August 8, 2019
Many businesses have unclaimed property and reporting requirements of which they are not aware of. Unclaimed property consists of intangible property and the tangible contents of safe deposit boxes that are unclaimed by the rightful owner for a specific period. Examples of these intangibles can include such things as checking/savings accounts, uncashed checks, insurance policies, customer deposits or credits. The amount of time for which something is unclaimed before it is considered unclaimed property, or the dormancy period, varies by state and by type of property.
In Alabama, the reporting period is July 1 – June 30. By July 1, businesses should determine if they are in possession of any unclaimed property, based on the dormancy period for each type of intangible. If a business does have unclaimed property, the business (holder of the property) has a due diligence requirement to send written notice to the owner at the last known address informing him/her that the business has property belonging to them that may be presumed abandoned. (There is a de minimis exception for property less than $50.) This notice must be sent at least 60 days prior to the filing of the Unclaimed Property Report which must be filed by November 1, 2019.
Once deemed unclaimed, the property is remitted to state custody until the rightful owner comes forward to claim the property. Generally, unclaimed property is remitted first to the state of the owner’s last known address. If the holder does not know the address of the owner, it is remitted to the state of domicile of the holder.
Unfortunately, unclaimed property reporting is not optional. "Any business entity, financial institution, insurance company, or other holder of unclaimed property as described by law, whether for profit or not for profit, including proprietorships, partnerships, corporations, estates, trusts, charitable organizations; fraternal or cooperative associations; and other legal or government entities which are in possession of property belonging to another." (Alabama Instructions for Business Reporting and Remitting of Unclaimed Property.) The penalties for non-compliance can be costly. In Alabama, failure to report, pay or deliver carries a penalty of $100/business day, up to $5,000. Willful failure to report, pay or deliver is $500/business day, up to $25,000. Filing a fraudulent report has a penalty of $1,000/business day, up to $25,000.
Not sure where to begin? Start by reviewing your balance sheet and bank reconciliations for outstanding items. Determine to which state unclaimed property should be reported and remitted and become familiar with the dormancy periods, due dates, reporting requirements for each state in which there potentially is unclaimed property. Please note that unclaimed property report due dates are not all the same. Put policies and procedures in place to track, monitor and remit unclaimed property. Visit https://alabama.findyourunclaimedproperty.com/docs/Reporting%20Instructions%20-%202019.pdf for Alabama’s unclaimed property guidelines.
If you have any questions about an unclaimed property or if you need assistance with identifying or reporting unclaimed property, please contact your Truitt, Tingle, Paramore & Argent accountant.