Unclaimed property: update from the front line.

• Author: Hopkins, Chris

States continue to collect revenues through aggressive enforcement of unclaimed property laws; recent developments present opportunities and risks for businesses that hold unclaimed property.

Even as the economy improves and states fill their coffers from more traditional revenue sources, many continue to turn to their abandoned and unclaimed property (AUP) laws to drum up additional funds. No state has generated more heat over the propriety of its audit methods than Delaware, the state of incorporation for numerous U.S. companies, yet other states are following its aggressive lead. They are hiring more contract auditors and widening their focus from large companies to smaller and different types of businesses. In Ohio, for example, even small medical practices have come under audit.

It is critical, therefore, that businesses of all shapes and sizes stay up to date on changes in the AUP arena. There have been some encouraging developments for businesses holding AUP, as Delaware's methodologies have come under some well-grounded and successful assaults of late. But it is not all good news.

Unclaimed Property in a Nutshell

AUP generally is defined as property held or owing in the ordinary course of business that the owner has not claimed for a certain period. AUP can include uncashed payroll and vendor checks, unapplied accounts receivable credit balances, dormant bank and brokerage accounts, unredeemed gift certificates and gift cards, life insurance policies, publicly traded securities with "lost" owners, customer refunds and rebates, benefit plan payments, and the contents of safe deposit boxes. The scope of the definition seems pliable, and it is not unreasonable to expect that states might attempt to expand AUP in the future to target areas such as the customer loyalty programs common to hotels, airlines, and some types of retailers.

Every state, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and some foreign countries have AUP laws. The laws generally require businesses holding AUP (holders) to turn it over to the state after the dormancy period expires. States ostensibly hold AUP in a custodial capacity until the rightful owner claims it, but often AUP eventually is treated as revenue in state budgets. In Delaware, AUP actually goes directly into the general fund and is not removed unless an owner makes a claim.

Most state AUP laws, including those based on the Uniform Unclaimed Property Act of 1981 or the...