What Should Your Company do with Unclaimed Property?July 08, 2019
Is your business in compliance with unclaimed property laws? Failing to report unclaimed property to the state can potentially result in fines, penalties, and interest assessments.
Does your company have unclaimed property sitting on its accounting records? Unsure of the next step to take? Every U.S. state has unclaimed property laws, which require organizations to report any money or personal assets that are considered lost by the rightful owner annually to the state. It is important to ensure your business is in compliance with unclaimed property laws. You could face hefty penalties for noncompliance.
What is unclaimed property?
Unclaimed property, which is also known as abandoned property, refers to any asset that has become dormant and has not been claimed by its rightful owner for an extended period of time. Dormancy periods vary depending on the property type and by state, but generally fall around three years for the most common types of unclaimed property.
Common examples of unclaimed property include outstanding checks, security deposits, unclaimed wages and refund checks. Each state has enacted unclaimed property laws to protect these unclaimed assets from reverting back to the organization.
How does the unclaimed property process work?
When property remains unclaimed past the state mandated dormancy period, the property will then revert back to the state. Each state has its own set of unclaimed property statutes that govern how the property is to be handled. For purposes of this blog, let’s take a look at Rhode Island and Massachusetts unclaimed property laws.
Rhode Island Unclaimed Property
Rhode Island requires holders to send due diligence notifications for any unclaimed property with a value of $50 or more, that is held for longer than the dormancy period, to the respective owners at least 120 days before the unclaimed property gets reported to the State. All Rhode Island holders of unclaimed property must report and remit funds to the state by November 1st. The State of Rhode Island requires that institutions holding unclaimed property submit the appropriate data electronically on the National Association of Unclaimed Property Administrators (NAUPA) website.
Massachusetts Unclaimed Property
Massachusetts requires holders to send due diligence notifications for any unclaimed property with a value of $100 or more, that is held for longer than the dormancy period, to the respective owners at least 60 days before the unclaimed property gets reported to the State. All Massachusetts holders of unclaimed property must report and remit funds to the state by November 1st, except for life insurance companies, who must report by May 1st. The state of Massachusetts allows companies to submit the appropriate data by mail, by completing a report package from the Reporting Department of the state’s unclaimed property division, or online at the Massachusetts unclaimed property website.
What is the penalty for noncompliance?
Failing to report unclaimed property to the state can potentially result in fines, penalties, and interest assessments. Noncompliance can also increase the risk of an unclaimed property audit conducted by the state.
Need guidance on unclaimed property laws in your state? Contact us.