PORTFOLIO

Unclaimed Property (Portfolio 1600)

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AUTHORS

KENDALL L. HOUGHTON, ESQ.

Kendall L. Houghton, Esq., is currently with Alston & Bird LLP. Kendall was a partner with the state and local tax practice group of Sutherland, Asbill & Brennan LLP, Washington, D.C. Previously, she was a partner with Alston & Bird LLP in Atlanta, Ga. From September 1993 through December 1997, Kendall served as General Counsel to the Committee On State Taxation (COST), a nonprofit trade association that represents the interests of approximately half of the “Fortune 1000” corporations. While at COST, she was responsible for the organization's legal affairs, overseeing its tax policy work (including major initiatives in the nexus and electronic commerce arenas), and conducting its judicial advocacy program (filing amicus briefs in numerous United States Supreme Court and state supreme court cases addressing state and local taxation). Prior to serving with COST, Kendall served as an associate in Alston & Bird's Atlanta, Georgia office. Kendall was also Editor in Chief of the ABA Section of Taxation's State and Local Tax Lawyer and is a member of the Advisory Boards of the National Institute on State and Local Tax, and the State Income Tax Alert, and Interstate Tax Insights publications. She is also a member of the Operating Committee for the National Tax Association – sponsored Communications and Electronic Commerce.

 

 

 

Credentials / A.B. degree (magna cum laude) from Harvard University, J.D. degree from the New York University School of Law, and LL.M. in Taxation from Emory University School of Law. Kendall is admitted to practice in Georgia and the District of Columbia.

 


JOHN L. COALSON, ESQ.

John L. Coalson, Esq., is a partner in the Atlanta law firm of Alston & Bird LLP, where his practice focuses exclusively on state and local tax matters. John is Past Chair of the State Bar of Georgia's Section of Taxation, and he continues to serve as the Taxation Section's Liaison with the Georgia Department of Revenue. He is also a member of the Executive Committee of the National Association of State Bar Tax Sections, and serves on the Advisory Board of the Paul Hartman State and Local Tax Forum at Vanderbilt University. In addition, John has served as an Adjunct Professor at Emory University School of Law, teaching courses in state and multistate taxation.

 

 

 

Credentials / B.B.A. degree (with highest distinction) from Emory University, and J.D. degree (summa cum laude) from the University of Georgia. John is admitted to practice in Georgia.

 


TABLE OF CONTENTS

Detailed Analysis

1600.01. INTRODUCTION

1600.02. DEVELOPMENT OF STATE UNCLAIMED PROPERTY LAWS

A. Early Common Law

B. Development of State Statutory Law

1600.03. DETERMINING WHICH STATE'S UNCLAIMED PROPERTY LAW MAY BE APPLICABLE

A. Introduction

1. Texas v. New Jersey

2. Pennsylvania v. New York

3. Delaware v. New York

4. Application of Priority Rules to Disputes Between a Holder and a Single State

B. First-Priority Rule: Claim by State of Owner's Last Known Address

1. Definition of Last Known Address

2. Whether a Holder Has a Duty to Review Its Records to Determine if It Has a Record of the Owner's Address

3. Whether a State May Use the Records of a Person Other Than the Holder to Establish a Claim Under the First-Priority Rule

4. Whether a State May Use Statistical Estimation to Establish a Claim Under the First-Priority Rule

5. Place-of-Purchase Presumption

C. Second-Priority Rule: Claim by State of Holder's Domicile

1. Definition of “Domicile”

2. Can Second-Priority State Claim Property Exempted by First-Priority State?

3. Can Second-Priority State Claim Property Owned by a Foreign Person?

D. Third-Priority Rule: Claim by State in Which Transaction Occurred

1. Problems in Application

2. Constitutional Issues

E. Can Any Other States Potentially Claim the Property?

1600.04. TYPES OF PROPERTY THAT MAY POTENTIALLY CONSTITUTE “UNCLAIMED PROPERTY”

A. In General

1. Derivative Rights Doctrine

a. The Holder's Obligation Is the Unclaimed Property

b. Fixed and Certain Obligation

2. Nature of the Underlying Obligation (Substance versus Form)

3. State “Catch-All” Provisions

4. Period of Presumed Abandonment

a. When Is Property “Payable or Distributable”?

b. Restarting the Dormancy Period

c. Constitutional Issues

B. Bank Accounts and Other Similar Accounts

C. Traveler's Checks and Money Orders

D. Securities, Brokerage Accounts, and Other Investment Properties

1. Summary of Standards Applicable to Shares of Stock

2. Publicly-Traded Stock

3. Brokerage Accounts and Investments

a. Overview

b. Applying Standards at an Account Level

c. Uncashed Dividends or Other Distributions

4. Mutual Fund Shares

E. Wages

F. Accounts Payable

G. Customer Credits and Credit Balances (Including Accounts Receivable Credit Balances)

H. Uninvoiced Payables

I. Insurance Proceeds

J. Employee Benefits

K. Retirement Accounts and Other Tax-Deferred Accounts

1. Overview of Federal Rules

2. Application of State Unclaimed Property Laws to IRAs

a. The 1981 Uniform Act Standard

b. The 1995 Uniform Act Standard

c. Other State Standards

(1) California

(2) Delaware

(3) Illinois

(4) New York

d. Considerations

L. Prepaid Cards

M. Rebates

N. Loyalty and Rewards Programs

O. Tickets

P. Class Action Settlement Proceeds

Q. Refunds

R. Coupons

S. Tangible Property

1600.05. POTENTIAL EXEMPTIONS AND DEFENSES TO ESCHEAT

A. De Minimis Property

B. No Consideration

C. No Obligation to Pay Cash to Owner

D. Failure to Satisfy Condition

1. Introduction

2. Failure to Demand or Present Document Required to Receive Payment

3. Waiver Doctrine

E. Property Owed to Other Businesses

1. Types of Property Covered by B2B Exemption

2. Ongoing Business Relationship Requirement

3. “Outstanding” Obligation Requirement

F. Foreign-Owned Property or Foreign Transactions

G. Property Not Held or Owed in Ordinary Course of Business

H. Right of Setoff

1. Setoff Claim May Be Subject to Applicable Statute of Limitations

2. Claim to Be Used as Setoff May Need to Be Liquidated

I. Voluntary Payment Doctrine

J. Statute of Limitations

1. Unclaimed Property Statute of Limitations

2. Non-Unclaimed Property Statute of Limitations

3. Federal Statutes of Limitations

K. Contractual Limitations (Expiration Dates)

1. Anti-Limitations Provisions

2. The Private Escheat Cases

3. Federal Contracts

L. Deductions of Fees/Charges From the Escheatable Amount

M. Laches

N. Acquiescence

O. Estoppel

P. Lack of Jurisdiction

Q. Other Due Process Issues

1. Multiple Liability

R. Takings Clause

S. Contracts Clause

T. Full Faith and Credit Clause

U. Federal Preemption

1. Federal Common Law

2. ERISA

3. National Bank Act

4. Bankruptcy Code

a. State Claims During or After Bankruptcy Proceeding

b. Unclaimed Excess Funds of the Bankruptcy Estate

5. Property Owed or Held by Federal Government

6. Federal Statutes of Limitation

7. Other (Airline Deregulation Act, Federal Aviation Administration Authorization Act, Interstate Commerce Commission Termination Act, Federal Telecommunications Act, Federal Acquisition Regulations, Federal Food and Drug Act)

a. Airline Deregulation Act

b. Federal Aviation Administration Authorization Act

c. Interstate Commerce Commission Termination Act of 1995

d. Federal Telecommunications Act

e. Federal Acquisition Regulations/Defense Federal Acquisition Regulations

f. Federal Food, Drug and Cosmetic Act

1600.06. WHO IS REQUIRED TO ESCHEAT THE PROPERTY?

A. Definition of “Holder”

1. U.S. Supreme Court Definition

2. Statutory Definitions

B. Multiple Holder Issue

1600.07. DUE DILIGENCE AND REPORTING

A. Due Diligence Requirements

1. Introduction

2. State Requirements

3. Threshold Amount

B. Filing an Unclaimed Property Report and Remitting Property

1. Introduction

2. Due Dates

3. Aggregate Reporting

4. Electronic Reporting

5. Negative Reports

6. Early Reporting

C. Retention of Records

D. Penalties for Non-Compliance

E. Statutory Indemnification

1600.08. POST-REPORTING ISSUES

A. Claims for Unclaimed Property That Has Been Remitted to a State

B. Owner Claims From Holder and Holder Reimbursement From State

C. Subsequent State Claims From Holder

1600.09. AUDIT ISSUES

A. Introduction

B. Engaging Counsel and Privilege Issues

C. Use of Third-Party, Contingent Fee Audit Firms

1. States' Perspective

2. Holders' Perspective

D. Scope of Audit

E. Confidentiality Issues

F. Reasonableness Requirement

G. Use of Statistical Sampling

1. Introduction

2. 1981 and 1995 Uniform Acts and State Laws

3. Challenges & Proposed Reforms to the Use of Estimation

H. Settlement

I. Administrative Appeal

1. In General

2. Delaware Administrative Appeals Process

J. Litigation

1. Sovereign Immunity and Ex Parte Young Doctrine

2. Exhaustion of Administrative Remedies

3. Seeking Declaratory Judgment

4. Federal Jurisdiction

1600.10. HOLDER OPPORTUNITIES

A. Voluntary Disclosure Agreement and Amnesty Programs

1. In General

2. Delaware VDA Program

B. Planning Opportunities


WORKING PAPERS

Working Papers

Item Description Sheet

Worksheet 1 Uniform Disposition of Unclaimed Property Act (1954)

Worksheet 2 Revised Uniform Disposition of Unclaimed Property Act (1966)

Worksheet 3 Uniform Unclaimed Property Act (1981)

Worksheet 4 Uniform Unclaimed Property Act (1995)

Worksheet 5 U.S. Supreme Court DELAWARE v. NEW YORK, 507 U.S. 490 (1993)

Opinion

Worksheet 6 U.S. Supreme Court PENNSYLVANIA v. NEW YORK, 407 U.S. 206 (1972)

Opinion

Worksheet 7 U.S. Supreme Court TEXAS v. NEW JERSEY, 379 U.S. 674 (1965)

Opinion

Worksheet 8 State Unclaimed Property Offices

Worksheet 9 State Unclaimed Wages Laws — Comparison Chart

Worksheet 10 Business-To-Business Exemptions

Worksheet 11 Due Diligence Requirements

Worksheet 12 Reporting Requirements

Worksheet 13 Unclaimed Property Law Cheat Sheet