1 2 Overview Introduction Definitions History of Law Under the Unclaimed Property Law Questions 3 Introduction - Definitions What is? Unclaimed property consists of intangible personal property, including general ledger and securities-related property, for which there has been no owner-initiated activity for a specified period of time, usually five years. 1
4 Introduction - Definitions Intangible Property: Property that has no intrinsic value but is merely representative of value Example 1 A check Example 2 A credit memo Holder: An entity that is in possession of property belonging to another, or is indebted to another on an obligation Owner: A person or entity having a legal right or equitable interest in the unclaimed property 5 Introduction - Definitions Dormancy Period 1 : The period of time, also referred to as the abandonment period, during which an owner of property does not take action in regards to the property. Dormancy periods range from 1 to 15 years, depending on the property type. Due Diligence: The use of reasonable and prudent methods under particular circumstances to locate apparent owners of inactive accounts. 1: See our website for a chart listing dormancy periods for different property types. 6 Introduction History History of Law Origins in British Common Law Land was returned to the local Lord if a tenant died without heirs. Personal property was subject to claim by the Crown under the bona vacantia ( ownerless goods ) doctrine. When English colonists settled in America, they brought the common laws of escheat and bona vacantia with them which developed into modern-day unclaimed property laws. 2
7 Introduction History Modern Law Every state has an unclaimed property law. The Uniform Law Commission has enacted a series of Acts to promote uniformity among the states unclaimed property laws (1954, 1966, 1981, 1995). 8 Introduction History South Carolina Law First unclaimed property statute passed in 1971 South Carolina s current unclaimed property law is a version of the 1981 Uniform Unclaimed Property Act. Program was transferred to the State Treasurer s Office from the Department of Revenue in 1996. 9 Introduction History Custodial Escheat Law Derivative Rights Doctrine What does this mean? The State stands in the shoes of the owner. The State holds the property for the owner. The owner may claim it at any time. 3
10 Introduction History Benefits of Law Holder: Creates a system in which an obligation due an owner can be removed from the holder s books and records forever Transfers custody and liability to the state Owner: Protects the property owners interest Provides a centralized search for abandoned assets 11 Under the Law WHAT YOU NEED TO KNOW 12 Identify unclaimed property Perform due diligence Report and remit unclaimed property before November 1 st each year Keep adequate supporting records 4
13 Common Property Types 1 Wages Outstanding Checks Customer Credit Balances Bank Accounts Utility Deposits Stocks and Dividends Bonds Insurance Proceeds and Annuities Money Orders Travelers Checks 1: See our website for a listing of property types and corresponding codes. 14 Unclaimed property law applies to all categories of intangible property unless specifically exempted. Examples: Gift Certificates Capital Credits (issued by South Carolina Telephone and Electric Cooperatives) Safe Deposit Box Contents 15 How to determine if property is abandoned Aging: Age property from the date payable to the owner (dormancy trigger). Reissuing a check does not restart the dormancy period. Activity: No owner-generated activity or written communication for the duration of the dormancy period. The owner has not communicated an interest in the account. The owner does not have another relationship with the holder with owner-generated activity (where applicable). 5
SC Dormancy Periods 1 One Year: Wages Utility Deposits Three Years: Stocks & Securities Five Years: Outstanding Checks Bank Accounts Insurance Proceeds & Annuities Credit Balances Seven Years: Money Orders Fifteen Years: Travelers Checks 16 1: See our website for Dormancy Chart and Report Conversion Table. 17 Due Diligence Required by Section 27-18-180 of the South Carolina Law For property valued at $50 or more, the holder must send written notice to the owner at the owner s last known address not more than 120 days before the report is filed. Sample letter provided on our website 18 Tips for effective due diligence Allow enough time for response. Make the letter easy to understand. Clearly state the purpose of the letter. Include a deadline for receipt of the response. Indicate what will happen if the response is not received. If providing state contact information, include when the property will be sent to the state. Provide holder contact information for customer questions. 6
Unclaimed property is reported based on the rules of jurisdiction set by the U.S. Supreme Court in Texas v. New Jersey (1965). 19 Texas v. New Jersey (1965) State of owner s last known address State of holder s incorporation or domicile if owner s address is not known Further detail can be found in Section 27-18- 40 of the South Carolina Code of Laws 20 Reports and remittances are due before November 1 for property that has reached its dormancy period as of the previous June 30 1. One-year property (i.e., paychecks and utility deposits) issued between July 1, 2012 and June 30, 2013 must be reported by November 1, 2014. Five-year property (i.e., vendor checks and credit balances) with a last activity date between July 1, 2008 and June 30, 2009 must be reported by November 1, 2014. 1: See our website for Report Conversion Table. 21 To better safeguard owner information, SC does not accept paper reports. Reports must be filed on CD, via email, or through UPExchange and must be encrypted or password protected. Email reports are preferred and will be required in 2014. NAUPA format required UPExchange offers free holder reporting software to create a NAUPAformatted file. 7
UPExchange Endorsed by NAUPA Web-Based Provides Excel templates Offers user training and support Online reporting available Creates an encrypted file Produces due diligence letters A link to UPExchange can be found on the South Carolina State Treasurer s website. 22 To ensure proper payment to the owner: Provide the full name and last known address (if known) for all owners Use the correct property, owner, and relationship codes 1 and vs. or Provide as much other owner information as possible Further detail can be found in Section 27-18-180 of the South Carolina Code of Laws 1: See our website for reporting codes. 23 To ease the reporting burden, most states, including South Carolina, will accept incidental property with a last known address in another state. Incidental property is defined as less than ten accounts totaling less than $1,000. Reciprocity Matrix www.treasurer.sc.gov Check requirements of both states. 24 8
25 All amounts are reportable. Aggregate Less than $50 Negative Reports Required in South Carolina in limited circumstances upon request by UPP staff Specific reporting instructions available on State Treasurer s website 26 Submitting the report Reports must be submitted electronically (email, CD, or online via a UPExchange file or other NAUPA-formatted file). Email address for report submission upreports@sto.sc.gov For password-protected files, send the password in a separate email. 27 Remitting Payment ACH Bank Wire Check Instructions for remitting payment and delivering securities are available on State Treasurer s website. 9
Requesting an extension Request for a filing extension must be in writing to Courtney Crosby at Courtney.Crosby@sto.sc.gov and is due before November 1. Extensions are granted for extenuating circumstances. Late filing penalties and interest waived Negative reports required when an extension is approved 28 Record Retention All holders are required to retain unclaimed property records for ten years after the property becomes reportable (S.C. Code Ann. 27-18-320). 29 If your company may be We will work with your holding past-due unclaimed organization to report property, please contact past-due property without Courtney Crosby at (803) penalty. 734-2623 or Courtney.Crosby@sto.sc.gov to help your company achieve compliance with the unclaimed property law. Voluntary Disclosure (Self-Audit) Program Desk Audit 30 10
31 Disclaimer The information provided on these slides and in this presentation pertains only to South Carolina unclaimed property reporting. Unclaimed property laws vary by state. If your organization is holding property due to other states, please check with those states for unclaimed property reporting requirements. 32 Questions? 33 Contact Information Linda Gamble Senior Assistant State Treasurer (803)734-2683 Linda.Champion- Gamble@sto.sc.gov Jim McInnis Assistant Director (803)734-2645 Jim.McInnis@sto.sc.gov Courtney Crosby Audit Manager (803)734-2623 Courtney.Crosby@sto.sc.gov 11