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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: October 2019

Posted By Administration, Thursday, October 24, 2019

To help members remain aware of UPPO’s advocacy activities, the Unclaimed Property Focus blog presents the recurring Advocacy Update when legislatures are active or significant advocacy activity has occurred. Following are recent activities and trends from UPPO’s Government Relations and Advocacy Committee (GRAC).

 

Texas H.B. 3598 Update

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.

 

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. 

 

UPPO received a prompt response. Texas unclaimed property officials are currently drafting guidance regarding the new law and welcomed a call to discuss our questions. We look forward to our discussion, scheduled for Oct. 30, and will provide additional member updates when more information is available.     

 

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.

 

 

Tags:  consolidated reporting  Texas 

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UPPO Advocacy Update: September 2019

Posted By Administration, Thursday, September 26, 2019
Updated: Thursday, September 26, 2019

To help members remain aware of UPPO’s advocacy activities, the Unclaimed Property Focus blog presents the recurring Advocacy Update when legislatures are active or significant advocacy activity has occurred. Following are recent activities and trends from UPPO’s Government Relations and Advocacy Committee (GRAC).

 

Whistleblower Litigation

Among the issues GRAC has been closely monitoring is the increase of whistleblower court cases related to unclaimed property. Bloomberg Law recently covered one such case, which involves allegations surrounding JPMorgan Chase’s unclaimed property liability in New York. 

 

UPPO is concerned that the case could result in unintended consequences affecting unclaimed property compliance: 

  • The outcome of the case could diminish the incentive to voluntarily come into compliance. 
  • The case also raises issues regarding multiple state agencies interpreting the same statute differently.
  • The case could result in new operational burdens for both holders and administrators.

Please watch the UPPO blog in the coming weeks for more information about whistleblower cases and steps holders can take to protect themselves. 

 

Texas H.B. 3598 Questions

Earlier this year, the Texas legislature passed H.B. 3598. 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. GRAC has begun compiling a list of these questions, which will be used to request clarification from the state. UPPO will email members shortly with additional information and an invitation to contribute questions to GRAC. 

 

Do You Have Ideas for GRAC?

GRAC is interested in your feedback. 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. 

 

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.

Tags:  consolidated reporting  litigation  qui tam  Texas  whistleblower 

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Gain Efficiencies Through Consolidated Reporting

Posted By Contribution from Christopher Jensen, 2017/18 UPPO treasurer, Thursday, February 15, 2018

Unclaimed property laws have been enacted in all 50 states, certain United States territories, and various foreign countries. However, with little uniformity of reporting deadlines, dormancy periods, filing methods and payment methods, unclaimed property compliance can be both challenging and frustrating for holders. One way holders can streamline the process and maximize resource efficiencies is by filing a consolidated report.

 

The concept behind consolidated unclaimed property filing bears little difference from the way many corporations file federal income tax returns or financial statements. A consolidated unclaimed property report is one report sent to a specific state or jurisdiction, usually by a parent company, on behalf of multiple subsidiaries and legal operating entities.

 

The consolidated report is inclusive of all the property that would have been included within the multiple separate reports if the filing was done for each individual entity.

 

Holders that want to take advantage of the benefits of consolidated reporting should consider several important factors and best practices.

 

Filing classifications: Not all holders are created equal. There are several different filing classifications and related schedules for certain industries such as insurance, financial/banking, and mutual funds. As such, holders cannot combine entities with differing filing classifications into one report (e.g., a bank and a mutual fund). They need to adhere to the appropriate filing schedules, and keep filing classifications consistent and separate.

 

Owner-unknown property: When consolidating entities that have a differing state of incorporation than the parent, holders need to ensure the priority rules of Texas v. New Jersey are recognized and applied. Owner-unknown property should be sourced to the state of incorporation or formation from the entity that emanated the property, rather than the state of incorporation of the parent or consolidating entity.

 

Originating entity identification: When possible, holders should identify the entity where the property originated within the NAUPA file. Unfortunately, the current NAUPA format, which was originally developed in 2002, does not have a dedicated field for that information. One option is to repurpose the “Property Description” field, which is otherwise duplicative of the “Property Code” field. For example, when reporting a vendor check, the report includes the NAUPA Property Code of “CK13,” and also shows the description “Vendor Checks.” Including the NAUPA code is essential, but the description is not. Holders can override the information in the “Property Description” field and replace it with the name of the entity sourcing the property.

 

If the state ever questions the source of the property, having this information in the report will help to identify the originating entity. It can also help property owners identify the origins or details about their property. Owners may not be familiar with the name of a parent company, but could easily recognize the name of an entity where they worked, purchased something or otherwise did business.

 

Cover letter: Include a cover letter, addressed to the state administrator, specifying that the filing is a consolidated report. Include a list of entities and their Federal Employer Identification Numbers so the state can easily identify all of the entities included in the filing.

 

Verification: Before filing, check with the state to ensure it accepts consolidated reports. With the exception of Nevada, many states typically do, and encourage them! However, it’s wise to verify with each state that consolidated reporting is acceptable in case such practices have changed.

 

Allowing consolidated reporting is a benefit to the state or jurisdiction as well. From an administrative perspective, it significantly reduces the number of reports to accept and process each year, all while maintaining the same volume of properties reported and remittances accepted. In an era where state personnel have been asked to do more with less, it will exponentially reduce the burden with processing (possibly) unnecessary reports. From a practical perspective, allowing consolidated reports may encourage compliance with state unclaimed property laws, as the once laborious requirements that dictated a separate report per entity have now been made more efficient and holder-friendly.

 

This win-win scenario makes consolidated reporting a worthwhile consideration for holders seeking to streamline and improve the complex unclaimed property process.

 

 

Tags:  consolidated reporting 

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Contemplations of Consolidated Unclaimed Property Reporting

Posted By Christopher Jensen, director, Sam Schaunaman, senior manager & Christa DeOliveira, manager at Ryan, Tuesday, August 11, 2015

Introduction

The lack of uniformity with abandoned and unclaimed property laws and requirements is frustrating for holders.  A primary goal most holders pursue is to maximize resource efficiency and streamline processes, while complying with unclaimed property’s myriad of filing obligations.  One noteworthy way to achieve this goal is for holders of unclaimed property to prepare and file consolidated reports.

 

A consolidated unclaimed property report is one compliance report sent to a specific state or jurisdiction by a parent on behalf of multiple legal operating entities and contains properties reportable to that jurisdiction.  Sometimes, this is also referred to as reporting under one Federal Employee Identification Number (FEIN). It has been an increasingly frequent practice for holders to consolidate their compliance reporting to each applicable jurisdiction and a welcome practice by many states in environments where they have been asked to do more with less.  As this article indicates, the use of consolidated unclaimed property reporting generally is a “win-win” for both the holder community, as well as for the jurisdictions that receive such reports.*       

 

Use of Consolidated Reporting in Other Areas

Consolidated unclaimed property reporting is not an isolated practice.  Rather, consolidated reporting is also typical for other key areas holders use to report information to other governmental entities.  Specifically, it is common for any companies preparing financial statements to do so in a consolidated manner, rolling up financial reporting under a parent company.  For instance, according to the Financial Accounting Standards Codification Topic 810, a parent company is required to consolidate “…the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single economic entity.” This is due to the premise that “…consolidated financial statements are more meaningful than separate financial statements….”

 

By way of further example, the Internal Revenue Service (IRS) allows for consolidated reporting among its legions of filers.  In addition to consolidating balance sheets and income statements, IRS Form 851 - Affiliations Schedule is submitted to disclose affiliated entities that have been included with the submitted federal income tax return.  The instructions for completing Form 851 specify to identify “the common parent corporation and each member of the affiliated group.”

 

An Important Caveat

A notable difference for unclaimed property reporting for consolidated financial statements and consolidated corporate income tax filings, when compared with unclaimed property consolidated reporting, is related to the fact that the state of corporate domicile, also sometimes referred to as the state of incorporation, is the most important report for many unclaimed property holders. This key difference is tied to the priority scheme determined by the Supreme Court in Texas v. New Jersey.  Under the federal priority rules determined in that case, first priority is given to the jurisdiction identified as the owner’s last known address, according to a holder’s books and records, and second priority is given to the state of incorporation, if either the owner is unknown or the owner’s address is unknown.  Therefore, it may be undesirable in some situations to co-mingle entities with different states of incorporation. Similarly, companies in the practice of acquiring companies, retaining them for a limited period, and then selling them for financial benefit (e.g., private equity holder) may not be interested in consolidated unclaimed property reporting.  However, for many holders, the consolidated unclaimed property report assists in making best use of scarce resources.  

                                                       

General State Practices

Allowing consolidated reporting is a benefit to the state or jurisdiction as well.  From an administrative perspective, it significantly reduces the number of reports to accept and process each year, all while maintaining the same volume of properties reported and remittances accepted.  In an era where state personnel have been asked to do more with less, it will exponentially reduce the burden with processing (possibly) unnecessary reports.  From a practical perspective, allowing consolidated reports may encourage compliance with state unclaimed property laws, as the once laborious requirements that dictated a separate report per entity have now been made more efficient and holder-friendly.  

 

Some states expressly acknowledge acceptance of consolidated reports.  Michigan notes in its Manual for Reporting Unclaimed Property, “Michigan does accept consolidated reports. A consolidated report is one that is filed on behalf of more than one legal holder (e.g., a parent company that files one report for itself and a number of subsidiaries).” Additionally, the directions on Arkansas’s Unclaimed Property Transmittal form AOS/UP1 instruct for “[h]olders reporting for multiple entities under a single entity name (consolidated report) must attach a detail of the entities included in the report…”

 

Additionally, when polled informally, the following states confirmed they indeed accept consolidated reporting: Idaho, Illinois, Iowa, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, and West Virginia.  Most of these states, like Arkansas, did indicate they prefer or even require an attachment listing all of the FEINs of the entities included within the report to be submitted with the report packet.*The understanding and experience of Ryan’s Abandoned and Unclaimed Property (AUP) practice is that most all jurisdictions will accept consolidated unclaimed property reports.

 

In contrast, Nevada’s Unclaimed Property Division has taken the lonely stance that “consolidated reporting is not permitted.” Further, Nevada’s stated position is that any “reports submitted in this manner will be returned unprocessed and subject to penalty.” Nevada specifies that, unlike other jurisdictions, “[c]onsolidated lists attached to holder reports stating the entities listed are included as part of the actual holder report submitted are not permitted.” With respect to Nevada’s approach to individual FEIN level reporting and disallowing consolidated reporting, it is expressly neither required nor denied by statute nor regulation.  It is worth noting, based on informal conversations with Nevada officials, the state may be considering alternatives to this current policy, but no immediate changes are anticipated.*** Undoubtedly, the status of this will be closely monitored by the unclaimed property holder community.

 

Unfortunately, requiring holders to file individual unclaimed property reports for each legal operating entity causes reporting problems for the holder community.  For example, significantly more individual reports need to be processed, signed, and in some cases, also have the report signer’s signature notarized.  In addition, it also requires for holders needing to report to Nevada to have a singularly different process for reports.  Presumably, filing individual reports also requires states to load thousands more reports than they would otherwise have needed to do.  Incidentally, many larger companies may only have a limited number of entities with actual disbursements or other activity leading to possible unclaimed property.  Without consolidated reporting, a much larger number of “zero” or “negative” reports would have to be filed by the various subsidiaries, thus creating a larger volume of tracking activity for the states.  

 

Future of Consolidated Reporting

Solutions can perhaps be found in a new National Association of Unclaimed Property Administrators (NAUPA) Standard Electronic File Format (“NAUPA Format” or “Format”).  Unfortunately, a new NAUPA Format is unlikely to be a quick solution, but it could be a mid-term or long-term solution.  As listed on NAUPA’s website, the current Format was originally developed in 2002 and has been used since 2003, with some revisions made over time, most recently in 2010 adding property type codes and in 2013 revising relationship codes. Additionally, the NAUPA Format calls for the output file to be text with fixed width file fields. 

 

NAUPA most assuredly recognizes there are limitations to the current Format. As such, NAUPA included updating the Format as part of its Strategic Plan dated 2013 – 2017. The Strategic Plan was promulgated by NAUPA, indicating a goal to begin writing a new NAUPA Format by 2017; however, this date was based on the completion of the Uniform Law Commission’s Drafting Committee to Revise the Uniform Unclaimed Property Act.  Specifically, the goal stated: “Update NAUPA’s file format by end of 2017 following resolution of revised Uniform Unclaimed Property Act in 2015.” Based on updates provided at the NAUPA track, during the recent National Association of State Treasurers 2015 Treasury Management Training Symposium held in Kansas City, Missouri, May 12–15, 2015, it appears the timing on a rewrite of the Format could be extended. 

 

Although certain provisions of a new Format could be altered by the outcome of the Uniform Law Commission’s (ULC’s) Revised Uniform Unclaimed Property Act (RUUPA) Committee, some of the necessary work could be accomplished in advance of the completion of this process.  Happily, NAUPA officials have expressed interest in working with the holder community to develop the new Format.

 

Undoubtedly, any revisions to the NAUPA Format will result in an output file that is in a more current language, significantly changing flexibility and allowing for more information to be reported.  Ideally, the new Format will be designed to allow holders to correspondingly report specific holder information at a property level—whether this is to be accomplished by a new method of submitting consolidated reports, the pertinent information captured directly in the property record, or another unforeseen alternative yet to be determined.  Regardless of the method, this could allow for holders to both streamline reporting operations and responsibly use internal resources, with the added benefit of consolidated reports providing states with property-level holder information and likely more information to enable states to appropriately return properties to claimants. 

 

Conclusion

Filing consolidated unclaimed property reports allows for holders to follow one efficient and effective reporting process.  The numerous advantages associated with creating efficiencies in the reporting process should not be undervalued. Given the importance in this area, we should see a continued focus by holders, service providers, and states to ensure the consolidated reporting option continues to be available to the unclaimed property reporters.  Additionally, a revised NAUPA Format will be forthcoming, hopefully providing a method for all states to accept consolidated reporting and, at the same time, provide owner information to aid states in the process of returning funds to the correct claimants. 

 

Contacts

Christopher S. Jensen, CPA

Director

Abandoned and Unclaimed Property

972.934.0022

christopher.jensen@ryan.com

 

Sam Schaunaman, J.D.

Senior Manager

918.518.5179

sam.schaunaman@ryan.com

 

Christa DeOliveira, CIA, CCEP

Manager

Abandoned and Unclaimed Property

319.378.5707

christa.deoliveira@ryan.com

 

Ryan, LLC is neither a CPA firm nor a law firm.



*FASB ASC 810-10-10-1

PURPOSE OF CONSOLIDATED STATEMENTS

1. The purpose of consolidated financial statements is to present, primarily for the benefit of the owners and creditors of the parent, the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single economic entity. There is a presumption that consolidated financial statements are more meaningful than separate financial statements and that they are usually necessary for a fair presentation when one of the entities in the consolidated group directly or indirectly has a controlling financial interest in the other entities.

**Ryan internally conducted informal polling inquiries to confirm that states accepted consolidated reporting, and to ascertain if there were any related restrictions.  The question was posed to Idaho, Illinois, Iowa, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, and West Virginia.

***Until the NAUPA Format is updated and expanded to allow for greater detail in reporting details at the property level, there is the possibility of including ancillary information in field 45 of the property record.  The NAUPA Format identifies this field to be used to provide “[a]ny additional information that will assist in identifying the owner of the property should be listed in the property description field…” NAUPA Standard Electronic File Format, http://www.unclaimed.org/reporting/naupa-standard-electronic-file-format/


Tags:  abandoned property  consolidated reporting  Ryan  unclaimd proprety compliance 

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