Kim Tarnakow, CPA
Unclaimed property is intangible property and intangible and tangible contents of safe deposit boxes held by a business on behalf of an individual or business. Common types of unclaimed property include bank accounts, uncashed checks, accounts receivable/customer credits, gift cards (in some states) and safe deposit box contents.
In 1981, unclaimed property as we know it, came into being. It is based on the premise that the states are better equipped than a business to return unclaimed property to its rightful owner. After something has been dormant for a certain amount of time (dormancy period), the property is deemed to be “unclaimed” and must be remitted to the state to find the owner. Dormancy occurs when the company holding the property (the holder), is unable to locate the owner and the owner has not contacted the holder. The length of the dormancy period varies by the type of property for each state. For example, in Alabama, the dormancy period on uncashed wage checks and credit memos is 1 year, while vendor payments, checking accounts and CDs are 3 years.
A business must review the balance sheet for unclaimed property as of the date specified by the state. If the dormancy period has lapsed, the business may have due diligence requirements, such as sending specific notifications or posting unclaimed property notices in order to try to reach the owner a final time before remitting the property to the state. If the property is still unclaimed, the business is required to file the report and remit the property to the “appropriate” state. The sourcing of unclaimed property is first to the state of the owner’s last known address. If the address is not known, the unclaimed property is sent to the holder’s state of organization.
In Alabama, the measurement date for unclaimed property is June 30. The unclaimed property, along with the property itself, should be remitted to the state by November 1. Alabama requires that the holder send written notice to the owner at the last known address of the owner at least 60 days before the filing of the report. The notification should convey that the property is in possession of the holder and that the property may be presumed abandoned. If the holder does not have an address for the owner, no due diligence notification is required.
There are penalties for not filing/remitting unclaimed property or completing the required due diligence. In Alabama, the penalties are:
- $100 per day, up to $5,000 for failure to report, pay or deliver property within the required time period;
- $500 per day, up to $25,000 for willful failure to report, pay or deliver property within the required time period;
- $1,000 per day, up to $25,000 for a fraudulent report.