Many states, including Washington, impose a November 1 deadline for filing reports of unclaimed property. For a limited period, Washington is offering an amnesty program that waives penalties and interest on delinquent unclaimed property or unremitted property—an opportunity for companies that have fallen behind to clear the slate and start fresh.
With the November 1 deadline approaching, companies should evaluate whether they own reportable property and whether they’re up to date with their state reporting requirements. Companies that aren’t current with their unclaimed property reporting or remittance may consider taking advantage of Washington’s amnesty program or the voluntary disclosure programs provided by many other states.
What is unclaimed property?
Every state has an unclaimed property program that requires businesses to report abandoned property they hold but don’t own. These unclaimed property programs require businesses in possession of unclaimed property to make reasonable efforts to attempt to locate the owner and return such property. If the business cannot locate the owner, the business must remit the property to the state; it isn’t allowed to retain unclaimed property.
Property subject to unclaimed property laws generally includes interests in intangible personal property, such as dormant savings or checking accounts, stocks, life insurance policies and annuities, uncashed checks for dividends, payroll and expense reimbursements, and insurance proceeds. Some states also treat unused gift certificates as unclaimed property. Property may also include tangible personal property, such as the contents of safe-deposit boxes. These types of property become unclaimed and subject to state reporting requirements after a specified period, usually two to five years.
Generally, states impose penalties on businesses for failing to report or deliver unclaimed property. In Washington, for example, this penalty is 10 percent of the property value. Most states also impose interest for the failure to report or deliver property.
Washington’s Amnesty Offering and Voluntary Disclosure Programs
Washington’s amnesty program, created by Substitute Senate Bill 6057, Section 2109, aims to encourage businesses to voluntarily come forward to file reports and deliver property. Under the amnesty program, the state Department of Revenue must waive all penalties and interest for the failure to report or deliver property due before November 1, 2016. To enter into the program, the holder of unclaimed property must complete an application form, file an unclaimed property report, pay all amounts, and deliver all property identified on that report before November 1, 2016.
Many states offer similar voluntary disclosure programs reducing or eliminating penalties and occasionally interest on unclaimed property. They also often limit the number of years a state may look back in determining what reports and property are due. In general, businesses must be proactive in considering voluntary disclosure programs. If a state identifies a business as a delinquent filer, in general, penalties and interest aren’t abated and the look-back period is unlimited—as long as 20 years or more. Because records may be missing or incomplete for older periods, states often employ contract firms to estimate unclaimed property liabilities. These can be difficult and expensive for a business to contest.
Advantages of entering into an amnesty or voluntary disclosure program include:
- Clearing out any outstanding credit memos
- Clearing out any uncashed payroll checks
- Reducing your risk of being assessed large penalties on outstanding unclaimed property filings
- Avoiding time-consuming due diligence requirements in the event of a transaction
- Starting the next reporting period fresh
- Pleasing your customers or clients by returning property or accounting for it properly
We're Here to Help
Unclaimed property laws are complex, and identifying which state has jurisdiction over a given unclaimed item isn’t always straightforward. We can help your company determine whether it has property subject to the unclaimed property laws, identify state filing requirements, and assist your company with entering into a state’s amnesty or voluntary disclosure programs.
For more information about unclaimed property, or for help determining what the implications are for your business, contact:
Marke Greene, Partner
Shannon Wright, Manager