Unclaimed assets bill halted, sponsor says needs more work

By John Breslin | Apr 30, 2018

SACRAMENTO – A bill designed to stop California businesses being penalized for holding unclaimed assets has been put on hold as its sponsor believes it needs more work.

SACRAMENTO – A bill designed to stop California businesses being penalized for holding unclaimed assets has been put on hold as its sponsor believes it needs more work.

Assembly Bill 2773 would create a voluntary disclosure agreement (VDA) program to allow those holding unclaimed property to reveal them to the state without being penalized.

Unclaimed assets, or property, includes payroll checks, refunds, accounts receivable, credit balances, bank accounts, customer over payments, money orders, traveler’s checks and insurance proceeds.

Under California law, if a business has assets or monies belonging to an individual that remain unclaimed for a set period of time, they have to be turned over to the state. The state then is obligated to find the individual and pass on the assets. 

The state controller's office estimates that around 900,000 filers in the state are not in compliance and that some $12 billion in monies and assets should have been sent to the state.

Businesses must hand over those assets and property to the state after three years. It is then up to the state to find and reimburse individuals or companies. Companies face penalties of 12 percent per annum for every year of non-compliance.

Assemblyman Dante Acosta (R-Santa Clarita) introduced a bill this year designed to allow companies to return assets without facing those penalties.

"I proposed AB 2773 after a conversation with a constituent who is an accountant in my district," Acosta told the Northern California Record.

Acosta added, "The bill would create a Voluntary Disclosure Agreement (VDA) program similar to what a number of other large states such as Texas, New York and Pennsylvania have. By creating the VDA program, small businesses could apply to the program and, if accepted, send all unclaimed property without facing penalties.

"The bill also says the state would review 10 years of the business’ records to 'ensure there are no other problems that need to be addressed,'" Acosta said. "This would ensure that bad actors who are purposefully trying to avoid their duty to the state are not allowed to avoid penalties and interest.

“I decided to pull the bill for this year because there is still much work to be done to craft a system that works for both the controller’s office and private industry," he said. "I’m a big believer in crafting legislation that is done right, not just done quickly, so we will continue working on this issue and I look forward to putting a bill forward in the coming year that helps businesses across the state come into compliance without unnecessary and punitive penalties.”

When a law covering unclaimed property was first passed in 1959, anything more than 15 years was deemed as unclaimed. This was reduced to the current three years in 1990.

In the year ending June 30, 2017, the end of the fiscal year, $313 million out of $765 million collected was returned to individuals and some $399 million was sent to the general fund, according to the state controller's office, according to Town Hall. 

About 95 percent of the unclaimed property is cash, according to a report in the Sacramento Bee in an article published last year. Unclaimed property represents the state’s fifth-largest source of general fund revenue.

Some critics suggest putting unclaimed property and assets into the general fund amounts to a Ponzi scheme. The argument is that the state is putting money owed to others into the general fund, but doing nothing to cover the amount unclaimed and that there is an ulterior motive to doing so.

In an op-ed published by Town Hall, accountant Bruce Bialosky wrote, "Since California is running a budget deficit and has unfunded pension debt of over $100 billion, how motivated are public employees to get more of this money to the rightful owners since those funds would either decrease their revenue source or have to be paid out of the general fund?

"If there was actually a better notification of the rightful owners, then the state would have to cough up money they don’t have or wait to take it from some other unclaimed property. The money in the unclaimed property fund has even less than the social security fund. At least with the social security fund they put IOUs in the fund. Here they do nothing.

"The Unclaimed Property Fund in California has turned into a Ponzi scheme and this is being replicated in states across the country. Keep an eye on your assets. Don’t let these thieves steal it."

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