Illinois has overhauled their unclaimed property law with the passage of Senate Bill 9 and Senate Bill 868 in 2017 (effective January 1, 2018). Initially, SB 9 was enacted on July 6, 2017 as part of the overall budget package, however provisions in the new law created a great deal of confusion for those responsible for reporting unclaimed property as well as consultants and legal professionals. In response, Illinois passed trailer bill SB 868 to provide corrections and clarity surrounding SB 9.
Some of the significant changes to the Illinois unclaimed property law included:
- Updated dormancy periods
- New reporting requirements for securities
- Accelerated dormancy periods for deceased owners
- Clarifying owner interest
- Transitional provision
The compliance date of January 1, 2018 continues to be a concern for the holder community because of the time involved in updating systems, testing, and ensuring the property due diligence letters go out in time for the spring reports. This is especially a concern with the new accelerated presumption of abandonment requirements for deceased owners.
During Georgeson's recent webinar on the changes (now available on-demand) the state clarified that the Treasurer’s office is more interested in compliance than creating a “gotcha” situation for holders.
Other highlights include:
Interest/penalty waivers: The Treasurer may waive interest and penalties for holders that are demonstrating a good faith effort to comply with the new law. Additionally, the Treasurer is prohibited from charging interest and penalties if the only reason property has not been escheated is the lack of knowledge that an owner is deceased. A public announcement from the Treasurer’s office is expected with details on how holders should demonstrate their “good faith effort” to comply and how to request an extension.
Transitional lookback periods: Another “hot topic” coming out of the new legislation is the transitional (lookback) period of five years. This requires reporting of any property that would have been reportable in the past five years, even if the property was exempt under the old Act. Since most of the dormancy periods in the new act are now three years, this would result in a total lookback period of eight years. Any property that was not reported prior to January 1, 2018 is now reportable under the provisions of the updated law. Where businesses previously had an exemption in Illinois for property belonging to businesses in which they regularly do business (B2B exemption), that property is now escheatable.
Report due dates: The reporting language in SB 9 also created a great deal of confusion regarding the actual report due dates, particularly for financial institutions and investment companies. The state confirmed that the intentions of SB 9 were not to change any of the reporting due dates. The trailer bill clarified the report due dates, but did not fix the dates for investment companies. Therefore, banks and financial institutions will continue to report in the fall but investment companies are not subject to the May 1 filing deadline. This created an additional complication for investment companies that are required to file six months earlier than normal and comply with the decreased and split dormancy periods, in addition to the new deceased owner requirements.
Presumption of abandonment for securities: llinois is the first state to pass a law that splits the presumption of abandonment period for securities into multiple categories. Securities will now be escheatable based on 3 years of bad address or 5 years of inactivity; whichever comes first. If the owner is deceased the property will be escheatable two years after the date of death of the owner.
Georgeson hosted a webinar "Illinois Unclaimed Property Reform" in January on these topics and more, to bring information directly from the state representatives to participants.
The state panel for the webinar included:
- G. Allen Mayer, General Counsel, Illinois State Treasurer
- Gwen Drake, Assistant General Counsel, Illinois State Treasurer
- Rick Cory, Manager for Unclaimed Property Compliance, Illinois State Treasurer
You can view the full webinar on-demand via the link below.
For more information, please contact Dana Terry at dterry@georgeson.com. You may also sign up to receive our UP Alerts to stay up to speed with legislative updates.