Unclaimed property is property that belongs to an outside third party/person. Unclaimed property can be in the form of an uncashed payroll check, an uncashed payable check, unused gift certificates and/or credit balances on an account. These items are often sitting on the books of one entity (the holder), but they rightfully belong to another person/entity. The holder has the responsibility to find the rightful owner, and if the owner cannot be located, report and remit the funds to the state for holding until the rightful owner comes forward.
One of the issues with unclaimed funds is that many businesses will take these funds into income not realizing they have a responsibility to try and return them to the rightful owner. Another issue with unclaimed funds reporting is to what state are the funds required to be remitted, and when are the funds required to be remitted. Gift certificates and gift cards also pose a significant challenge in the area of unclaimed funds.
The area of unclaimed funds is increasingly becoming an important part of state and local taxation. As states continue to need additional revenue, they are turning their attention to other areas to generate this revenue, and unclaimed fund efforts are becoming important. The unclaimed funds collected by the states belong to the owner; but generally, the interest generated from the investment of the funds until claimed belongs to the state—and very few states pay interest to the rightful owners of the funds. Over the last few years, there have been significant court cases in this area, and the state of Delaware has been offering amnesty for back unclaimed funds filing.
Unclaimed funds reporting is often not addressed thoroughly by businesses. Businesses will often address the reporting of stock certificates and uncashed dividend checks; yet the other areas, such as payroll, accounts receivable and accounts payable, are not reviewed and reported.
Skoda Minotti’s state and local tax (SALT) team can assist in the following aspects of unclaimed funds: