Unclaimed property laws impact nearly every business. Whether a business has a sole employee, issues credits to customers, rents property or offers gift cards, they may be subject to unclaimed property reporting. This reporting is required when the business owner loses track of a person to whom they are indebted, whether because of a paycheck that has not been cashed, a security deposit on a rental deposit is being held or a gift card was issued to a customer.
What is unclaimed property?
Unclaimed property is most easily defined as any financial property that a business holds that belongs to another person who has not shown any interest in the property. Simple examples of this would be a bank account that has had no activity for extended periods of time, a paycheck that has not been deposited for more than one year or a gift card that has never been used. Business owners need to know what their individual states reporting requirements are since they may vary slightly by state.
Businesses who issue stock are also required to maintain the property for the rightful owner. In some cases, states will require stock shares or dividend reinvestment plans to be liquidated. In some cases, the business will be asked to liquidate these funds prior to being turned over while in other cases, the state will take possession of the stock certificates on behalf of the shareholder and keep them for a specific period of time.
Before a business turns property over to their state offices as abandoned or unclaimed, the business must make good-faith efforts to locate the person who has the right to the property. The business must record each effort and the result of the effort. If the property owner cannot be located, the business then has an obligation to turn the property over to the state. The state takes possession of the property under a process known as escheatment.
Every state in the United States, the District of Columbia and some areas of Canada have unclaimed property laws. Unclaimed property laws also apply to the US Virgin Islands and Puerto Rico. Business owners in any of these municipality must be aware of the laws as they apply to their own business. With more than $40 billion dollars in unclaimed property being held by states, the accurate reporting of any property a business is holding on behalf of a third person is critical.