United States

2017 UPPO conference highlights key trends in unclaimed property

INSIGHT ARTICLE  | 

During the week of March 20, 2017, over 580 unclaimed property professionals, attorneys, state administrators, and holders gathered in Austin, Texas for the Unclaimed Property Professionals Organization’s (UPPO) Annual Conference.

The conference highlighted the extraordinary changes currently occurring in the field of unclaimed property, and the challenges and opportunities they bring for all stakeholders. Conference sessions covered hot topics such as the 2016 Revised Uniform Unclaimed Property Act (RUUPA), current litigation and audit trends, and many day-to-day essential topics for holders trying to maintain or improve their unclaimed property compliance procedures.  

Revised Uniform Unclaimed Property Act

Perhaps the most important session at this year’s conference, demonstrated by the number of attendees and time allocated, was “Breaking Down the Uniform Unclaimed Property Act,” which covered the Uniform Law Commission’s (ULC) adoption of the RUUPA in 2016. Members of UPPO served as advisors to the ULC as the RUUPA was being drafted, and were available to provide first-hand insight on the new act.

Last revised in 1995, the provisions of the RUUPA were designed to address many of the challenges faced by the holder community including how advances in technology have changed the way companies do business. For example, the RUUPA includes guidance on what constitutes customer contact and last activity, defines the term “stored value cards,” and contains new express exemptions for game-related digital content and loyalty cards. The RUUPA also includes a welcome five year statute of limitations on assessments after the holder has filed a non-fraudulent report, and a ten year statute of repose if no report was filed or a fraudulent report was filed. However, many updates the holder community had been seeking were not included in the revised act. For example, the RUUPA does not contain an exclusion for foreign addressed property, the use of third party contingency fee auditors is still permitted, and the RUUPA does not contain a “business-to-business” exemption (although a prefatory note was included to give states the option to include such exemption “without offending the goal of achieving substantial uniformity”).

It was also noted during the session that the American Bar Association (ABA) has not endorsed the RUUPA. The ABA Business Law Section had raised concerns as to the constitutionality of many provisions of the RUUPA and in early March, released its own draft model act for comments. 

The key takeaways from this session were that the RUUPA contains both advantages and disadvantages for the holder community and it is clear that non-uniformity will continue to be an issue as states consider adopting RUUPA in whole or in part. States including Delaware (Senate Bill 13) and Utah have adopted some provisions of the RUUPA. Tennessee and Illinois currently have bills pending, and it is anticipated that additional states will be proposing legislation to revise their unclaimed property laws in 2017.   

Delaware Senate Bill 13

Another hot topic at the conference was Delaware’s enactment of Senate Bill 13. Earlier this year, Delaware enacted a major overhaul of its unclaimed property laws which reduced the look-back period for audits and voluntary disclosure agreements, aligned the statute of limitations with record retention requirements, and enacted provisions for certain groups of holders to convert their existing audits to expedited audits or voluntary disclosure agreements.

A representative from Delaware announced that the forms for the audit conversions will be released in early April. Additionally, regulations providing clarity on the state’s required estimation methods will be released for comment by the Delaware Secretary of Finance in early April.  Comments will be due in early May so that the estimation regulations may be promulgated by July 1, 2017.  

Litigation Update

This year’s litigation update focused on two ongoing and heavily watched cases; Marathon Petroleum v. Cook and Delaware v. Pennsylvania, both of which are challenges to audits and address unclaimed property priority rules – that is, which state should be accorded the primary right and power to escheat before others.  

In addition, last summer’s settled Temple-Inland case continued to be heavily discussed given its enormous impact on today’s unclaimed property landscape. Many provisions of recently enacted Delaware Senate Bill 13 seem to directly address the many constitutional concerns brought forward in Temple-Inland. It was evident at the conference that other states have also taken note of the case and it is anticipated that as additional states move forward in updating their unclaimed property legislation they too will take into consideration the challenges raised in the case.

Audit Trends and Landscape

A number of courses held at the conference focused on the current audit landscape, audit trends, and best practices to mitigate exposure.  Audit trends highlighted at the conference included an increase in audits of smaller companies , multistate audits where Delaware was neither the lead audit state nor a participating state , and comments from many holders that their submission of a signed Non-Disclosure Agreement no longer prevented additional states from joining a multi-state audit. 

The use of third-party auditors continues and appears to be on the rise.  Although some states have placed limits on their use, the RUUPA still permits the use of third party or contingent fee auditors.  More third-party audit firms have emerged, thereby increasing the likelihood of an audit being performed by a third party.

Lastly, the judicial and legislative landscape, discussed above, is having a profound impact on the future of unclaimed property audits and is forcing states to reevaluate their audit procedures, specifically as they relate to estimation methodology. Delaware’s new legislation providing for the promulgation of regulations on estimation by July 1, 2017 is a small step forward.  Although there is still ambiguity regarding the estimation methodologies employed by states on audits, at this time, it appears that the use of estimation in unclaimed property audits is here to stay.

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