NY Unclaimed Property Update

Current Developments

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, provide
d they reply within a designated amount of time.

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.

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.

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    Voluntary Disclosure Program

    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
    • why they think they are eligible for a limited look-back clause

    Source: BizFilings

    Voluntary Compliance

    Non-compliance can be costly. Companies that fail to do so are subject to audit and are potentially liable for interest and penalties. In New York, the lookback period, regardless of whether a company chooses to report through the Voluntary Compliance Program or not, is January 1, 1992. The interest that will be assessed will be at 10% per year computed for a period to commence upon the date such payment or delivery was required and to terminate upon the date of full compliance therewith. Any person willfully failing to make any full and complete report or to file any affidavit required shall be fined the sum of $100 for each day such report or affidavit shall be willfully delayed or withheld.

    Retailers Beware

    Although retailers have to deal with the standard unclaimed property items such as refund checks, uncashed vendor payments and uncashed payroll checks, the largest liability usually surrounds gift card liability. 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 time-frames. 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, unclaimed 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.

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