November 2002

Table of Contents

Cal-Tax Home

Email Editor

Guest Commentary 

Edwiges B. Hamblet is senior manager, National Unclaimed Property Group, Deloitte & Touche (213) 553-1085 / ehamblet@deloitte.com

Time is running out on California’s amnesty program for reporting unclaimed property. It expires December 31 and will have brought in more than $150 million in unclaimed property to the state, according to preliminary estimates.

Holders of those properties that qualify for amnesty will be forgiven the 12 percent statutory interest and penalties.

The program is for property (not including real estate), such as bank accounts, trust funds, escrow accounts, matured or terminated insurance policies, estates, uncashed cashier’s checks or money orders, certificates of deposit, safe deposit box contents and stocks, mutual funds, bonds and dividends.

The state possesses more than $2.9 billion in unclaimed property that belongs to about 5.2 million individuals and organizations, according to the state Controller’s Office, which manages the program. Under the law, holders of the property, such as banks, have three years to turn it over to the state, which then holds it forever. For example, contents of a safe deposit box are sold and the proceeds kept in an account under the owner’s name.

The Controller’s Office has a Web site (www.sco.ca.gov) where information on the UCP is available. There is a national site (www.unclaimed.org) where anyone can check to see if they have a long-forgotten account, etc. In some cases, owners are deceased and heirs have no knowledge of the property.

The Legislature enacted the amnesty program with AB 1888 (Dutra) in 2000, and extended the deadline for participating in the program for one year with AB 227 (Dutra) in 2002.  It applies to property that should have been reported by November 1, 1999, and is not subject to a controller’s audit, or an investigation by the state attorney general or litigation with the controller on or before January 1, 2003.

The state controller has until next July to file a report on the program with the Legislature, but, according to preliminary numbers, the amnesty program brought in approximately $90 million in cash or property to the state during 2001, and officials believe some $50 million worth of unclaimed assets will be turned in during 2002 as a result of the one-year extension.

According to the Assembly floor analysis of AB 227, the program has had “tremendous success.” Governor Gray Davis proposed extending the program in his proposed 2002-03 state budget, expecting an additional $50 million in property to be turned in.  The controller reported that in 2001 the office received about $70 million in cash and about $20 million in stocks under the amnesty program.

The state anticipated revenue of about $35 million to be derived from increased payments and delivery of unclaimed property as a result of the extended deadline.

Prior to passage of the unclaimed property law, the holder of the property would have use of the money. A state appellate court held in 1985 that holders of the property, such as banks, had no interest in the assets. Thus the state’s unclaimed property law was enacted with two objectives: reuniting owners with the funds or property and providing the state, rather than the holder, the benefit of using the unclaimed funds or property.

Unclaimed property is any liability that has not been paid to the rightful owner within a specified period of time. Although not a tax, unclaimed property triggers similar obligations, including multi-state reporting and remittance requirements.

Companies are responsible for remitting unclaimed funds to the state of the owner’s last known address, or if unknown, to the holder’s state of incorporation.  Any company that issues checks, maintains or writes off aged credit balances, or has had merger or acquisition activity, offers customer refunds or gift cards, or is publicly held, may have significant unclaimed property liability.

Currently several states have amnesty or voluntary compliance programs to encourage holders of potential unclaimed property to come forward and to prevent costly audits.

If a company is incorporated or doing business in California, and has outstanding liabilities, it should take advantage of the California Amnesty Program,. Interest on delinquent California remittances is statutory, and a further extension of the California Amnesty Program would need to be approved through the legislative process.