The New Unclaimed Property Act – 10 Questions Companies Ask About RUUPA
Recently there’s been a number of states updating, or completely rewriting, their unclaimed property statutes. Often, changes to the statutes are described as being “based on RUUPA” or “using RUUPA-style language”, leaving many companies wondering what “RUUPA” means, and more importantly, how will it impact them. Below, we’ve tried to briefly answer some of the more common questions most companies have about RUUPA.
1. First, what exactly is RUUPA?
The term “RUUPA” stands for the Revised Uniform Unclaimed Property Act. It is the most recent version of a model act, known as the Uniform Unclaimed Property Act, which was last amended in 1995. These Acts were developed and updated by the Uniform Law Commission (“ULC”) to provide each state with a template for their specific use when drafting unclaimed property laws.
2. If it’s just a model act, why should a company care about it?
Historically most states have adopted portions of the various Acts drafted by the ULC over the years. Therefore, although they have no authority until adopted by a state, the fact that so many states look to the Acts for all or part of their unclaimed property statutes means that companies should be pay attention the RUUPA to be aware of potential changes to state laws that could impact their businesses.
3. What is the ULC?
The ULC is one of the oldest state organizations designed to promote uniformity of laws among the states by providing states with non-partisan, carefully considered, and properly drafted legislation. It has commissioners from all 50 U.S. states and three U.S. territories who are licensed attorneys appointed by state governors or legislatures to draft consistent laws for use as model legislation.
4. How long have the model unclaimed property acts been around?
The ULC first drafted uniform state legislation on unclaimed property with the Uniform Disposition of Unclaimed Property Act of 1954, which was revised in 1966. In 1981 the ULC created the Uniform Unclaimed Property Act (“UUPA”), which was updated in 1995. Most states have adopted one or more versions of the Acts on unclaimed property as a basis for their own unclaimed property statutes.
5. Why did the ULC decide to initiate a revision to the 1995 UUPA?
Based on developments since 1995, it was determined that an update to the 1995 UUPA was needed. One reason was that as states adopted various versions of the Acts for their statutes, they made changes and revisions that resulted in state statutes that were inconsistent and sometime contradictory. However, one of the main reasons the ULC determined there was a need for an update was the many technological changes and new types of potential unclaimed property developed in recent years that were not addressed in the earlier versions of the Acts, such as stored value cards and pay-cards.
6. How did RUUPA actually get written?
It’s a long story, but it really started in 2009 when the American Bar Association (ABA) proposed some revisions to remedy what it saw as defects in the 1995 UUPA, including the lack of a meaningful statute-of limitations for companies. By 2011, the ABA came up with some suggestions, but the ULC decided that it didn’t agree with the ABA’s suggestions and rejected their proposed changes. The ABA decided to draft is own unclaimed property model Act, and continued to work on it until 2012, when the ULC agreed to revise the 1995 UUPA.
The first meeting of the Drafting Committee was held in Washington, DC on February 21-22, 2014, with subsequent meetings held in November 2014 and February 2015. The first reading of the draft Act was held at the Annual Meeting of the ULC on July 10-16, 2015 in Williamsburg, Virginia, where many business advocates raised concerns with certain provisions in the proposed Act. However, the new Act was approved at ULC’s Annual Meeting on July 13, 2016 and RUUPA was born.
7. What are some of the key provisions in RUUPA that would impact my company?
While there are many provisions in the RUUPA that could impact all companies, some of the more notable ones include:
- No business-to-business (B2B) exemption is included in the RUUPA. Therefore, when Illinois adopted many of the provisions of the RUUPA, it actually eliminated its pre-existing B2B exemption.
- Only optional exemptions for gift cards and in-store credits for returned merchandise. Many companies take advantage of state specific reporting exemptions for girt cards and store credits, so making these provisions optional in the RUUPA creates concern that many states may not elect this exemption.
- Expressly requires companies to escheat stored value cards and virtual currency to the state.
- Establishes 5-year statute of limitations if a company filed a non-fraudulent report; otherwise, 10-year statute of limitations. This change is actually good for companies, as many jurisdictions do not currently have a statute of limitations applicable to unclaimed property, or one that is very narrow, applying only to items specifically reported to the state.
- Allows for estimation if the company fails to maintain records. While a company’s state of incorporation will estimate potential liabilities where complete records are unavailable during an audit, the RUUPA specifically provides that a state has the authority to do so.
- Authorizes escheatment of foreign-owned property. States are not uniform in their treatment of property payable to a foreign person or entity that is held by a company. Some states specifically exempt these items, while others require them to be reported to the company’s state of incorporation.
8. So everyone agreed on the final version of RUUPA, right?
Well, no. After the ULC completed the RUUPA, it submitted it to the ABA for their approval. The ABA had a number of concerns with the RUUPA as it was drafted, and stated its concerns to the ULC. Ultimately, the ULC and the ABA were unable to reach an agreement on what should be contained in the RUUPA, and in early 2017 the ULC pulled the RUUPA for consideration by the ABA. Shortly after this, the ABA began to resume work on its own model unclaimed property Act, and on January 31, 2018, a draft of the ABA Model Unclaimed Property Act was published. In addition to objections from the ABA, sections of the RUUPA were also challenged by advocates, unclaimed property professionals, and organizations that support the unclaimed property holder community, such as the Unclaimed Property Professionals Organization (UPPO).
9. How many states have actually adopted RUUPA?
Currently, Delaware, Illinois, Kentucky, Tennessee and Utah have adopted some form of the RUUPA. Remember, despite the ULC’s urge for uniformity among the states, states typically modify the Act to suit their needs, or only adopt parts of the Act. As mentioned earlier, one of the most notable impacts of a state adopting RUUPA is in Illinois, where it resulted in the retroactive repeal of B2B exemption for companies.
In addition to the states that have actually adopted RUUPA, during 2017 and 2018 RUUPA style legislation was introduced in multiple jurisdictions, including Colorado, the District of Columbia, Idaho, Maine, Minnesota, Nebraska, Nevada, Vermont and Washington. Currently, RUPPA style legislation is proposed / pending in Colorado, the District of Columbia, Minnesota, Nevada, South Carolina and Washington.
10. OK, this sounds important – what should I do?
The most important thing that any company can do relating to the RUUPA is to stay informed. First, make sure that your unclaimed property compliance team is aware of any recent or pending legislation that may impact reporting dormancy periods or exemptions. Next, keep track of key states in which your company may have significant unclaimed property reporting obligations, as well as your company’s state of incorporation, to see if they are proposing RUUPA style legislation. Finally, reach out to unclaimed property professionals or organizations like UPPO to make sure that you are in compliance with the new laws and keep informed of changes likely to impact your company.