Significant developments in unclaimed property laws have turned settled expectations upside down in a variety of areas. While states continue to press forward on audits, new legislation, new regulation and litigation across the country are shifting the rules in this already uncertain area. Companies under audit face difficult choices ahead, and those not (yet) under audit face an uncertain risk and compliance landscape. This webcast will examine recent trends and what to expect moving forward. Topics include:

·        trends in audits, legislation and regulation
·        IRA reporting under new IRS guidance
·        gift cards and False Claims Act issues
·        other litigation highlights
·        emerging unclaimed property issues

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There’s never a dull moment in Delaware when it comes to unclaimed property. The latest salvo comes by way of a lawsuit filed by the Delaware Department of Finance against Blackhawk Engagement Solutions (DE), Inc. (formerly known as Parago, Inc.), a provider of rebate, reward and incentive programs to retailers and other client companies. As part of an unclaimed property audit being conducted by Kelmar Associates, the Department is seeking to enforce a summons and obtain access to client contracts, uncashed rebate check amounts returned to clients, and the particulars of the rebate checks and payees. The complaint alleges that more than 300 retailers use Parago for rebate fulfillment assistance. 

View the full Legal Alert.

We are pleased to announce that Amy F. Nogid has joined Sutherland’s State and Local Tax (SALT) practice as counsel in New York. Prior to joining Sutherland, Amy was of counsel at Morrison & Foerster LLP.

Amy represents clients in all aspects of state and local taxation matters at the administrative, trial and appellate levels, including the U.S. Supreme Court. She brings a wealth of knowledge in the areas of New York State and New York City tax issues, litigation and controversy matters, voluntary disclosures and multistate planning.

As a former assistant chief in the Tax and Bankruptcy Division of the New York City Law Department for more than 12 years, Amy brings extensive knowledge of a broad range of taxes, including income, franchise, sales and use, excise and other transaction-based taxes. She has also advised industry-leading clients across the country in unclaimed property matters, such as the treatment of virtual payables, gift cards, uncashed rebates and payroll cards.

Proposed revisions to the Uniform Unclaimed Property Act were under debate this past week in Washington, DC as the Uniform Law Commission Committee to Revise the Uniform Unclaimed Property Act continued the process of crafting a new Uniform Act. The Drafting Committee focused on seven priority issues, including (1) the definition of address; (2) gift cards and stored value cards; (3) life insurance; (4) securities; (5) presumptions of abandonment; (6) definition of holder; and (7) burden of proof.

View the full Legal Alert.

By Kathryn Pittman and Jack Trachtenberg

On April 17, 2013, Select Medical Corporation (Select Medical) filed suit in federal district court seeking to enjoin Delaware from enforcing an unclaimed property assessment issued for years that had been resolved already through the state’s voluntary disclosure program. In 2006, Select Medical entered into Delaware’s voluntary disclosure program for the years 1997-2001. As part of the voluntary disclosure process, Select Medical escheated approximately $17,000 to Delaware and paid approximately $300,000 in unclaimed property to states other than Delaware. On the same day that Delaware cashed Select Medical’s escheatment check, it notified the company that it was being placed under audit. Using a third-party auditor, Delaware demanded payment of $297,436 for the period 1997-2001 based on an estimate that looked to the amount of property owed to other states from 2002-2008. Unable to resolve the matter with the state, Select Medical commenced a lawsuit and sought injunctive relief against the demand for payment, alleging that Delaware exceeded its authority under state law by estimating an unclaimed property liability through extrapolation of amounts paid to other states for a different period, even though Select Medical had actual records from which any liability could be determined and the owners of any unclaimed property identified. Select Medical also alleged a variety of federal common law and constitutional violations. Given Delaware’s position as one of the most aggressive states in enforcing unclaimed property law, the trajectory of this litigation will be important, especially given the recent trend toward more aggressive unclaimed property enforcement in all states. Taxpayers who have previously entered into voluntary disclosure agreements or who are contemplating doing so should pay close attention to this case as it may frame new powers for the states with respect to escheatment. Select Medical Corp. v. Del. Sec’y of Finance, Del. Dir. Of Rev., & Del. State Escheator, Case No. 1:13-cv-00694-UNA (D. Del. Apr. 17, 2013).

New Jersey amended its escheatment laws on June 29, 2012. Some of the notable amendments include:

  1. Extending the period for which no activity is deemed to be considered abandoned from two years to five years;
  2. If a balance of less than $5 remains on a gift card, issuers are required to refund the balance in cash at the card owner’s request;
  3. Funds on stored-value cards sold on or after December 1, 2012 shall not expire;
  4. No fees shall be charged on a stored-value card except for an activation and replacement fees; and
  5. New Jersey’s requirement for issuers to collect customers’ names and addresses is delayed for 49 months.

A copy of the bill is available here.


North Carolina

North Carolina H.B. 692 contains several important, and somewhat disconcerting, changes for unclaimed property holders. The bill provides that for amounts due to the apparent owners of intangible property valued at $50,000 or more, holders must report the following information with respect to the owner: “full name, last known address, SSN or TIN, date of birth, driver’s license or state identification number, email address…a description of the property, the identification number, if any, and the property amount.” If amounts are held or owing under an annuity or life or endowment insurance policy, a holder must report “the full name and last known address, SSN or TIN, date of birth, driver’s license or state identification number, and email address of the annuitant or insured and of the beneficiary.” The Bill further provides that the dormancy period for “wages or other compensation for personal services” is reduced from two years to one year


At the end of the 2011 Delaware legislative session, H.B. 229 was introduced. If enacted, the bill will make significant revisions to the Delaware Unclaimed Property Law. First, the “look back” period for a state-initiated audit could not extend to “any calendar year prior to 1995.” This bill will trim 14 years off of an unclaimed property look back period (which is currently 1981).

Second, with respect to any holder who enters into a Voluntary Disclosure Agreement (VDA) with the state, the state would be precluded from conducting an audit or examination of records, or from “seeking payment of any amounts of property,” for any calendar year prior to 2001. This provision shortens Delaware’s VDA “look back” authority by 10 years.

Third, the legislation requires the state to be timely in any request for payment from a holder. Currently, there is a six-year limitations period in which the state may request payment after receipt of any report. H.B. 229 would limit the period to three years. However, the bill also provides that “if no report is filed or if a holder has filed a fraudulent report,” the state may make a “request for Payment” to the holder at any time.

The bill has been assigned to the House Judiciary Committee for review, which will begin when the legislature is back in session in January.


In addition to A Pinch of SALT (our monthly State Tax Notes column on hot issues in state and local tax), Sutherland SALT regularly publishes UPwords, which covers the latest developments in unclaimed property. In this edition of UPwords, we focus on a new form of digital property—the online prepaid discount voucher, such as those sold by Groupon and LivingSocial—and evaluate the unclaimed property issues it raises. 

Read “Prepaid Discount Vouchers: The Not-So-Final Frontier,” reprinted with permission from the May 16, 2011 issue of State Tax Notes.


Indiana just launched a new unclaimed property compliance enforcement effort that is bringing unwelcome news to some holders. In early April, Indiana sent out formal notices to holders indicating that fines could apply for failure to timely report and remit unclaimed property. In some cases, not only did holders receive the warning notice, but also an actual assessment and invoice reflecting the threatened fines. The letters accompanying these assessments indicated that the holder has 60 days to pay the assessment, including the fine, or demonstrate to the Indiana unclaimed property authorities that the assessment was incorrect. Adding salt to the wound, the letters indicated that failure to comply may subject the company to an audit.

Idaho, on the other hand, recently passed a law that eases the compliance burden associated with reporting unclaimed corporate securities and related distributions. HB 174 (effective July 1, 2011). Idaho’s new law makes two major changes to corporate securities reporting: (1) a requirement that the owner is actually “lost” before the dormancy period commences, and (2) clarification of the requirements for reporting unclaimed dividends paid pursuant to dividend reinvestment program accounts (DRIP accounts).

Continue Reading The “I’s” Have It: Indiana and Idaho Unclaimed Property Developments

Sin City, Lost Wages, Glitter Gulch, or just plain old Las Vegas. What immediately comes to mind? Probably not unclaimed property. But the state of Nevada has finally discovered a way to add insult to injury by requiring unclaimed property holders (e.g., casinos) to remit uncashed “wagering instruments.”

On March 1, 2011, the Nevada Legislature introduced Assembly Bill No. 219. This bill, if passed, would add the following property type and dormancy period to the state’s unclaimed property law reporting and remittance requirements: Any wagering instrument, one year after the wager is placed, unless the Nevada Gaming Commission specifies by regulation a different period in which the wagering instrument must be redeemed is presumed abandoned.

Continue Reading Unclaimed Property…Nevada is Betting on a Sure Thing