Unclaimed Property Reporting Basics 101

Fast Facts about Unclaimed Property All States, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have Unclaimed Property Programs Three Canadian Provinces (Quebec, British Columbia and Alberta) have an Unclaimed Property Program.

Fast Facts about Washington Unclaimed Property Over $1 billion received since 1955 Holding over $750 million for lost owners Over $417 million returned to date 1 in 5 chance of finding unclaimed property Program funded from receipts – no tax burden $750 million dollars available for refund Over 3 million names in our database Securities portfolio now $25 million 22 FTE’s plus 5 programmers Over 20,000 active reporters FY10 – 98,363 claims paid worth $44.5 million – For Period Ending June 30th, 2010

History of Unclaimed Property Escheat vs. Unclaimed Property Based on English Common Law WC Fields Law First Model Unclaimed Property Act in 1954 Latest Washington Unclaimed Property Act 1981 Under British Common Law if someone died without an heir the property reverted to the crown. The idea was that all property and money belonged to the crown and they were simply allowing you to use it. When the 13 colonies became the United States the idea did not fit with the new concept of democracy and this law was eliminated. Escheat – Literally means to “Take Possession/Ownership.” The “crown” would actually “take possession” of the property if the tenant died. Unlike British common law, which actually takes ownership or “escheats” the property, the state only acts as a trustee until the property is claimed. Claims can be made in perpetuity, even by the heirs. WC Fields was a Vaudeville performer who traveled the rails and performed for the people, survived the depression and didn’t trust banks, he diversified his money by opening banks accounts in every town he visited. The issue got national attention decades ago after the popular actor died on Christmas Day in 1946 and it was discovered that he had squirreled away money in banks all across the country. His heirs had a heck of a time finding it. It led to a national effort to make sure money didn't sit around in accounts in banks or that banks couldn't just keep it. Unclaimed laws were enacted in the 50’s by all of the states. In 1954 the U.S. Uniform Law Commission developed the first nationwide Unclaimed Property Act In the 1980s the states worked to make reporting easier by using similar language and statutes. Uniform act of 1981 (passed in Washington in 1983) which is the act we are using today. This is a Consumer Protection Act – Not a Tax! Our program is self funded and not by taxpayer dollars.

Purpose of the Act Protect the property rights of the owner. Relieve holder from liability of the property Provide economic benefit to “all” citizens of the State, not individual holders. The main purposes are: To safeguard the property for the owner To indemnify holders – Once the property is reported, the state is liable to return the property to the owner, not the business To distribute windfall profit - the act protects the owner’s property so it is not absorbed as profit back into the business

Definitions Holder Holding assets that the owner is entitled to Owner Person whose name appears on the records of the holder as the person entitled to the assets held or issued by a holder Claimant Person who is claiming the property

Benefits of the Act Maintains good customer relations. Keeps records current. Reunites property with owners. Reduces risk of audit findings. Keep your records current – work your aging accounts and ask your customers to use their credits, or cash the checks to reduce your liabilities. Keep detailed records so you know why the check was voided, and who the payee is. Audit findings can occur if the records do not show how the liability was resolved.

Unclaimed Property Act Duties of the State: Notify Owner (through advertisements, website, claim form mailings) Pay owner or heirs Keep records Safeguard property until claimed Once property is sent to the state, we mail claim forms to anything at least $75 with a complete address. $25.00 and above appear on the internet. Items under $25.00 (including items down to a penny) are in our system. There is no de minimis amount in our law. We also advertise in newspapers, on buses, on the radio,…you may have heard our ads “You may be Richer than you think” We have appeared on numerous TV news shows including Dateline, NW Afternoon & Radio Broadcasts throughout the state. We also keep an online database at claimyourcash.org Our on-line claims process has won national awards. Through the “smart” claims process you can have your money back in as little as three days…if all of the data that was provided matches what the holder provided.

Unclaimed Property Act Duties of the Holder Identify and protect property Notify owner (due diligence) Report and Remit property Retain Copies of Holder Reports In order to make this property available to the owners, the holder needs to: Identify and protect the property – the more information you can provide the easier it is to return it the owner. This means maintaining the last known address, social security numbers, and even birthdays. All of these items assists in reunited property to the rightful owner. Due diligence –notifying the owners and hopefully returning the property before you need to report it. Retain copies of your reports and the detail for 6 years. – That’s the current report year and 5 previous report years.

Rules of Jurisdiction Texas vs. New Jersey (1965) Primary Rule Property is reportable to the State of the owner’s last known address Secondary Rule If the address is unknown, property is reportable to the holder’s State of domicile The unclaimed property rules of jurisdiction were decided by an important Supreme Court ruling. In our society, people are mobile, they work in one state then move to another. Or, you purchase goods or services from a business in another state. Once the property has aged and needs to be reported, which state do you send it to? In 1965 Texas sued New Jersey. The result was a Supreme Court ruling that decided the primary and secondary rules: Custody goes to the state of the owner’s last known address. If there are no records of the owner’s address, custody goes to the state of the holder’s domicile. (incorporation)

Identifying Unclaimed Property

What kind of property might a holder have? Do you have employees? (payroll) Do you have retail customers? (credits, overpayments) Are you a utility? (deposits, refunds) Do you deal with patients? (overpayments, credits) Do you hold escrow accounts? (trust funds)

Examples of Intangible Property Bank Accounts Uncashed Checks and Money Orders Wages/Payroll Travelers Checks Stocks & Dividends Credit Balances Matured Life Policy Funds/Insurance Proceeds Refunds/Rebates Bail Bond Deposits

Examples of Tangible Property Jewelry Silver/Gold Monies (cash, coins) Antiques Collectibles Musical Instruments Toys/Video Games These items would be reportable if found in abandoned safe deposit boxes or safekeeping repositories. We do not accept tangible property left in storage units, businesses being liquidated or personal residences.

When Does Property Become Unclaimed?

Property becomes unclaimed when the owner: Has not communicated, in writing or by other means, with the holder regarding the property or the account in which the property is held for a specified period of time. According to the unclaimed property law property becomes unclaimed when the owner…..

Actions that do NOT Prevent Abandonment Automatic Payments Posting of Interest Absence of Returned Mail Service Charges Holder’s Awareness of Owner Automatic payments do not require any action on the part of the owner of the property. These will continue long after the property is abandoned until the account is empty. These generally occur in savings or checking accounts. But, if there is action initiated by the owner on a checking account, a savings or other account held by the same owner is also considered active. You cannot simply reissue checks to prevent abandonment. You need to have contact with the owner. As an example: You send a due diligence letter regarding an uncashed check. The owner tells you it was lost and you void/reissue. This restarts the aging period. Be sure to note the reason for the void/reissue to maintain an audit trail. Holder’s Awareness – If you have a retail store and you see your customer on a regular basis, the unused credit is still aging. Encourage your customers to use their credits or refund them.

Dormancy Periods Caution: May vary by state

Dormancy Holding Periods Vary by property type and state receiving the report The end of a dormancy period is when property is reportable Most dormancy periods are 1,2,3 or 5 years Dormancy Periods vary among states Incidental Property Dormancy Periods determine when property becomes unclaimed. Dormancy Periods vary by property type… Payroll & Utilities have a 1 year abandonment period. Public Agencies and Local Governements have a 2 year abandonment period. Most property has a 3 year abandonment period. Money Orders and Safe Deposit Box contents have a 5 year abandonment period. Please be aware that dormancy periods vary among states if you report incidental property for non-Washington addresses. Incidental property is defined as less than 10 names or owners per state & less than $1,000 per state.

One Year Conversion Table Payroll & Utilities Items that were issues or had a last activity date during: Need to be reported on the report by: 7/1/03 thru 6/30/04 November 1, 2005 7/1/04 thru 6/30/05 November 1, 2006 7/1/05 thru 6/30/06 November 1, 2007 7/1/06 thru 6/30/07 November 1, 2008 7/1/07 thru 6/30/08 November 1, 2009 7/1/08 thru 6/30/09 November 1, 2010 7/1/09 thru 6/30/10 November 1, 2011 7/1/10 thru 6/30/11 November 1, 2012

Two Year Conversion Table Public Agencies Items that were issues or had a last activity date during: Need to be reported on the report by: 7/1/02 thru 6/30/03 November 1, 2005 7/1/03 thru 6/30/04 November 1, 2006 7/1/04 thru 6/30/05 November 1, 2007 7/1/05 thru 6/30/06 November 1, 2008 7/1/06 thru 6/30/07 November 1, 2009 7/1/07 thru 6/30/08 November 1, 2010 7/1/08 thru 6/30/09 November 1, 2011 7/1/09 thru 6/30/10 November 1, 2012

Three Year Conversion Table Most Property Items that were issues or had a last activity date during: Need to be reported on the report by: 7/1/01 thru 6/30/02 November 1, 2005 7/1/02 thru 6/30/03 November 1, 2006 7/1/03 thru 6/30/04 November 1, 2007 7/1/04 thru 6/30/05 November 1, 2008 7/1/05 thru 6/30/06 November 1, 2009 7/1/06 thru 6/30/07 November 1, 2010 7/1/07 thru 6/30/08 November 1, 2011 7/1/08 thru 6/30/09 November 1, 2012

Five Year Conversion Table Money Orders & Safe Deposit Box Contents Items that were issues or had a last activity date during: Need to be reported on the report by: 7/1/99 thru 6/30/00 November 1, 2005 7/1/00 thru 6/30/01 November 1, 2006 7/1/01 thru 6/30/02 November 1, 2007 7/1/02 thru 6/30/03 November 1, 2008 7/1/03 thru 6/30/04 November 1, 2009 7/1/04 thru 6/30/05 November 1, 2010 7/1/05 thru 6/30/06 November 1, 2011 7/1/06 thru 6/30/07 November 1, 2012

Effective Due Diligence

Due Diligence Due diligence is the process of attempting to locate the owners of dormant property on a holder’s books and records. The process is conducted by the company holding the account – “Holder”

Due Diligence Due diligence is mandated by state law “Reasonable” efforts must be made to locate owners Due diligence requires that “reasonable” efforts must be made to locate owners. Due diligence is done in the form of a letter.

Due Diligence Requirements Mailings For amounts $75 or greater Between May 1 and August 1 (prior to November 1 reporting) First class mailings to owners For owners with good addresses Put an annual reoccurring appointment on your electronic calendar - May Letters should be mailed to all those owners for which you have an apparent good address. If you have sent a previous letter that has been returned as undeliverable, make a note on their account. You do not need to send a “due diligence” letter to these owners.

Why practice due diligence? Increased good will Reestablish communication with customer Good customer service Good business It’s the law The goal of due diligence is to return the property to the owner before it has to be reported. It increases good will with your customers as well as reestablish communication with them. This identifies property that could become a question in an audit and allows you to identify and retain detail information that could be valuable in an audit.

Tips to Increase Due Diligence Responses Color coded return envelope for simplified processing Ensure outgoing envelope doesn’t look like “junk” mail Key words on the envelope Time sensitive Response Mandatory Unclaimed Funds/Money

Tips to Increasing Due Diligence Responses Short due date Administrators may have a certain number of days required to be given for a response Give response options: Fax Mail Telephone E-mail Once you have sent your due diligence letters, be sure to remove these items from your reportable items.

Preparing Your Report

When to Report? Reports are due by November 1st Put an annual reoccurring appointment on your electronic calendar - September Each year, we send out postcards to remind you when it is time to report. The postcard has the website for online reporting. We recommend putting a reoccurring appointment on your calendar usually around September to give you the time necessary to prepare your report. If you have nothing to report, remember to file a negative report. This is also done online.

How to Report Electronic Reporting Software (Preferred) FREE at http://ucp.dor.wa.gov Click on “Are you holding Unclaimed Property? Report it to us.” Paper Forms can be accessed via our website at http://ucp.dor.wa.gov Reporting has never been easier. There is free software available at wagers.net or off our ucp web site. There are also fee based software programs available. All software must be in the NAUPA format By using this software, you can then submit it directly through our secured website. The report is uploaded into our database and once the funds are received they can be posted to the Internet.

Common Reporting Errors Invalid Property Type Codes Payment does not match amount reported Invalid Date of Last Transaction Incorrect Country Code Punctuation of any kind in the name fields Invalid Joint Owners/Relationship Codes Business Name is First and Last Name field (Should be in last name only) Incorrect use of deduction code Incorrect country code: Country codes must be ALPHA – 3 code “zz” must be entered in the state field if a foreign country Punctuation of any kind in the Names fields: a. e.g. apostrophes, hyphens, commas, parenthesis, periods, etc. If you report Social Security numbers and birth days, they are extremely useful in proving claims with common names or claims when there is a Junior and Senior with the same name, and sometimes the same address.

Common Remittance Errors A check for each property on the report One check, one report Check made payable to the owner Make payable to Washington State Department of Revenue/UCP Remittance not included with the report Mailed to the incorrect address Sometimes we receive multiple checks, one for each owner, for a single report. We need one check, made payable to the Department of Revenue. Also, make sure to send it to the Unclaimed Property Post Office box so it posts correctly. Occasionally these are mailed to the tax Post Office box. When this happens, it gets posted to your tax account as a credit and we have no record in Unclaimed Property of the payment.

Advantages of Electronic Reporting Accounts available to owners sooner Eliminates keying errors Data can be imported from Excel Produces due diligence letters and reports Accepted by all states Easier!

Develop a Strong Unclaimed Property System Prepare an unclaimed property manual Establish written procedures Conduct internal training, and cross train Identify personnel responsible for preparing reports Develop strong internal controls Utilize internal audit function

Online Help and Information Washington State: www.ucp.dor.wa.gov Forms and Publications Questions: ucp@dor.wa.gov This is our website and our mailbox. If you have questions about reporting, write into ucp@dor.wa.gov and we will respond back timely. Talk about Reporting Guides (bring a supply for Local Governments, Financial Institutions, General Information)

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