As the nation began shutting down businesses, sheltering in place, closing schools and working from home, state unclaimed property offices followed suit with many closing their offices to the public and delaying claims processing. The states, however, have been somewhat slow to respond to unclaimed property reporting concerns due to COVID-19.
Unlike the Internal Revenue Service who issued a blanket extension for all taxpayers, most of the states are requiring holders to file extensions if they cannot report on time. Pennsylvania and Massachusetts are two states that offer blanket waivers but unfortunately, very few states seem to be following their lead. This has been troublesome for the spring state reporting since some states require a notarized form sent in with their report (on CD). With social distancing and employees working from home, these types of requirements can be very challenging.
Many industry groups such as the Unclaimed Property Professionals Organization (UPPO), the Securities Transfer Agency (STA), and the Shareholder Services Association (SSA) have reached out to the National Association of Unclaimed Property Administrators (NAUPA) to express concerns about COVID-19's impact on their member’s ability to comply with state unclaimed property laws; specifically the lack of blanket waivers for late reporting and potential issues with due diligence requirements. While NAUPA leadership appears to be in favor of a blanket waiver, they do not have the authority enforce such a policy over all states; they can only make the recommendation. NAUPA has created a page to compile state extension and other relevant information in one location that can be found here.
There are a few states that have provided some guidance to UPPO in response to specific questions that were sent through NAUPA. Regarding the issue of blanket waivers, Texas responded that they do not have the statutory authority to waive the due date of their unclaimed property reports, however they will consider waiving the penalties and interest for late reports on a case by case basis. Kansas has agreed to an automatic extension of safe deposit box contents reporting from November 1, 2020 to January 1, 2021 and Texas does not want any safe deposit contents delivered until the situation improves. UPPO is also maintaining a blog post with various state updates to help members stay up to date with the latest state developments. That specific blog post can be located here.
To further complicate unclaimed reporting concerns and more specifically, due diligence concerns, the U.S. Postal Service has issued a Temporary Service Suspension. Because of the widespread transportation cancellations and restrictions, the Postal Service will temporarily suspend international mail service to several countries. The list of countries impacted by the suspension is updated daily by the Postal Service and can be found here.
Mail that has already been routed to one of these countries should be returned to the sender with the marking “Mail Service Suspended – Return to Sender.” While the states have not provided any guidance on sending due diligence letters to one of these foreign countries yet, it would be logical that if one of these items are returned with this marking, that the account NOT be coded as a return mail account. This further raises the question about escheating accounts presumed abandoned in one of these countries that cannot be served a due diligence letter. Should the account be suspended for a complete cycle until due diligence can be completed? Should the account be escheated without sending the due diligence letter? Again, UPPO, the STA and SSA have reached out to NAUPA for much needed guidance on this issue. It should also be noted that according to the U.S. Postal Service website “unless noted otherwise on International Service Alerts, service suspensions to a particular country do not affect delivery of military and diplomatic mail.”
According to one survey, Michigan responded informing holders that due diligence to one of the suspended countries should be completed as soon as the restriction is lifted, however the escheatment process should not be delayed. The due diligence letter will aid in helping the owner know what state to reach out to in order to file a claim for their assets. This has the potential of being a very unfortunate situation if the property escheated is a security and the state liquidates prior to the owner being able to reclaim it.
State information regarding COVID-19 changes frequently, and often daily. Most recently, California published a holder notice that the June 1 – 15 period for holders to submit their final reports and remittance for properties on the 2019 Notice Reports is extended to August 15, 2020. California is also willing to work with holders to accept a CD of the final file and an emailed confirmation page rather than sending the data through the postal system.
The virus has caused changes on a scale that we have not seen before. It is likely that holders of unclaimed property will continue to face challenges regarding unclaimed property compliance over the coming months. Georgeson continues to monitor all the COVID-19 impacts on unclaimed property reporting and will send out alerts as necessary to keep holders informed. For additional questions regarding this article, please contact Dana Terry at 201-539-1998 or dterry@georgeson.com.