an expiration date if certain conditions are met.

 

Hawaii

Effective on Jan. 1, 2019, Hawaii S.B. 208 adopts the National Conference of Insurance Legislators’ Model Unclaimed Life Insurance Benefits Act, which requires life insurers to conduct database searches using the federal Social Security Administration’s death master file or similar database to determine whether an insured has died. It requires life insurers to use good faith efforts to locate any beneficiaries to a policy, contract or retained asset account.

 

Indiana

Effective on July 1, 2018, Indiana S.B. 376 provides, for purposes of the unclaimed property act, that a time deposit that is automatically renewable is considered matured upon the expiration of its initial period, unless: (1) the owner has consented to a renewal at the time of the account opening or at about the time of the renewal; and (2) the consent is in writing or is evidenced by the original account agreement or by any memorandum or other record on file with the holder of the account.

 

Kentucky

Effective on July 14, 2018, Kentucky H.B. 394 enacts the Revised Uniform Unclaimed Property Act of 2016. it also requires the State Treasurer to submit a report on the status of the abandoned property fund to the Legislative Research Commission by December 15, 2018.

 

Missouri

Effective on Aug. 28, 2018, Missouri S.B. 644 creates the crime of failure to register with the state treasurer to claim property on behalf of another person for a fee, set as a class A misdemeanor. The claim form will provide notice of the requirement to register with the treasurer if one is acting as a compensated representative for another individual entitled to unclaimed property. It also allows the treasurer to review and withhold any claim until he or she is reasonably satisfied that the claim is legitimate and that the person making the claim is aware of the nature and potential value of his or her claim.

 

Effective on Aug, 28, 2018, Missouri H.B. 1879 revises notification and abandonment requirements pertaining to consumer deposit accounts with a banking or financial organization.

 

Effective on Aug. 28, 2018, Missouri S.B. 769 provides that whenever a consumer deposit account with a banking organization or financial organization has been inactive for 12 months or more and inactivity fees apply, the organization must notify the account holder of such inactivity through first class mail postage prepaid marked “Address Correction Requested” or through electronic notice if the consumer has agreed to this. Additionally, the bank must send annual statements for such account and charge a fee up to $5 per statement.

 

Pennsylvania

Effective on Dec. 25, 2018, Pennsylvania H.B. 152 requires life insurance providers to participate in the Life Policy Locator Service adopted by NAIC.

 

South Dakota

Effective on Jan. 1, 2019, South Dakota H.B. 45 revises certain provisions regarding the sale of unclaimed property. It extends the timeframe before the state treasurer can sell abandoned stocks, bonds, and other negotiable instruments from 90 to 180 days.

 

Utah

Effective on May 8, 2018, Utah S.B. 156 defines various terms, subjects stored-value cards and payroll cards to the Revised Uniform Unclaimed Property Act, provides a time period after which a stored-value card is considered unclaimed property, exempts 529 educational savings accounts from certain provisions, and addresses the State Tax Commission's responsibilities with regard to unclaimed property.

 

Virginia

Effective on July 1, 2018, Virginia S.B. 253 and H.B. 686 clarify the criteria that must be met for a bank or other financial organization to impose charges or cease to pay interest on a dormant or inactive account that differs from those imposed on active accounts. The holder may reverse or cancel dormancy charges or retroactively credit interest upon the request of the owner if it also does so for all such property that becomes subject to certain unclaimed property reporting requirements.

 

Wisconsin

Effective on April 5, 2018, Wisconsin S.B. 274 implements the Model Unclaimed Life Insurance Benefits Act prepared by the National Conference of Insurance Legislators. Generally, the bill addresses the obligations of an insurer providing life insurance policies, annuities, or retained asset accounts with respect to identifying insureds who have died and their beneficiaries.

 

For the latest information about these and other noteworthy unclaimed property bills, visit UPPO’s govWATCH website

Tags:  Arizona  Hawaii  Indiana  Kentucky  legislation  Missouri  Pennsylvania  South Dakota  unclaimed property  Utah  Virginia  Wisconsin 

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Litigation Update: Supreme Court battle over MoneyGram “official checks” begins taking shape

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Monday, June 12, 2017

Delaware v. Pennsylvania and Wisconsin and Arkansas, et al. v. Delaware (U.S. Supreme Court)

MoneyGram has been involved in a number of lawsuits involving Delaware, Wisconsin and Pennsylvania. The states are each claiming right to MoneyGram’s official checks. Delaware claims MoneyGram should escheat the property to Delaware because it is MoneyGram’s place of corporate domicile. Wisconsin and Pennsylvania argue that the official checks should be remitted to the jurisdiction in which the purchase took place. 

 

A key issue is whether the unclaimed funds attributable to the official checks should be escheated in accordance with the federal priority rules set forth in Texas v. New Jersey, or whether they should be escheated in accordance with the rules set forth in the Disposition of Abandoned Money Orders and Traveler’s Checks Act, 12 U.S.C. sec. 2501 et seq.

 

More than two dozen other states have joined Pennsylvania and Wisconsin in the lawsuits against Delaware. In October 2016, the U.S. Supreme Court (“Supreme Court”) agreed to hear the cases, and consolidated the two cases into one.   

 

(Learn more about the cases involving MoneyGram that led to Delaware v. Pennsylvania and Wisconsin: Part 1 and Part 2.)

 

Special master appointment

In disputes involving two or more states, the Supreme Court has original jurisdiction under the U.S. Constitution and the U.S. Code. In order to efficiently consider and manage such original jurisdiction cases, the Supreme Court may appoint a “special master” to act as a de facto trial court, responsible for gathering facts, taking testimony and making recommendations to the Supreme Court.

 

On March 29, 2017, the Supreme Court appointed Circuit Judge Pierre Leval of the Court of Appeals for the Second Circuit as the special master for this case.

 

Case Management Order No. 1

On May 12, 2017, Special Master Leval issued Order No. 1 in the case. It indicated that a status conference would be held in New York City on June 5, 2017, whereby the special master would meet with counsel for the parties and MoneyGram Payment Systems Inc. to discuss formulation of a Case Management Plan. Our understanding is that arguments on certain motions of the parties would be heard at such conference, as well as discussions pertinent to a letter from legal counsel for one of the parties requesting bifurcation of the proceedings. Such request asked that the case be bifurcated into two stages: (i) a first part to determine liability, and (ii) a second phase to determine damages, if needed. 

 

UPPO will continue to monitor and report on this case as it develops.

 

About the contributor
Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property, is a frequent author of unclaimed property articles and whitepapers, and is a co-author of the Bloomberg BNA Unclaimed Property Portfolio, Corporate Practice Series.  Schaunaman is a member of the Oklahoma Bar Association.    


Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering business, financial, legal, tax, reporting or compliance or other professional advice or services.  This summary blog is not a substitute for such professional advice.

 

 

Tags:  Delaware  litigation  money orders  MoneyGram  official checks  Pennsylvania  unclaimed property 

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New Pennsylvania and Texas due diligence requirements raise questions

Posted By Administration, Tuesday, February 21, 2017

In recent years, Pennsylvania and Texas enacted new unclaimed property due diligence requirements that affect holders this year. In both cases, the statutes raise several questions for holders required to comply with the new requirements.

 

Pennsylvania

Last year, Pennsylvania amended its unclaimed property law, effective Sept. 12, 2016. Among the changes was the addition of a due diligence requirement. According to draft guidance from the state, the new due diligence requirement applies to all property to be reported on April 15, 2017.  

 

The due diligence requirement specifies that property holders must send a notice to owners between 60 and 120 days before reporting the property to the state treasurer. The requirement applies to any property valued at $50 or more for which the holder has an owner address it believes is valid.

 

Holders are also permitted to provide optional, additional notice any time between the date of last activity by, or communication with, the owner and the escheatment date, under the new requirement.

 

Unless the holder has valid consent from the owner for electronic contact the owner, written notice must be sent by first-class mail. The holder is required to include descriptions of the property and property ownership, value of the property (if known) and information for contacting the holder to avoid escheatment of the property.

 

The due diligence requirement’s language raises several questions for holders. It is unclear whether having valid consent to communicate electronically triggers a requirement that the holder must provide the notice electronically, or if the holder has the option to provide notice either electronically or by first class mail.

 

It is also unclear what constitutes owner consent to receive the due diligence notice electronically. Does the consent have to specifically mention due diligence notices? Does consent apply if the owner agreed to receive only specific types of documents, such as tax forms, electronically?

 

UPPO has raised these questions via comments to Pennsylvania’s treasurer in hopes of receiving clarification for the holder community.

 

Texas

In June 2015, Texas passed H.B. 1454, which includes new due diligence requirements, effective on Sept. 1, 2017. Under the new requirements, if a property owner has designated a “representative for notice,” the holder must mail or email the written notice required upon presumption of abandonment to the representative in addition to mailing the notice to the owner.

 

The requirements specify that, although the designated representative does not have any rights to claim or access the property, the dormancy period will cease if the representative communicates to the holder knowledge of the owner’s location and confirms that the owner has not abandoned the property.

 

Holders are also required, under the new requirements, to include the name and last-known mailing or email address of the representative for notice designated by the holder.

 

As with Pennsylvania’s new requirements, the Texas requirements raise several questions for holders:

  • What types of property are covered? The law specifies mutual funds, deposit accounts and safe deposit boxes, but doesn’t specify whether both open-end and closed-end mutual funds, and IRAs are included?
  • What are the acceptable methods for obtaining representative information? The requirement specifies that the comptroller provides a form that a holder may make available to an owner to designate a representative. However, it does not specify whether this is the only acceptable method for collecting this information.
  • Is there any criteria for being designated as a representative for notice, and does the designated representative have to provide any sort of consent to serving this role?
  • How long does a designation of being a representative for notice last, and are there any requirements for an owner to revoke this designation and/or for a holder to notify Texas of the revocation?
  • If the owner holds multiple accounts with the same holder, is designation of a representative for notice on one account considered applicable to all accounts? Likewise, does a representative response regarding one account automatically reflect interest in all of the owner’s accounts maintained by the holder?

UPPO has raised these questions with Texas officials and will continue to monitor implementation of the new requirements.

 

 

Tags:  due diligence  Pennsylvania  Texas  unclaimed property 

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UPPO seeks clarification about Pennsylvania’s due diligence and IRA provisions

Posted By Administration, Thursday, October 6, 2016

On July 13, 2016, Pennsylvania Gov. Tom Wolf signed H.B. 1605 into law. The massive bill revises the commonwealth’s Fiscal Code, including its unclaimed property program. Among H.B. 1605’s unclaimed property provisions are requirements for conducting due diligence and escheating Individual Retirement Accounts (IRAs). Unfortunately, the law’s language is causing confusion for unclaimed property holders. In an effort to gain clarity, UPPO submitted a letter to Treasurer Timothy Reese and legislative leaders on Sept. 22, 2016.

 

Due Diligence

One of the new statutory provisions imposed by H.B. 1605, Section 1301.10A, requires holders to perform due diligence for property valued at $50 or more when the holder’s records do not disclose the owner’s address to be inaccurate. The statute specifies that holders must send written notice by first class mail, “unless the owner has previously agreed to a method of electronic notice that remains valid to contact the owner.”

 

The statute’s wording opens the door to multiple interpretations. It is unclear whether an owner’s agreement to receive electronic notices triggers a requirement for the holder to use electronic communication or merely gives the holder the option to choose either first class mail or electronic communication.

 

The due diligence provision also fails to specify what constitutes owner agreement to receive electronic communication. It fails to define whether the owner’s request to receive any type of communication from the holder is sufficient or if the agreement must specifically include due diligence notices. Similarly, it causes confusion for holders who have received consent to send specific types of communication via one method (tax forms by mail, for example) and other types of communication via another (i.e., general account information by email). 

 

IRA Distributions

Under federal law, IRA owners are allowed to take account distributions beginning at age 59 ½ without penalties and are required to take account distributions beginning at age 70 ½. If they choose to take distributions before 59 ½, they are subject to an additional 10 percent “early distribution” tax (with some well-defined exceptions).

 

Section 1301.8(2) of H.B. 1605 suggests that IRAs could be reportable to Pennsylvania regardless of the owner’s age. This could trigger the 10 percent early distribution penalty for owners under the age of 59 ½. Because the Internal Revenue Service has not addressed whether unclaimed property reporting of an IRA owned by someone younger than 59 ½ triggers the early distribution tax, the change to Pennsylvania’s law could lead to several unintended risks for IRA owners and custodians, including:

  • The incorrect application of taxable income reporting.
  • Tax withholding and overall tax liability computation.
  • Long-term loss of compounded interest earned on account balances.
  • Long-term loss of the accrued value of reinvested dividends no longer accruing on accounts.
  • General interference with the long-term retirement investing goals of individuals who often use IRAs as passive, long-term investments with no expectation of the need to access the funds prior to retirement.

In its comments, UPPO encouraged Pennsylvania officials to consider the potential negative tax consequences of the unclaimed property provisions on the commonwealth’s residents and questioned whether the state has the authority to subject residents to such consequences.

 

Federal Preemption

The new IRA dormancy standard in H.B. 1605 also may conflict with federal law governing the creation, control and tax treatment of such accounts. UPPO points out that the tax implications from IRA distributions required by the new law contradict Congress’ intent to provide a clearly defined and heavily regulated tax benefit to retirees. Thus, the state’s unclaimed property law would violate the Constitution’s Supremacy Clause, which establishes that federal law takes precedent.

 

Pennsylvania Law Inconsistency

In addition to the apparent conflict with federal law, H.B. 1605’s IRA provisions seems to conflict with Pennsylvania’s own unclaimed property principles. UPPO writes, “The Pennsylvania Disposition of Abandoned and Unclaimed Property is founded on the premise that the Commonwealth may take custody of property that is ‘payable or distributable’ to an owner, but which the owner has abandoned or neglected to claim. The change implemented by H.B. 1605 permits the Commonwealth to take custody of assets that are not ‘payable or distributable,’ and ignores whether the owner has truly abandoned the property or not. Thus, the legislation crosses over the threshold of taking custody, and acts instead to confiscate the assets of Pennsylvania residents.”

 

A spokesperson for Pennsylvania’s Treasury Department told The Wall Street Journal that the dormancy standard was aimed at protecting retirement account beneficiaries, allowing them to access IRA accounts when the owner died before the mandatory IRA distribution age. The wording of the new IRA dormancy provision, however, is overly broad for that intent.

 

UPPO hopes to receive clarity regarding these issues soon. We will update membership via the blog with news and developments related to the UPPO letter or these regulations. View UPPO’s letter.

 

 

Tags:  compliance  due diligence  IRAs  Pennsylvania  unclaimed property 

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Litigation update: Pennsylvania files complaint and seeks ruling that “official checks” are treated like money orders in suit against Delaware and MoneyGram, Part 2

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Friday, June 24, 2016

Treasury Department of the Commonwealth and Treasurer Timothy Reese, Plaintiffs v. Delaware State Escheator David Gregor and MoneyGram Payment Systems Inc., Defendants (U.S. District Court for Middle District of Pennsylvania)

 

Part 1 of this article provides background on lawsuit filed by the state of Pennsylvania against MoneyGram Payment Systems Inc. (MoneyGram), and the state of Delaware, as well as a separate suit filed against the same defendants by the state of Wisconsin.

 

MoneyGram’s Motion to Dismiss

Defendant MoneyGram filed a Motion to Dismiss the lawsuit brought by Pennsylvania. In an April 25, 2016 brief supporting its motion, the company explained how the dispute arose and why it believes the lawsuit lacks merit to proceed.

 

According to allegations made in MoneyGram’s Motion to Dismiss, the dispute began in 2014 when Arkansas demanded the company pay substantial sums to that state for uncashed official checks that had already been escheated to Delaware. MoneyGram declined and encouraged Arkansas to resolve the matter with Delaware. Arkansas refused, informing MoneyGram that the state intended to audit the company and “request that every state join” the audit, unless the state’s demands were met. As a result, approximately 20 states have made similar demands of MoneyGram.

 

MoneyGram’s brief raises numerous issues, two of which are especially noteworthy:

  • The company alleges that the District Court does not have subject matter jurisdiction. It cites 28 U.S. Code sec. 1251(a), which says, in part, that the U.S. Supreme Court “…shall have original and exclusive jurisdiction of all controversies between two or more states.”
  • The company also alleges that the plaintiffs’ claims violate MoneyGram’s constitutional due process rights. It cites the U.S. Supreme Court case of Western Union Telegraph Co. v. Pennsylvania, and claims that requiring MoneyGram (as opposed to Delaware) to pay Pennsylvania for property already escheated to another state would improperly result in the company paying a single debt more than once, taking its property without due process of law. MoneyGram notes that the Supreme Court in the Western Union case stated, “Our Constitution has wisely provided a way in which controversies between states can be settled without subjecting individuals and companies affected by those controversies to a deprivation of their right to due process of law. Article III, Section 2 of the Constitution gives this court original jurisdiction of cases in which a State is a party.”

Delaware’s Motion to Dismiss

Defendant David Gregor, Delaware state escheator, also filed a Motion to Dismiss. In an April 20, 2016 brief in support of the motion, it is stated that the case should be dismissed because it essentially is a disagreement between two states, Pennsylvania and Delaware. Therefore, under 28 U.S. Code sec. 1251(a) and other authorities cited, it is argued that the U.S. Supreme Court has original and exclusive jurisdiction over the dispute.   

 

Supreme Court motions

Despite the disagreement between states, it appears there is one thing on which they agree. They all contend that the U.S Supreme Court (Supreme Court) is the appropriate venue for the dispute. In recent weeks, there have been multiple motions to the U.S. Supreme Court related to the MoneyGram disputes:

  • On May 26, 2016, Delaware filed a motion, asking the Supreme Court to hear its dispute against Pennsylvania and Wisconsin.
  • On June 3, 2016, Wisconsin filed a motion, making a request to the Supreme Court, seeking leave to file a counterclaim against Delaware.
  • On June 9, 2016, 21 states filed a motion, asking the court to hear their dispute against Delaware. The states note that hundreds of millions of dollars are at stake.  For example, they state that between May 2011 and March 2015, at least $162 million in unclaimed funds attributable to MoneyGram official checks went uncashed or were not redeemed. They are asking the court, among other things, to: (i) declare that funds payable on unclaimed MoneyGram official checks sold in their states should be remitted to them, rather than Delaware, (ii) instruct Delaware to turn over funds for unclaimed official checks that have already escheated by MoneyGram, and (iii) award damages, including interest.
  • On June 13, 2016, Pennsylvania filed a motion with the Supreme Court, stating that it concurs in Delaware’s Motion for Leave to file Bill of Complaint, and asking the Supreme Court to grant Delaware’s motion.

The U.S. Supreme Court will review the motions and decide whether to hear the cases or decline. UPPO will continue to monitor and report on developments surrounding these cases as they occur.

 

About the contributor

Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property and is a frequent author of unclaimed property articles and whitepapers. Schaunaman is a member of the Oklahoma Bar Association and American Bar Association.    

 

Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering business, financial, legal, tax, reporting or compliance or other professional advice or services.  This summary blog is not a substitute for such professional advice.

Tags:  Delaware  litigation  money orders  MoneyGram  official checks  Pennsylvania  unclaimed property 

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