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Abandoned Property Law

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    • Abandoned Property Law

    Over the past six months, companies have been receiving notices requesting that they comply with the filing requirements of New York State’s Abandoned Property Law (APL). The Office of Unclaimed Funds has been sending packages with information regarding their Voluntary Compliance Program. The program aims to encourage taxpayers who have not filed or paid their taxes to come forward and voluntarily pay what they owe without incurring penalties or interest, provided they reply within a designated amount of time.

    Unclaimed Property

    Unclaimed property services have become increasingly more popular as states are requiring companies from many different industries to report any unclaimed property based on the property type and each state’s dormancy rules surrounding each property type. In general, these consist of savings or checking accounts, uncashed checks, matured certificates of deposit, stocks, bonds or mutual funds, traveler’s checks or money orders, and proceeds from life insurance policies.

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      Voluntary Disclosure Participation

      New York’s APL was enacted to protect individuals from losing their assets to businesses who were easygoing with their notifications to debtees. Property is usually presumed abandoned if there has not been any activity on the account for a set period, usually between two and five years. To participate in a voluntary disclosure program in New York, a taxpayer must submit a detailed explanation of:

      • the taxes that they owe
      • the reason that they failed to report and pay those taxes, and
      • why they think they are eligible for a limited look-back clause
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      Information on Gift Cards

      Gift cards are some of the most common unclaimed property in New York and Delaware. Under the New York State APL, New York-based companies must report any balance remaining on a gift card after five years of dormancy with the New York State’s Office of Unclaimed Funds; different industries have specific reporting timeframes. Gift cards fall under general corporations, so the remittance and report date would fall on March 10.

      Delaware has a similar APL and the dormancy period for gift certificates is five years. In fact, the dormancy period for most property is five years except for securities (dividends, interest and equity payments) and fiduciaries (escrow accounts, traditional and Roth IRA’s). Property must be reported in electronic format by March 1 using the Form AP-1 (or AP-2 for property with less than 10 owners). Companies are now required to conduct a due diligence mailing in order to contact all holders with securities-related property valued at over $250.

      If an address appears on the company’s records, the unclaimed property would be reported there. However, in the event that an owner or an address cannot be found, abandoned property goes to the state in which the company holding the property is incorporated. This is a major source of income for Delaware because so many corporations are formed there. However, this can become tricky, which is evident by a lawsuit filed by Pennsylvania challenging Delaware’s claim to over $10 million in abandoned property. Pennsylvania is arguing that money orders purchased in Pennsylvania that went uncashed should be remitted to Pennsylvania; however, they were remitted to Delaware because that is where the company is incorporated.

      Delaware is involved in another pending lawsuit with a company that allegedly falsified records and hid funds in shell organizations in states which are not subject to similar escheatment laws. This case is still ongoing since 2014.

      We strongly suggest companies comply with the filing requirements of their states’ APL. Companies that fail to do so are subject to audit and are potentially liable for fees and penalties.

      A Few of the More Common Unclaimed Assets by Industry Are Listed Here:

      New York Abandoned Property Time Limits

      Bank Account

      Demand, savings, time, and other deposit accounts: Five years

      Checks of Drafts

      % Years: Includes vendor checks

      Demutualization proceeds

      Two Years

      Gift certificates, gift cards, and Credit Memos

      Gift Certificates: Five years

      Insurance Policies

      Life or Annuity policies: Three years; the presumed maturity of an insurance policy is three years

      IRAs or Retirement Funds

      No specific provision

      Money Orders

      • Money orders issued by banks: Five years
      • All other money orders: Seven years

      Other Intangible Personal Property not otherwise Specified

      • Excess from a sale of pledged property: 6 years (one year if from pawnbroker)
      • Funds held by sales or insurance finance companies: three years
      • Other property: two years

      Proceeds from class-action suits

      No specific provision

      Property distributed by a business association in the course of dissolution

      No specific provisions

      Property held by courts or public agencies

      • Property held by state courts or condemnation awards: Five years
      • Property held by federal courts: Ten years
      • Property held by federal government agencies: Seven years

      Property held by fiduciaries

      • Escrow funds held by a title company: Three years
      • Other escrow funds: Five years
      • Other property held by fiduciaries: Three years

      Safe Deposit Boxes

      Three years

      Shares in a financial institution

      No specific provision

      Stocks, Dividends, and Distributions

      Three years

      Traveler’s Checks

      • Traveler’s checks issued by a bank: Five years
      • Other traveler’s checks: 15 years

      Deposits and advances owed to utility company customers

      Deposits, refunds, and advances: Two years

      Wages or salaries

      • Ages or salaries held by the NYS Department of Labor: One year
      • wages or salaries: Three years

      Oil & Gas

      1. Mineral interest proceeds

      Healthcare

      1. Overpayments
      2. Misposted/unapplied payments
      3. Unused rebates
      4. Medicare credits
      5. Wellness credits
      6. Health Savings Account (HAS) transfers

      Higher Education

      Telecommunications

      1. Prepaid gift cards
      2. Rebate checks
      3. Subscription refunds and credits

      Retail

      1. Gift cards
      2. Gift certificates
      3. Stored value cards
      4. Customer refund checks
      5. Accounts payable
      6. Accounts receivable
      7. Uncashed payroll checks

      Utilities

      1. Refund checks
      2. Customer utility deposits

      Transportation & Logistics

      1. Unused balances from prepaid shipping accounts
      2. Uncashed refund checks from lost or damaged shipments
      3. Credits from overpayment of international duties and taxes

      Non-Profits & Charities

      1. Uncashed payroll checks
      2. Accounts receivable
      3. Credit memos

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