California Unclaimed Property Amnesty Program in Full Swing

Background

Unclaimed property refers to certain types of “intangible property” (e.g., uncashed checks, stocks, refunds, customer overpayments, etc.) that a business owes to its employees, customers, vendors, creditors, or shareholders when there has been no activity or contact with the owner of the property for a specified period of time (“dormancy period”). After the dormancy period has lapsed – three to five years for most property types – the property becomes “unclaimed” and must be turned over to the state of jurisdiction. All U.S. states and territories have enacted unclaimed property laws.

To increase compliance with existing unclaimed property reporting requirements, California previously enacted Assembly Bill 466, which authorized the addition of queries about required annual unclaimed property compliance on certain California business tax forms. The law also authorized the Franchise Tax Board to share responses with the State Controller’s Office to identify non-compliant entities and conduct outreach efforts to boost unclaimed property compliance. The questions, which are included on California Forms 100, 100S, 100W, 565, and 568, read as follows (below excerpt from 2024 CA Form 100):

DD 1. Has this business entity previously filed an unclaimed property Holder Remit Report with the State Controller’s Office? • □ Yes □ No  
2. If “Yes,” when was the last report filed? (mm/dd/yyyy) • __________________
3. Amount last remitted •  $_____. __

To help ease the burden on companies to become compliant with California’s unclaimed property laws, the state enacted Assembly Bill 2280. The bill created a voluntary compliance program (VCP) for unclaimed property that allows companies to become compliant voluntarily without incurring the annual 12% interest assessment on any past-due unclaimed property remittances.

VCP Program Eligibility

The VCP Program requires the following for eligibility:

• The holder cannot be the subject of an examination or cannot have received notice of an examination of unclaimed property;
• The holder cannot be the subject of a civil or criminal examination related to compliance with the state’s unclaimed property statutes;
• The holder cannot have had an interest assessment under unclaimed property statutes within the past five years that remains unpaid. A holder may enroll after resolving the interest assessment; and
• The holder cannot have had an interest assessment waived by the Controller in the past five years.

If companies have not entered the VCP program and continue to answer “No” to the new unclaimed property question on their tax forms, they may be at increased risk of audit.

Companies wishing to participate in the program must complete a VCP application. Once approved, participants will receive an enrollment letter from the California State Controller’s office that outlines unclaimed property reporting deadlines, responsibilities, and requirements that are contingent upon the enrollment date.

Program Benefits

The primary benefit of the VCP is that all interest on past-due property is waived, provided holders comply with the following program terms:

• At least two company employees must take part in a two-hour state-provided unclaimed property educational webinar within three months of being accepted into the program;
• Review books and records for the previous 10 reporting years;
• Provide notification to owners of unclaimed property no less than 30 days before submitting the notice report required under the program;
• File an initial notice report within six months of the date of acceptance. Extensions may be requested to postpone the reporting date for a period not to exceed 18 months after the date the holder was notified of enrollment in the program; and
• Submit a final remit report no sooner than seven months and no later than seven months and 15 days after the initial notice report, including full payment.

Failure to meet the above timelines authorizes the controller to reinstate all applicable interest assessments.

Considerations

It is imperative that all companies not currently compliant with California’s unclaimed property laws that are (1) filing tax returns in California, (2) have entities formed in California with California operations, or (3) have significant customers, vendors, or employees in California, proactively evaluate its unclaimed property compliance and strongly consider enrolling in the VCP to avoid potential audit and to waive interest on unpaid amounts.

Please note the following when considering entering the VCP:

• Entities that are incorporated or formed in California may be required to report to the state not only California-addressed property, but foreign (outside the U.S.) addressed property, as well as unknown addressed property.
• If complete records are not available for the entire 10-year look-back period, California may require an estimate of liability for those periods where records are not available.
• Companies with no history of filing unclaimed property reports are encouraged to undergo an internal review to assess their potential liability and confirm or establish unclaimed property compliance policies and procedures.
• Companies with a history of mergers or acquisitions may have acquired successor liability for unreported unclaimed property of the acquired entity.

Let our experienced team of unclaimed property professionals help your company navigate the California VCP and mitigate potential exposures. 

Contact Kellie Lanford Clark or Michael Goldman in the CBIZ National State & Local Tax Practice for additional details.