Unclaimed Property Definition
The unclaimed property definition is any funds, or asset, that is unclaimed by the rightful owner. A common example of unclaimed property is the unredeemed value of gift cards and gift certificates. Other typical examples include the following:
- Outstanding checks that have not been reissued
- Dormant bank accounts, unclaimed security deposits
- Uncashed dividend checks
- Unidentified remittances
State Departments of Revenue see unclaimed property as a revenue source: an alternative to higher state tax rates to generate additional revenue. State laws mandate the reversion of such property to the rightful state, after a presumed period of abandonment. This creates a compliance exposure for many commercial enterprises. Consider the reversion indebtedness, and is subject to unclaimed property tax laws in multi-state jurisdictions.
Some large companies are turning over millions of dollars to the states, even though they have tried to locate and give back the unclaimed funds to the rightful owner. Other companies are paying because they have never filed an unclaimed property tax report or even tried to pay back unclaimed funds.
Unclaimed property tax audits used to occur maybe once every fifteen to twenty years. But the frequency has escalated to every one to three years. With no statute of limitations on unclaimed property, a state’s window of opportunity is unlimited.