State enforcement of this area has become aggressive. It is not uncommon
for a business to be audited by 10 or 20 states at a single time, typically
through “bounty hunters” hired by the state who are paid a percentage of the
unclaimed property they collect. Further, because ownership of the property
remains with the true owner and because the states’ rights derive from the
true owners, many states treat their ability to take custody of unclaimed
property as not being subject to any statute of limitations.
Fortunately, experience has shown that there are many ways to reduce
exposure for the liabilities. Obviously, complying with remittance
requirements for future periods is essential. In addition, liabilities from back
periods may not be as great as they initially appear once transactions are
properly classified and analyzed, in part because many states exempt
selected transactions from their remittance requirements. For example,
some states exclude from their unclaimed property laws any unclaimed
property originating in transactions between businesses. Finally, businesses
that come forward voluntarily, on an anonymous basis through their
attorney, often receive favorable terms from the states. These terms can
include the waiver of interest and penalties.
This Alert provides an introduction to American unclaimed property laws.
For further information and assistance with state and local tax issues
anywhere in the United States, please contact David A. Fruchtman at
04-629-0520 or 312-281-1111.
*Adapted from the author’s annual lecture on the subject to New York University’s Summer
State and Local Tax Institute.