Does your company have a lost and found department? Does property you store there include uncashed checks, unapplied customer deposits, and credit balances in accounts receivable? You might not think of intangible property as "lost." Yet the owner of these assets has a right to receive them, and you may have a reporting requirement with a state government. Under unclaimed property statutes, you're generally required to identify unclaimed property, attempt to find the owner, file a report, and send the property to the state. Failing to do so could mean penalties and interest.
How do you identify unclaimed property? To determine whether intangible property is unclaimed, states typically designate a "dormancy" period. That's the amount of time in which you have not had any owner-generated activity with the property holder. The dormancy period can vary, depending on state law and the type of property. As an example, unclaimed paychecks may have a dormancy period of a year, while the dormancy period of security deposits may be five years or longer.
Once you've identified the property, you're required to perform "due diligence," which means you need to attempt to contact the owner. Typically, this means you send a written notice to the last known address.
If you haven't heard back from the owner by the end of the dormancy period, you'll need to file a written or electronic report with the state. Which state? The answer depends on the information you have. For instance, if you know the last address of the property owner, you'd report the unclaimed property to that state. Depending on the type of business you operate, you may have reporting requirements in multiple states, and these reports are generally due annually.
Finally, you have to send the unclaimed property to the state. For intangible property, "sending" the property means you write a check or make a bank or wire transfer for the total amount you reported.
If you don't already have a policy in place to identify unclaimed property that your business may be holding, take time to establish one. Then review your accounting records to make sure you haven't inadvertently neglected to comply with unclaimed property laws. As always, if you have questions, please contact us for assistance.
