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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 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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IRS Extension Provides IRA Holders an Extra Year

Posted By Administration, Thursday, November 29, 2018

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. At that time, holders were given a compliance deadline of  Jan. 1, 2019, or as soon as it becomes “reasonably practicable” to do so.


UPPO worked closely with the Holders Coalition and other organizations, including SIFMA and ICI, 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. Members of the Holders Coalition, including UPPO representatives Jen Borden and Dana Terry, met with the IRS in September to discuss a variety of concerns.


These efforts contributed to an extension of the compliance deadline from Jan. 1, 2019, to Jan. 1, 2020. On Nov. 20, 2018, the IRS issued Notice 2018-90 announcing an extension:


“Relief is extended to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable to comply with the withholding and reporting requirements described in Rev. Rul. 2018-17.”


Revenue Ruling 2018-17 clarifies that Section 3405 of the Internal Revenue Code considers “any distribution or payment from or under an IRA… as includible in gross income,” and thus subject to tax withholding by the holder/trustee. Some holders already have held this position and routinely withhold tax and issue 1099Rs for escheated IRAs. Others do not. 


Although the IRS ruling provides clarity and paves the way for consistent practices, it creates challenges for securities holders, who would need to liquidate property before reporting it to the state and withholding the 10 percent federal income tax. This practice could conflict with other regulations.


The extension allows for an additional 12 months to seek guidance and clarification from other regulatory bodies and put practices in place to comply with the IRS requirement.


UPPO will continue to monitor issues related to the IRS ruling and will provide members with any relevant updates that occur. 

Tags:  1099  banks  IRS  securities 

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Unclaimed Safe Deposit Box Basics

Posted By Administration, Thursday, July 27, 2017

Unlike most of the property types in the unclaimed property world, safe deposit boxes are an anomaly because they contain physical, tangible items. As such, handling of safe deposit boxes has a unique set of rules, requirements and concerns. Candace Rummel, senior operations manager, consumer operations, for Capital One Bank, discussed the handling of safe deposit box contents during a recent UPPO webinar. 


Drilling the Boxes

There are two scenarios for when a financial institution would likely drill open a safe deposit box: nonpayment and relocation. In either case, state bank laws and the rental agreement between the financial institution and the customer govern how the property should be handled.


Because most consumers are likely to return to the location where they left their physical property, the state where the safe deposit is located—rather than state where the owner lives—dictates the requirements for safe deposit box handling. Familiarity with the specific requirements of the applicable state is essential. 


When owners violate their rental agreements by failing to pay rent, the financial institution where the box is located will usually opt to drill the box. First, the holder should make appropriate collection attempts. Because most safe deposit box fees are charged annually and property is held for long periods of time with little thought, customers may not realize they have neglected to pay. For example, if a linked bank account that was used for automatic payments for several years is closed, the customer may inadvertently neglect to link a new account. So, efforts should be made to collect payment before assuming boxes have been abandoned. 


Most states set a dormancy period beginning on the date of the last rent payment, plus additional time for the holder to send a drill notification and await payment. If customers don’t respond to the drill notification, the holder may proceed with drilling. 


“If you decide you want to allow the customer to keep their contents in the box without paying, that is your decision,” Rummel said. “But be careful. If you determine you’re not going to drill at all, it could be viewed as avoiding escheatment.”


During the drilling, most states require holders to maintain dual control. They usually specify that one or two bank personnel—in some cases a bank officer—be present. A notary is also required. In some states, the notary cannot be a bank employee. Finally, the holder will need a drill vendor. 


As soon as the box is drilled open, the holder and notary complete an affidavit, ensuring all of the box’s contents are listed.  


“It is wise to err on the side of caution and be vague with descriptions on the affidavit,” Rummel said. “For example, if there is jewelry in the box, remember that you are not a jeweler when describing those items. Instead of saying the box includes a diamond ring, list it as a yellow ring with a clear stone. If it’s not a diamond and you list it as such, you may find yourself in litigation and owing someone a diamond.”


Contents should be kept safe in a tamper-proof bag. The affidavit should stay with the contents. If you plan to place the affidavit in the bag, make sure to keep a copy elsewhere so you don’t have to open the bag later. Having a process in place to track the chain of custody is also essential. Some states require that a post-drill notification must be sent to within a set time (often 10 to 30 days) after a box is drilled. 


The second scenario for drilling, relocation generally occurs when a bank branch is moving or closing. If the physical bank of boxes is being moved and not drilled, different rules apply because the holder is not technically breaking the rental agreement. Consult with applicable state laws regarding requirements for moving the entire box rather than its contents.


For relocation, notify safe deposit box owners that the branch is relocating or moving, and ask them to take their contents. Some states have specific language and mailing requirements. 


If owner payments are current but they have not responded to the relocation notice, dormancy generally begins at the time of drilling. In these instances, the customer has been paying but did not respond to the notice about the relocation. Holders may have to store items longer than required for nonpayment drilling because the one-year nonpayment gap doesn’t exist in this scenario. Otherwise, the same rules apply regarding dual control, notaries, affidavits and content handling.



Once the holder completes the drilling, the state requires holding the contents for a designated period specified by state law. In the event customers claim their property, there should be a process for documenting their receipt of the items—typically a section of the affidavit they complete and sign. Make sure to keep a copy of this to prove the customer picked up the items if needed. If customers claim items after reporting to the state, follow the state’s notification process, specifying that the property is no longer unclaimed. 


At some point defined by each state, the holder is expected to remit either the entire safe deposit box contents or just certain items. If states do not require remittance of the complete contents, holders send an inventory list and the state specifies which items they want. For items the state does not accept, there may be an additional holding period. Once this period ends, destruction or auction of remaining items may be allowed. Each state has its own time frame and requirements. Holders should keep detailed documentation of how all property was disposed. 


Safe deposit boxes present a unique set of challenges for property holders. However, they still share a significant similarity with other forms of unclaimed property—lack of consistent requirements from state to state. Banks and credit unions holding customer property in safe deposit boxes should consult with their state banking laws to understand the many nuances for their individual locations. 


Tags:  banks  safe deposit boxes  unclaimed property 

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