True Partners Insights

Pillar Icon

Proposed Unclaimed Property Voluntary Disclosure Program in California (AB 2773)

By: Cathleen A. Bucholtz Steven Swaigenbaum Matthew B. Chenowth |

It’s been over fifteen years since California had a program that allowed holders to report and remit past due unclaimed property to the state without being assessed interest at 12 percent per year.  California Assembly Bill 2773 (AB 2773) to create a voluntary disclosure agreement (VDA) program may change that.

Background

One of the reasons that the California State Controller’s Office (Controller) can’t develop an unclaimed property voluntary disclosure agreement (VDA) program without help from the legislature is that it is precluded by statute from waiving interest on past-due unclaimed property.  Cal. Code Civ. Proc. § 1577 provides that, unless the failure to report was due to reasonable cause, the Controller must assess interest on property from the date that the property should have been reported.  The proposed language in AB 2773 would solve that problem by creating Cal. Code Civ. Proc. § 1577.6, which would allow the Controller to waive interest and penalties on past-due unclaimed property reported and remitted by holders that meet certain requirements and that have entered into a VDA with the Controller.

This concept is not new to the State, as California had an unclaimed property reporting amnesty program in the early 2000’s.  That program was brought about by the enactment of Cal. Code Civ. Proc. § 1577.5, which became effective on January 3, 2000.  The statute allowed the Controller to waive interest assessments for holders qualifying for the amnesty that reported and remitted unclaimed property during the prescribed period.  Although it was originally set to expire on December 31, 2001, the sunset provision was extended, and the Controller’s unclaimed property amnesty program ended on December 31, 2002.  This original amnesty program brought in properties valued at approximately $196 million during its two-year span.

Just the Facts…

A summary of some of the key elements the AB 2773, and what it hopes to accomplish, are outlined below.  As they say “Just the facts, ma’am…”

WHAT

  • AB 2773 would implement an unclaimed property VDA program in California
  • Allows the Controller to waive interest on past due property that is currently required under Cal. Code Civ. Proc. § 1577
  • VDA review period would cover 10 prior report years, starting from the date when the holder’s intent to enter into a VDA is accepted by the Controller

WHEN

  • The official language of AB 2773 was introduced on February 16, 2018 and updated on March 20, 2018
  • Goal to commence program effective January 1, 2019
  • Sunset provision on December 31, 2023 (unless extended by California legislators)

WHO

  • VDA program to be managed by the Controller
  • VDA program would be open to all holders, including those with prior compliance filings
  • VDA program would not be available to any holders already undergoing an unclaimed property audit by the State or its agent (i.e. Third Party Auditors)
  • Bill authored by Assembly Member Acosta
  • Bill being sponsored by the Unclaimed Property Professionals Organization (UPPO), the leading national unclaimed property organization comprised of corporate members (holders) as well as leading law firms, accounting firms, and other unclaimed property professionals
  • Additional support for the bill is anticipated from large non-partisan organizations (e.g., COST, Holders Coalition, Chambers of Commerce)

WHY

  • Encourage and increase holder compliance with unclaimed property laws in State of California
  • Increase the amount of property that the State of California is able to reunite with its citizens
  • Raise revenue without the imposition of taxes (unclaimed property currently constitutes 5th largest source of the State’s general fund)

HOW

  • Once introduced, AB 2773 will be referred to the Judiciary Committee
  • Letter(s) will be sent to bill authors’ offices with copies to the Judiciary Committee from Sponsor and other key Supporters supporting AB 2773 and making the case for the benefits of a VDA program for the State and the owner and holder communities
  • Date set for Committee hearing
  • April 2018 – Sponsor and key Supporters to testify at Committee hearing in Sacramento to substantiate why the bill is necessary, problem(s), who supports the bill, etc.

What This Means to Holders

Every holder should keep an eye on AB 2773 as it moves though the legislative process.  Even companies that are not incorporated or located in California often have a significant unclaimed property reporting obligations to the State.  This legislation may provide the first opportunity since 2002 for holders to report and remit past-due property to California without the imposition of significant interest and to come into unclaimed property compliance with the State of California.

In Closing

True Partners will continue to monitor AB 2773 and other changes impacting your company as they arise, and will release relevant updates as additional information is available.

About Unclaimed Property…

Unclaimed property is any intangible property that is owed by a company (i.e., holder) and has gone unclaimed for a specific period of time by the rightful owner.  Every company is likely to generate unclaimed property and has a legal responsibility to report and remit that property to the appropriate jurisdiction.  Generally, there are limited statutes of limitations on a Holder’s unclaimed property liability, and a holder’s state of incorporation can estimate a holder’s potential liability for periods where actual records are not available.  Companies not in full compliance with the states’ unclaimed property laws often have many concerns about getting into compliance, including the likelihood of triggering interest and penalty assessments or being selected for an examination.  However, once aware of the various rules and processes, every holder should consider taking advantage of the various opportunities available to get into compliance for any past-due property.

Our Expertise

True Partners Consulting’s Unclaimed Property Management Solutions Team is comprised of a national group of professionals with a wealth of experience and knowledge and diverse backgrounds, including industry and government.  Our team can offer your company the best combination of experience, expertise, and resources to assist your company, regardless of your company’s industry.  We encourage you to contact one of our professionals to discuss any questions or concerns that you may have regarding unclaimed property.