The Dark Side of Unclaimed Property

Many times I have told readers of this column and of Practical Accountant of state Web sites that list owners of unclaimed property that was transferred to the state from businesses and entities that were holding the property for years, but who weren't able to communicate with the property owner so the property could be claimed. I figured firms could publicize the sites, and a perusal would result in "found money" for a number of the firm's clients.

There is a dark side to unclaimed property that I failed to think about or mention until now. I discovered it when reading a BNA press release which announced that Deloitte & Touche's Unclaimed Property practice teamed with the law firm of Morris, Nichols, Arsht & Tunnell, LLP, to co-author The BNA's Corporate Practice Library's Portfolio No. 74-2nd, entitled "Unclaimed Property."

The release explains how the portfolio addresses the impact of non-compliance by businesses and entities in identifying and transferring unclaimed property to the states. This relates in part to compliance to the Sarbanes-Oxley Act and Generally Accepted Accounting Principles. The release points out that in addition to increasing enforcement efforts, many states have no statutory provision to allow for a "statute of limitations" on property that hasn't been properly reported in the past. So substantial penalties and interest can be assessed against non-complying businesses and entities.

According to the release, "Companies most susceptible to a state unclaimed property audit include those that issue large numbers of checks, are publicly held, have merged with another company, have a transient workforce, and/or a large customer base. These companies are potential 'holders' of unclaimed property with possible reporting obligations to multiple states." If you have clients who fit that description, you might want to talk to them about their policies and procedures with regard to possible unclaimed properties.