Introduction to Unclaimed Property

Transcription

1 Introduction to Unclaimed Property Sonia Walwyn Duff & Phelps Hermanna Daniels Rexel Holdings Deborah Beauchamp StoneRiver 1

2 UPPO Presentation Disclaimer Use of the Unclaimed Property Professionals Organization, Inc., (UPPO) name or copyrighted materials in this presentation does not constitute an endorsement by UPPO of a member, vendor, product or service. The content represents the opinions of the author and not necessarily those of UPPO. This information is not intended as legal advice and should not be used to replace the advice of legal counsel. 2

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5 UPPO Essentials 5

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9 Conference Essentials The agenda and goals are developed throughout the year by UPPO Board of Directors, staff and members to ensure we accomplish our mission/purpose of expanding knowledge from basic to new information and keeping everyone informed to minimize risk and continue to build relationships. Conference is made of sessions that are broken down by industry and basic to advanced breakout sessions 2013 conference had quick hits vs has reform sessions and industry specific audit sessions. 9

10 Come in to conference looking like 10

11 Leave conference looking like 11

12 Unclaimed Property Basics What is unclaimed property? Unclaimed property is fixed and certain interest in tangible or intangible property held, issued or owed, in the course of a holder s business that has been abandoned or unclaimed for a specific period of time (dormancy period) by the rightful owner. 12

13 Unclaimed Property Basics In the beginning We ve got unclaimed property, so now what? Key Players: Owners Holders States 13

14 AP / Vendor Checks M&A Activity AR Credit Balances Promotions Payroll Stocks and Bonds Unclaimed Property Commission / Bonuses Gift Cards Bank Accounts Rebates Safe Deposit Boxes 14

15 General AP/GL Retail Financial Education Utility Pharmaceutical Industry Break-out Sessions Health care Petroleum Hospitals Manufacturing Insurance 15

16 Common Key Terms Escheat Holder Owner Custodian Dormancy Period Due Diligence Aggregate Third Party Auditor Negative Report Record Retention 16

17 Among the States - - Who Gets the Unclaimed Property? The United States Supreme Court in a trilogy of cases, established and re-affirmed a two-pronged approach for determining priority among states: Texas v. New Jersey, 379 U.S. 674 (1965) Pennsylvania v. New York, 407 U.S. 206 (1972) Delaware v. New York, 507 U.S. 490 (1993) 17

18 What Are the Priority Rules? First Priority: State of the Owner s last known address, as shown on the Holder s books and records, may escheat the unclaimed property, and its claim is superior to all competing claims. Second Priority: If no last known address for the Owner is indicated on the Holder s books and records, or if the State of the Owner s last known address does not have applicable unclaimed property legislation, then the Holder s state of incorporation may escheat the unclaimed property. 18

19 What Unclaimed Property Is NOT It is not a tax Nexus Standards - - are not applicable With few exceptions, there is generally no Statutes of Limtiation (very extensive reach back periods) It is rooted in the concept of Derivative Rights Generally No traditional administrative remedies (most states) 19

20 Laws Governing Compliance Uniform Unclaimed Property Acts of 1954, 1966, 1981 and 1995 Participating and non-participating States Individual state/local laws of each of the 54 Jurisdictions that require Unclaimed Property Reporting Laws of Foreign Countries 20

21 Challenges to Compliance Lack of uniformity among jurisdictional rules 55 different reporting jurisdictions Administered by varied state/local agencies Legislative changes: Shortening dormancy periods Changing filing requirements (even less uniformity) New and emerging property types and areas of focus Increased audit activity; and Enforcement of interest and penalties 21

22 How to Ensure Timely & Accurate Compliance? Establish an Unclaimed Property Team Written policies and procedures Implementation Update timely and consistently Security and Internal Controls Segregation of duties to avoid fraud Include all areas that can generate unclaimed property (sources) Remediation process (due diligence) Record Retention 22

23 Establishing the UP Team Buy-in and accountability from all levels of your organization Commitment to on time and accurate reporting, and performing due diligence Allocation of time and energy to develop, review and maintain policies and procedures All departments working together, sharing information and data willingly, timely and openly 23

24 Document Policies and Procedures Include all aspects of unclaimed property from start to finish Get buy-in from executive owner and all key resources Regular reviews 24

25 Implementation Assessment of your current scenario (prior reporting history) Upstream accounting practices flow to UP management and reporting In-house or out-source initial and on-going compliance UP timelines that impact your P&Ps 25

26 Update Timely and Consistently Legislation changes frequently Dormancy periods, reporting due dates, formats, delivery methods Aggregate thresholds Negative reports Report and remit to the appropriate jurisdiction 26

27 Security and Internal Controls Segregation of duties Compliance with non-up guidelines (i.e. HIPAA, GLB, SEC) Data integrity and security audit controls Archive supporting documents and records, prior year reports, proof of due diligence and other owner outreach 27

28 Unclaimed Property Sources Scan the organization for potential unclaimed property Include all areas that can generate unclaimed property Consider your organization s history, M&A activity, marketing programs, lines of business and source system updates 28

29 Remediation Process Owner outreach Due diligence Advertising Timeline Unique letter requirements Owner response processing Due diligence statements and attestation 29

30 Record Retention Archiving UP reports Retaining UP records Retaining supporting documents 30

31 TRANSACTION DATE STALE ABANDONED PERIOD END ESCHEAT INITIAL POINT OF CONTACT: COLLECT CUSTOMER/VENDOR INFORMATION POLICIES & PROCEDURES - CONSISTENT ACCOUNTING PRACTICES UP SYSTEM / OUTSOURCING LIVE RESEARCH ARCHIVE NON-STAT DD STATUTORY DUE DILIGENCE DORMANCY PERIOD 31

32 Sonia Walwyn Duff & Phelps, LLC (312) Questions Hermanna Daniels Rexel Holdings USA Corp. (972) Deborah Beauchamp StoneRiver (319)

33 Glossary of Key Terms & Definitions Abandoned and Unclaimed Property means tangible and intangible personal property that has gone unclaimed by the owner for a specified period of time (1,3,5 or 7 years)known as the Dormancy Period. Activity is action generated by an Owner, which has the effect of tolling or restarting the running of the applicable Dormancy Period and generally includes actions such as making a deposit or withdrawal, written communication from the Owner, or responding to a due diligence letter. Aggregate Amount means the State determined dollar threshold that determines whether specific owner detail such as name and address is included on the Unclaimed Property Report. Custodian is one who holds property that belongs to another. The property does not belong to the Custodian. Holders can hold property as custodians on behalf of 3 rd parties and could have obligations to report and remit said property if contact and communication with the owner is lost during the Dormancy Period. Most states also serve as custodians for unclaimed property remitted to them during the filing process on behalf of missing or lost owners. 33

34 Glossary of Key Terms & Definitions Dormancy Period is the period of time that a Holder can maintain possession of a liability before it is required to be reported and remitted to a state. Dormancy Periods vary by state and property type and generally begins to run on the date the property is payable or distributable to the owner (e.g., the date an uncashed check or credit balance was issued) and continues to run until either the Owner engages in Activity related to the property or the prescribed statutory period expires. Due Diligence is the degree of effort required by law that a Holder must perform to locate the Owner before reporting/remitting property to the state. Generally speaking, the required activity involves the Holder sending some form of written notice to the Owner. Most states have specific Due Diligence provisions that address the timing of the notice, the manner of mailing the notice, etc. Many jurisdictions have a monetary threshold relieving the Holder of the Due Diligence requirements for small dollar amounts. 34

35 Glossary of Key Terms & Definitions Escheat refers to the legal transfer of property to a state, whereby the state becomes the owner of the property. There are a few states that operate under a true "escheat" provision as most states have "custodial" statutes that do not diminish the Owners right to property, but allow the states to maintain custody of the property solely for the benefit of the Owner. Used interchangeably with unclaimed property Holder means a person in possession of property belonging to another such as a vendor, customer, employee or shareholder and has the obligation to file and remit the unclaimed property to the applicable state once the Dormancy Period expires. Negative Report is an Unclaimed Property Report in which the Holder certifies that it has no Unclaimed Property to report for the specific reporting period. Some jurisdictions do not require Negative Reports if a Holder has no property to report, while other require the filing of a Negative Report. 35

36 Glossary of Key Terms & Definitions Owner is the person or persons to whom a liability or an obligation is owed. Includes but is not limited to vendors, customers, employees and shareholders. Record Retention is the period of time in which Holder should maintain records to confirm compliance with the states unclaimed property laws and to disprove the presumption of abandonment on audit. Third Party Auditor (TPA) are independent accounting firms that are hired by the states, usually on contingent fee arrangements, to audit the books and records of Holders to determine their compliance with the unclaimed property laws of the states. Examples: Kelmar & Associates (Kelmar), Specialty Audit Services (SAS). 36