The Rules of Unclaimed Property – Interpreting Escheat Laws
If your organization issued a payment via check, but the recipient hasn’t cashed it in a year or longer, you might be wondering – “Can we write it off and keep the money?”
The short answer is no. According to U.S. Escheat Laws, unclaimed property that is held by a business entity, owed to a recipient, has had no recent activity or meets the required abandonment period must be sent to the state or “escheated.”
Examples of unclaimed property that often meet these criteria include unpaid wages, outstanding checks and accounts receivable credits. Real property is excluded. Additional information about unclaimed property and their abandonment periods can be found here.
If your organization is in possession of unclaimed property, it’s critical to know where, when and how to escheat it with the state.
Where to File
The U.S. Supreme Court determined that escheat returns and payments must be sent to the state where the property owner, or the entity that is owed money, last resided. If this address is unknown, the escheat returns and payments must be sent to the state where the property holder, or the entity that owes money, was incorporated.
For example, if your Texas-based organization issued a payment to a vendor residing in Florida, then your filing must be sent to the state of Florida. However, if the address of the vendor is unknown, then your filing must be sent to the state of Texas.
When to File
Filing deadlines vary by state.
Considerations for Texas Businesses
While most states’ deadlines are in the fall, Texas is one of two states with a summer deadline.
Predating Texas’ July 1 filing deadline, the lookback period in Texas ends on March 1 — meaning that unclaimed property meeting its required abandonment period before March 1 of a given year must be filed by July 1 of the same year.
Between March 1 and May 1, Texas requires the property holder to go through a due diligence process of trying to send the property owner their money. If the property owner accepts within this period, an Escheat filing is no longer needed. If not, the property holder must report and remit the amount to the state of Texas.
Additionally, unclaimed property holders incorporated in Texas may enter a Voluntary Disclosure Agreement (VDA) with the comptroller’s office through Texas’ Voluntary Disclosure Program. If your organization meets the qualifying criteria for a VDA, penalties and interest may be waived for unclaimed property past due over a lookback period of 10 years.
In addition to staying up to date as a potential holder, we recommend checking Texas’ unclaimed property website at least once per year to ensure that money owed to you has not been escheated.
Connect with SST today for help reporting and remitting unclaimed property.
