California Businesses Facing New Questions about Unclaimed Property on 2021 Tax Returns

This new legislation will be holding businesses operating in California accountable to State unclaimed property laws. Specifically, businesses will need to answer the following questions:

• Has the entity filed a previous unclaimed property report with the California State Controller’s Office?
• If so, when was the last report filed?
• On the last report, how much was remitted to the State?

These questions are included on the following tax forms: 100, 100S, 100W, 565 and 568.

According to a report issued in 2019, California estimates that only about 2% of eligible holders are following the State’s unclaimed property laws, which may explain the new questions. This is a significant development in California as now companies located in the state are facing additional scrutiny regarding their escheat compliance history. Based on a company’s responses, the company could be subject to a state or even a multi-state audit.

It should also be noted that California does not currently offer a Voluntary Disclosure Agreement (“VDA”) program to holders. Instead, the State charges 12% interest (per annum) for late property reported. While holders do have the ability to appeal any interest assessments issued, the State only tends to waive the charges under extraordinary circumstances.

If you are a business that operates in California and have never filed an unclaimed property return to California or believe that you may not be in full compliance with State laws, we urge you to take this new development seriously and prepare. One important step is to perform a diagnostic review of books and records to determine the extent of liability owed to owners in the state of California.

We have a team of experts at Clearview with many years’ experience in California unclaimed property law. We are available to answer any questions and point holders in the right direction.

Please contact Eric Mauldin for questions regarding this new development in California and for information on a diagnostic review.