ABANDONED PROPERTY REQUIREMENTS IN NEW YORK

By Tanya Lomac, CPA

Unclaimed Property: Overview

Unclaimed property statutes govern who will ultimately hold and control abandoned funds.  New York laws established an abandoned property fund in 1944, in which certain types of property that are deemed “aban­doned” are held until the rightful owner may be located or comes forward and requests the funds.  Certain types of property are deemed abandoned after a set number of years (the “dormancy” period).  The dormancy period and deadline for remittance to the state differ depending on the type of property range, from one to fifteen years, but are most commonly three to five years. Abandoned property typically includes unclaimed wages or payroll checks, vendor checks/credits, unre­deemed gift certificates/cards, merchandise credits, accounts payable, and receivable credits. Industries that may be significantly impacted by unclaimed property laws include retailers, healthcare companies, insurance providers and financial services companies.  Some of the more famous types of unclaimed funds are court awards and estate proceeds.

After the expira­tion of the dormancy period, unclaimed property is generally required to be remitted to the state of the last known address of the property owner. However, if no address may be determined from the debtor’s books and records, the property is generally remitted to the state in which the debtor is incorporated.  The form of the report depends on the type of property and the number of items to be reported.  On the abandoned property report, amounts less than $20 may be aggregated and reported as one item.  

Amendments to the New York State Abandoned Property Law

New York recently enacted Section 1422 of the New York State Abandoned Property Law, which requires that all entities holding unclaimed funds must perform due diligence mailings to contact the owners of the unclaimed funds prior to remitting funds to the State.  In some cases, the statutes require publications of property owners’ names or certified mailings, the cost of which may be usually deducted from the amount owed in these instances.      

New York’s Compliance Efforts

The Holder Education and Research Unit’s duties are to reach out to businesses across the country to increase awareness of and compliance with the New York State Abandoned Property Law.  New York believes that many businesses are not fully compliant with its Abandoned Property reporting requirements. The Holder Education and Research Unit offers Holder Awareness Seminars that provide comprehensive training on all aspects of abandoned property in an attempt to improve holder compliance.  If a business fails to remit unclaimed funds to New York State in a timely manner, it may impose late filing penalties and interest on the business. The interest rate is 10 percent per year from the date payment or transfer was originally due. In addition, the general statute of limitation rules does not apply to New York’s unclaimed property law.

New York State offers a Voluntary Compliance Program (the Pro­gram), which has been in existence since 1985 and allows businesses holding unclaimed property to report and remit the property under favorable terms (i.e., no interest or pen­alties). Entering the Program will afford the business protection from being audited by New York while allowing time to conduct the due diligence required by the state. An added benefit for entering the Program is the restriction on the Comptroller to reach back to prior periods. For most types of abandoned property, the reach-back period is limited under the Program to items arising on or after January 1, 1992. Note that companies that have not been contacted by the New York Comptroller may enter the Program on an anonymous basis.  Voluntary compliance is limited to first-time reporters of abandoned property who have not been contacted by New York State regarding an audit.  

Report Card on Current Unclaimed Funds

The New York State Comptroller currently is custodian of $7.2 billion in unclaimed funds, which accounts for more than 21 million account records.  Over the past year (4/04-3/05), the abandoned property fund has received $685 million and paid out approximately $135.5 million.  On average, 20% of funds are claimed by rightful owners on an annual basis.  Approximately 53% of all claims are less than $100.  Banks and corporations account for approximately 42% and 32% of the total funds remitted to the State, respectively.  Amounts resulting from interest-bearing accounts such as savings and CD accounts earn interest for the first five years in the abandoned property fund.  There is no fee to reclaim funds, but private companies may charge a finders fee of up to 15% for assisting claimants in locating unclaimed funds due them.  More information on how to report and remit or to reclaim abandoned property may be found on the web site of the Office of the New York State Comptroller at www.osc.state.ny.us.