BEST PRACTICES &
PREPARATION TIPS FOR
UNCLAIMED PROPERTY
REPORTING
Pamela Wentz, Director
Agenda
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Unclaimed Property Reporting Overview
Holder Duties
Common Reporting Errors
Requirements for Royalties
Best Practices
1099 Reporting
Questions & Answers
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Unclaimed Property 101
• Definition– Financial assets that have had no owner-generated
contact after a specified period of time, usually 3-5 years
• Roots are in English common law:
• Escheat vs. Custodial
• Governed and enforced at the state level
• Fifty-four (54) reporting jurisdictions including, DC, Puerto Rico,
Guam and U.S. Virgin Islands:
• No two laws are exactly the same
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Rules of Jurisdiction
• Texas v. New Jersey 379 U.S. 674 (1965)
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State of owner’s last known address
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State of holder’s incorporation or domicile if address not known
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*State of holder’s incorporation or domicile if address of apparent owner is
in a foreign country and if holder is incorporated or domiciled in the U.S.
*Provision added in the 1981 Uniform Act
Note – after nearly 40 years this remains the law of the land today
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Filing a Report
Why Should You Care?
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It’s the law!
Generally no statute of limitation
Historically an area that has been overlooked
States estimate 70-90% general ledger out of compliance
Increasing audit activity
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Potential for significant penalties
Reputational risk
Sarbanes-Oxley Section 302 & 404
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Know the States, Know the Dates
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Identifying Applicable Property
Types
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Un-cashed checks
Deposits
Customer credits
Refunds
Unapplied payments
Dormant accounts
Payroll
Accounts receivable
Accounts payable
Retirement assets
Workers’ Comp
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Mineral proceeds/royalties
Bonus
Delay rentals
Matured bonds
Un-exchanged shares
Unpaid dividends
Underlying stock
Other general ledger items
Tangible property - Safekeeping
Commissions
Rebates
Unidentified cash/credits
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Quantify the Potential Liability
• Identify periods where detailed records are available
• Review records and schedule items that are potential unclaimed
property
• Research items to determine if they represent a fixed and certain
obligation
• Identify royalties in escheat status
• Review suspense accounts for aged items that might not be designated
as escheatable
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Dormancy Decisions
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Date of last activity/contact
Production date
Issue date
Date returned from Post Office (RPO)
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Reporting Owner Information
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Complete name and last known address
Social Security Number, if known
Account number
Amount
Property type
Description of property
Joint ownership or custodial information
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Filing a Report
Know the filing requirements by state
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Are you required to file electronically?
Is a cover letter required?
Must the cover letter be notarized?
How should the funds/shares be delivered?
Can you upload via the state Web site? Is there a cost?
Do you need to send a paper copy of the report?
Who in your company must sign the report? CEO? CFO?
Does the state require a negative report if there is no reportable
unclaimed property this year?
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Holder Responsibilities
• Duty to file a timely report
• Duty to perform due diligence timely
• Duty to file in state mandated format
• Duty to maintain copies of the reports and supporting documentation
• Duty to protect the funds until reported and transferred to the state
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Holder Responsibilities
It is imperative for holders to ensure they are not
• Under reporting
• Over reporting
• Failing to report entirely
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Holder Responsibilities
• Holder is required to report and remit every applicable property
type generated by the organization and adhere to the unclaimed
property laws and requirements for the appropriate reporting
jurisdictions.
• Unless otherwise identified by contract, the legal obligation to file
the report remains with the holder.
• If a holder fails to reunite the dormant asset with the owner, heir or
beneficiary, the holder is required to file an unclaimed property
report with complete details of all reportable property.
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Common Problems Organizations
Face When Filing Reports
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Making incorrect dormancy decisions
Formatting names incorrectly
Using incorrect property codes
Failing to submit complete owner information
Placing data in incorrect fields
Creating multiple payments for a single report
Sending reports without payments
Sending payments without reports
Aggregating property incorrectly
Failing to identify joint owners
Reporting only to the state of incorporation
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1995 Uniform Act
• Section 1(8) defines “mineral”
• Section 1(9) defines “mineral proceeds”
• Section 25(c) prohibits finders from claiming a portion of the
underlying minerals or mineral proceeds not yet abandoned
• Section 2(b) – current balance rule
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Organizational Structure
• Identifying which entities have the legal obligation
or are the holders of the unclaimed property
• Partnerships and joint ventures
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Suspense Accounts
• Aging items held in suspense
– Date of last contact v. production date
• Classifications
– Unsigned division orders
– Title disputes
– Deceased Owner
– Bad Address
– Miscellaneous
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Current Pay
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Definition of current pay
Discussion of “rollup” concept
Discussion of “pay to current”
Current pay states
New Texas rules
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Current Pay?
At the time that an interest is presumed
abandoned under subsection 1, any other
property right accrued or accruing to the owner
as a result of the interest, and not previously
presumed abandoned, is also presumed
abandoned.
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Forced Pooling
• Oklahoma
– Applies to mineral owners whose mineral interest was
forced pooled on a well located in Oklahoma
– Within year of pooling, the Holder must report and remit
funds to Oklahoma Corporation Commission
– Funds are transferred to the Unclaimed Property Division
after the dormancy period has passed
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Texas – Mineral Proceeds
• Do not aggregate
• Do not include owners with a net negative balance
• Do not report owners if you have had contact in the last
three years
• Current pay
• Each owner listed once – combined total
• Report continuing production payments with property
type code MI10
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Best Practices – Create a Timeline
Fall Begins in Spring
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May/June – File delivery
July – Due diligence
August/September – Process due diligence returns
September – Prepare preliminary reports and confirm totals
October – Prepare final reports and transfer assets
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Best Practices - Gather Relevant Data
• Corporate Structure
– Owner unknown property to the state of formation
• General Ledger / Chart of Accounts
• Bank Reconciliations / Outstanding Check Lists
• Journal Entries
• Accounts Receivable & Payable Aging Reports
• De-Minimis / Automatic system write-offs
• Contracts w/applicable service providers
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Best Practices – Review Suspense
• Review suspense codes
– Which codes quality for escheat?
– Does status need to be changed to escheat?
– Are codes used properly?
– Are any codes problematic?
• Review aged items
– Pull a report by production date
• Minimum Suspense
– Identify amounts not released
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Best Practices - Perform a Self Review
• Analyze corporate structure
• Understand and document the current and historical policies and
procedures
• Document and review historical unclaimed property reporting history
• Identify potential types of unclaimed property your company may
generate
• Quantify the potential liability for each property type
• Research items to verify that they are unclaimed and pay owner where
possible
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Best Practices – Stay Current
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Be aware of legislative changes that impact your industry
Participate in industry associations that represent your interests
Review state filing instructions annually
Update your policies and procedures
Include new lines of business in procedures and reporting
Include unclaimed property compliance in due diligence of acquisitions
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Best Practices – 1099s
PROCESSING IRS NOTICE CP-2100A FOR MISSING OR INCORRECT
NAME/TINS
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CP-2100A received from IRS
Review accounts to determine if resolution is possible
Prepare and mail 1st “B” Notices with W-9 to owners, when applicable
Prepare 2nd “B” Notices for owners previously placed on backup
withholding due to prior notification
• Owners accounts noted in computer system as to type of notice issued
• Update accounts as owners provide documentation to correct
discrepancies
• After applicable waiting period for 1st “B” Notices, unresolved
accounts are placed on backup withholding
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Best Practices – 1099s
PROCESSING IRS PENALTY NOTICE
• Penalty Notice 972CG received from IRS
• Review accounts to determine if accounts have been resolved
• Issue 2nd “B” Notices to owners previously placed on backup
withholding
• Owner’s accounts noted that 2nd “B” Notice has been issued
• Correct any accounts for which a SSN printout or IRS Letter 147C
is received
• Corporate office drafts letter to IRS to request waiver of
proposed penalties
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Best Practices – 1099s
MONTHLY TIN MATCHING TO REDUCE IRS PENALTY EXPOSURE
• IT department provides listing of owners who received a
payment during current month
• Upload file to IRS website for processing
• IRS returns file indicating the accounts with TIN/Name
discrepancies
• Review the list to determine if any accounts can be resolved
immediately
• Contact owners whose TIN discrepancy remains unresolved
to request W-9 or name verification
• Update accounts as owners provide documentation to
correct discrepancies
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Best Practices – 1099s
ANNUAL TIN MATCHING TO REDUCED IRS PENALTY EXPOSURE
• IT department provides listing of owners who will receive
Form 1099-Misc.
• Upload file to IRS website for processing
• IRS returns file indicating the accounts with TIN/Name discrepancies
• Review the list to determine if any accounts can be resolved immediately
• Contact owners whose TIN discrepancy remains unresolved to request
W-9 or name verification
• Update accounts as owners provide documentation to correct
discrepancies
• Issue corrected Form 1099-Misc. to owners who provide
updated TIN information
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Question and Answers
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Contact Information
Pamela Wentz
Director
pwentz@KeaneUP.com
701-222-0134
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