The state of California charges some of the highest penalties in the country when it comes to unclaimed property that is reported late. The most common examples of such properties include unclaimed payroll and vendor checks, as well as unclaimed accounts receivable credit balances. California currently charges interest at 12% per year for any past due unclaimed property, which can add up to millions of dollars for non-compliant companies with a large presence in that state.
Additionally, in contrast to many other states, California has a robust enforcement program, which identifies non-compliant companies that have never reported unclaimed property as well as compliant companies that report properties late, to impose its significant interest assessments.
However, on February 16, 2018, a bill was introduced in the California Assembly, which would create a Voluntary Disclosure Agreement (VDA). An unclaimed property VDA is a program that is similar to a tax amnesty program in that it would allow companies to report past due unclaimed property without being assessed interest or other penalties. If enacted, the VDA would represent the first opportunity in approximately 18 years for companies to report past due unclaimed property to California without interest or other penalties. California enacted a time-limited unclaimed property VDA in the year 2000, but since that program expired in 2002, interest assessments have been imposed on companies without any possibility of a waiver.
According to the proposed bill, AB-2773, companies would be given one year to complete a self-review and would need to review ten transaction years. The program would sunset in 2024.
Because California actively seeks out companies with unclaimed property compliance gaps and imposes very significant interest assessments for reporting unclaimed property late, the proposed VDA would present a good opportunity for companies operating in that state to lower their unclaimed property liability risk. This is especially true for companies in the technology, real estate, medical and sports industries, which have recently been the focus of increased unclaimed property audit activity in California.
To learn more about your company’s potential unclaimed property liability risk in California and ways to reduce that risk, please reach out to one of Ryan’s unclaimed property professionals.
TECHNICAL INFORMATION CONTACT:
Jacob Oennerfors
Manager
Ryan
212.847.0126
jacob.oennerfors@ryan.com