California to Require Reporting Unclaimed Property on Business Tax Returns

See updated details in the alert, California Launches the Unclaimed Property Voluntary Compliance Program, published April 6, 2023.

The California Franchise Tax Board (FTB) now requires corporations, partnerships, and limited liability companies (LLCs) to attest to their unclaimed property reporting compliance on their 2021 business tax returns.

This change further authorizes the FTB to share the unclaimed property compliance information with the California State Controller’s Office (SCO) to aid in the enforcement of California’s unclaimed property laws.

New Questions on Returns

California Assembly Bill (AB) 466, an amendment to the Revenue and Taxation Code, was enacted on July 16, 2021.

This amendment authorizes the FTB to provide the SCO with certain business taxpayer information, including the taxpayer’s unclaimed property compliance. As a result, the FTB will add the following questions to its corporate, partnership, and LLC tax returns:

  • Has this business entity previously filed an unclaimed property Holder Remit Report with the SCO?
  • If yes, when was the last report filed?
  • What amount was last remitted?

Important Considerations

Based on the responses provided on the business tax returns, taxpayers may be subject to unclaimed property audits by the SCO.

Historically, California hasn’t offered a voluntary disclosure program. With a typical lookback period of 10 years, and a 12% interest rate, noncompliance can result in significant fines surpassing the actual unclaimed property amount owed.

Unclaimed property may be owed to multiple states and this process may trigger a multistate audit.

Key Steps for Businesses

Companies that haven’t previously filed unclaimed property reports or have gaps in their annual filing history should perform an internal review to determine their unclaimed property compliance and potential liability in California and other states.

Although California doesn’t currently offer a formal voluntary disclosure program, being proactive can help companies advocate their position prior to or during an audit.

Many other states do offer voluntary disclosure, therefore if the company owes unclaimed property to multiple states, taking a proactive stance can drastically help reduce liability.

We’re Here to Help

For more information about unclaimed property tax, or to understand the implications for your business, contact your Moss Adams professional.

For additional resources, visit our State & Local Tax Services.

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