Unclaimed Property – Emerging Trends to Watch in 2021

Unclaimed property laws have historically provided a steady and consistent source of funding for state budgets – in fact, the National Association of Unclaimed Property Administrators has suggested that about $3 billion of unclaimed property is added to state budgets on an annual basis.[1] However, the onset of the COVID-19 pandemic just one year ago has caused many states to look for ways to pay for pandemic-related costs and subsequent lost revenue, including updates and revisions to unclaimed property laws and compliance measures.

To limit the increase of unclaimed property exposure, companies should be mindful of the following emerging trends:

  • Renewed Focus on Unclaimed Property Legislation – Because unclaimed property is an important source of state revenue, pandemic-related budget issues may increase the pressure to obtain revenue through the enforcement of escheatment laws. A renewed focus on such legislation could mean the removal of certain exemptions as well as shorter dormancy periods allowed for escheatment. Since the release of the 2016 Uniform Act, nine states have enacted wholesale replacements to unclaimed property statutes as well as legislation that directly targets certain areas of unclaimed property types, including gift cards, life insurance and consolidated reporting.
  • Increased Compliance Invitations – States have historically leveraged third-party auditors to perform unclaimed property audits on their behalf. There are more third-party firms doing this now, so expect this trend to increase. Delaware continues to be the most prominent state when it comes to unclaimed property compliance reviews, through both third-party audits and their Voluntary Disclosure Agreement (VDA) program administered by the Delaware Secretary of State (SOS). The Delaware SOS mails numerous invitations every year for Delaware entities to participate in their VDA program with a relatively short window of time to respond (60 days). For entities that fail to respond to this invitation, the case is moved to the state’s Department of Finance to conduct an audit.[2]
  • Data Privacy Concerns – As states enlist the help of third-party auditors in their efforts to target unclaimed property, large amounts of data are typically transferred to the third party, including data on customers, employees and shareholders. Such data transference bears significant risk management implications to data privacy and abiding by a variety of laws regarding data privacy and security, such as the Health Insurance Portability and Accountability Act (HIPAA), Gramm-Leach-Bliley, California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR) passed in the European Parliament. It is important to be mindful of any data provided to a state or their representative as part of any unclaimed property audit or VDA. Companies need to ensure that their legal counsels are aware and proper measures are taken prior to sharing any sensitive data, including execution of non-disclosure agreements and business associate agreements with any parties that may be privy to this data.

Companies should continue to be aware of their compliance with state unclaimed property rules, especially as states continue to expand their definitions of unclaimed property and increase enforcement efforts. DHG’s team of professionals can help companies better understand and comply with unclaimed property regulations. We are a listed advocate firm for the Delaware SOS VDA program to help companies navigate this process. For more information on how DHG can help you with any unclaimed property needs, reach out to us at manufacturing@dhg.com.

 

References:

[1] Lima, Sara, Freda Pepper, Ashley Rivera. “Killing the Golden Goose: The Declining Health of State Unclaimed Property Programs.” Bloomberg Tax. Feb. 2, 2021.

[2] See https://vda.delaware.gov/ for more information regarding this process.

 

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