JMS Advisory Group, LLC An Overview of Unclaimed Property James O. Santivañez, President JMS Advisory Group, LLC

Topics of Discussion Unclaimed Property 101 Compliance Reporting Process Audit Defense Basics Asset Recovery Overview

UP 101 – What is Unclaimed Property? Generally consists of intangible personal property that a business or organization has in its possession that has not been claimed by the true owner Also referred to as “abandoned property” or “escheat” Monetary assets such as bank accounts, refunds, uncashed checks, securities & credit balances

UP Terms Holder - The business or any other entity which "holds” inactive property that belongs to another and is deemed to be presumptively abandoned under state law Apparent Owner - A person whose name appears on the records of a holder as the person entitled to property held, issued, or owing by the holder Dormancy Period - Period of time the holder retains the property before preforming due diligence Due Diligence - The Holder’s last attempt to contact the owner and reunite the owner with property Last Known Address - The location of the owner of unclaimed property sufficient for the purposes of the delivery of mail

UP 101 – Terms Continued Negative report - Report stating that the Holder has no property to report for a filing period Preliminary & final states - States require a report of unclaimed property due to the state. Payment to the state is done at a later final report date Report & remit states - States requiring reporting and remitting of property at the same time. Most states are report and remit states Uniform Unclaimed Property Acts - The Uniform Acts are the basis for many states unclaimed property laws. These were adopted in: 1954, 1966, 1981, & 1995.

UP 101 – Reporting Basics Where to report? – Priority rules – Texas v. New Jersey (1965) What property is reportable? – Abandoned intangible property Uncashed payroll/accounts payable checks Accounts receivable credit balances Insurance proceeds Unredeemed gift cards/certificates Securities/stock Dormant bank accounts

Compliance – Holder Responsibilities Determine what property is dormant Mitigation – Internal research − Application of exemptions and deductions Perform due diligence Determine when the property should be transferred to the state Report & remit property timely – Penalty and Interest for late filings/property Maintain copies of reports and supporting documentation – Statute of limitations

Compliance – What’s Dormant? Depends on the property type and the state Typical dormancy periods: – Payroll/CommissionsMS011 Year – Accounts payableMS083-5 Years – Accounts receivableMS093-5 Years – Other outstanding checksMS163-5 Years – Gift certificates/cardsMS123-5 Years Exemptions & deductions – Business to business – Gift card/certificate – De minimis amounts & allowable deductions – Prompt pay statutes

Compliance – Due Diligence When do I do due diligence? – Typically 60 to 120 days prior to the report due date Do I have to perform due diligence? – Yes, due diligence is statutorily required for almost all states I have 100 items in the amount of $.01, do I have to send a letter for those items? – No, most states have an amount threshold in between $20-$50 Can I recover my costs for due diligence? – Sometimes a state may allow a line item expense deduction on the report total for due diligence costs

Compliance – When are the Reports Due? KEY March 1 March 10 March 31 April 15 April 30/May 1 July 1 Oct 31/Nov 1 Nov 1/June 15

Compliance – Other Common Questions Does the state require electronic filing/payments? – Some states do require electronic filings and payments once a certain threshold is achieved – There can be penalty for not complying with these requirements Are there options out there for assistance? – There are a variety of software programs that are available. One program is even free. – Compliance outsourcing is also an option Is unclaimed property compliance required by law? – Yes, compliance is required under all state statutes – State enforcement of compliance is on the rise

Audits – Increased Activity Witnessing Increases in number & in scope Where most of the new property types are coming from – “Uninvoiced Payable” With belt-tightening, sates that have historically been lenient are now pursuing interest/penalties for non- compliance Industry-specific audit focus is back in certain states

Audits – We Got the Notice… Now What? Take the audit notice seriously – The auditors represent the states and have the authority to assess interest and penalties Assess your potential liability – Have an idea of what the potential assessment may be. Virtually every company has some degree of liability Determine how you will handle the audit – Internally or with outside consultation Make sure the scope of the audit is clearly defined – Do not give the auditors unsupervised access to your records, assign one point of contact to assist

Audits – Holder’s Rights Due process Adherence to statutes & regulations Adherence to state-specific written audit procedures Claiming/application of exemptions & deductions FOIA requests Confidentiality

Asset Recovery – Recover Funds for Your Company States have billions in their unclaimed property accounts waiting to be claimed Identify your company’s history – M&A activity – Old DBA’s & locations Gather corporate documents – Letter of authorization to claim funds – Affidavit of previous address – IRS Schedule 851 – Corporate entity map – Organization chart

Asset Recovery – Where to Look Start with the state UP websites – Check the databases regularly – most update once a year – is a good place to locate each state website Missing Money – – Consolidate searching source, about 40 states participate, sometimes can be outdated Bankruptcy courts Federal sites

Asset Recovery – Tips of the Trade Know how each database functions – Wildcard search (* represents unknown terms, etc.) – Exact term match – Partial term match – Spelling, spaces, & order The Coca-Cola Company, Coca Cola, Coke, CocaCola, Coke Cola, Coke Co, etc. Track your activity & results – Timeline what you did and when you did it – Follow up with states in a timely fashion Be patient & organized – It could take a year or longer in some states to reissue funds – Timing of claims does matter

Questions? James O. Santivañez President JMS Advisory Group, LLC