Unclaimed Property for Businesses

Did you know that businesses are required to report unclaimed or abandoned property to the state of the owner’s last known address as shown on a company’s books or in a company’s records, and that each state has its own unclaimed property rules and regulations?  You may then ask, what is unclaimed property?

Most companies have the potential to generate unclaimed property in normal standard business operations. The Journal of Accountancy states that “unclaimed property can be tangible (safe deposit box contents) or intangible property (securities-related property and general ledger property) due and owing to a [person or entity] (the owner) where there has been no contact with the owner for a specific period (dormancy period).”  General ledger property can include, but is not limited to, wages or commissions, account balances, credit balances, refunds, and any other funds or accounts payable distributable or due to a person or entity. Once the dormancy period has passed, the holder (entity with legal obligations to the owner) is required to perform due diligence to locate the owner of the abandoned property and, if unable to locate them, remit this money to the state of the owner’s last known address (escheatment).

Since each state has adopted its own unclaimed property act, it is important for a company to review its records each year to determine if it has unclaimed property, if it is being reported properly in the appropriate timeline, and if it is filed in accordance with the state’s rules and regulations of the owner’s last known address.  For more Unclaimed Property information by State go to the attached link for the FDIC’s site at https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/unclaimed-property-states.html. If a company does not report or appears to be inconsistent with reporting, it runs the risk of being audited and assessed with large penalties and interest.

For the State of Alabama, Unclaimed Property Reports are due annually prior to November 1^st of each year for the period of July 1^st through June 30^th along with any unclaimed property not reported from previous years.  At least 60 days before filing the report, a written notice must be sent to the last known address to notify the owner of possession of property by the holder to satisfy the due diligence requirement. Any business that does not have unclaimed property to report is not required to file a report in the given report year.  Any business entity, financial institution, insurance company or other holder of unclaimed property as described by law, whether for profit or not-for-profit, including proprietorships, partnerships, corporations, estates, trusts, charitable organizations; fraternal or cooperative associations; and other legal or government entities which are in possession of property belonging to another are all required to file.  Exemptions include electric cooperatives organized under Chapters 6 and 7 of Title 37, incorporated municipalities, incorporated municipal boards, and county boards of the state. Unclaimed Property Reports are required to be filed online and funds remitted electronically.

If you would like more information or assistance related to the reporting of unclaimed property, please reach out to us at tmann@bmss.com, dwaldrup@bmss.com, visit our website, or you can contact our office at (833) CPA-BMSS.