Tax Readiness:

Examining the changing landscape of

unclaimed property
April 24, 2019
Welcome to our Tax Readiness series
The latest on tax issues from across our network of specialists

• Register for our upcoming webcasts

pwc.com/us/taxreform
• Keep connected with real time updates
https://twitter.com/PwC Tax
Next week…
Tax Readiness:
Understanding the new Opportunity Zone guidance
and how it applies to businesses and investors

Date: April 30, 2019

Time: 02:00 PM EST
Register at: pwc.com/us/taxreform

PwC | Tax readiness 2

Administrative

• For a better viewing experience, please close all other applications

• For better sound quality, use headphones
• If you have any questions during the live program, type them into the box on the lower left side of
your screen, then click on ‘submit’
• In order to receive CPE credit for this program, you must:
– Stay connected to the webcast for the entire program and participate by responding to all
interactive questions
– Complete the course evaluation which will open in a new window upon exiting the webcast at the
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• CPE cannot be awarded for participants who:
– Are not logged onto this webcast as themselves, if not in a group
– Participate over the phone
– Participate via the on-demand (replay) version

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Speakers
Loredana Pfannenbecker Cherish Simmons Melissa Gentile
Principal, PwC Director, PwC Director, PwC

Wilson Barmeyer John Allen Zumpetta

Partner, Eversheds Sutherland Associate, Eversheds Sutherland

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Agenda

• Basics of Abandoned and Unclaimed Property (“AUP”)

• Legislative Updates

• Areas of Dispute

• Industry Focus - Nuances of the Insurance Industry

• The Future of Unclaimed Property

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Basics of
Abandoned
and
Unclaimed
Property

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Basics of Abandoned and Unclaimed Property
(“AUP”)
● Unclaimed Property is not a “tax”

● Sourcing Rules verus Nexus

• Texas v. New Jersey established unclaimed property priority rules in 1965

• 1st Priority Rule: State of Owner’s Last Known Address.
• 2nd Priority Rule: Holder’s State of Incorporation, if the last known address of the owner is unknown.

● Dollar for Dollar Liability

● Owner vs. Holder

● Legal obligation

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 Voluntary Disclosure Agreements
● The General Process
○ Mailing of “warning” letters or “invitations” to participate
■ Companies must respond to Delaware letter within 60 days
● Informal vs. Formal Programs
○ What is the deliverable?
○ What is the timeline?
● Treatment of Interest and Penalties
● Reasons Why a Company May Not Be Able to Participate

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 Unclaimed Property Audits
● Can last 5+ years
● Multi-State Reviews
● Third Party Audit Firms vs. State Specific Audits
● Contingent Fee Auditors

Common Challenges:

○ Cybersecurity
○ Resource drain
○ Voluminous record requests
○ Presumption of abandonment
○ Lack of complete records for entire “lookback” period of audit
○ Potential assessment of penalties/interest

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 Ongoing Compliance
● Holder Obligations Under the Abandoned and Unclaimed Property Laws
○ File a report annually
○ Perform Due Diligence
○ Protect the funds until transferred to the state
○ Remit the Property
○ Maintain copies of the reports and supporting documentation
● Industry Specific Requirements in some states
○ Publication Requirements
○ Unique Filing Dates
○ Different Dormancy Triggers
○ Application of Business to Business Exemptions/ Other filing positions

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Legislative
Updates

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2016 Uniform Act
In 2016, a “Revised Uniform Unclaimed Property Act” was introduced. Currently, the 2016 Uniform Act
has been adopted (wholly or in-part) in 6 states, with 7 additional states introducing bills similar to it.

Key Provisions:
● 5 year Statute of Limitation, if return filed; 10 year Statute of Limitation otherwise
● Addresses new property types, including virtual currency, payroll cards, stored value cards, etc.
● Securities: Returned mail dormancy trigger

Criticisms:
● Optional exemptions for gift cards and store credits
● No business-to-business exemption or de minimis exclusion
● Contingent fee audits permitted
● Escheat of foreign-owned property permitted
● Retroactivity provision

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State Enactment
• There are efforts by multiple states to enact the 2016 Uniform Act provisions:

- Enacted: Delaware (in part), Illinois, Kentucky, Tennessee, Colorado, and Utah

- Introduced: District of Columbia, Maine, Minnesota, Nebraska, Nevada (in part), Vermont and
Washington.
• Illinois Enactment
- S.B. 9 includes provisions implementing the Revised Uniform Unclaimed Property Act. Effective January 1, 2018:
● the business-to-business exemption is eliminated
● record retention requirements are specified
● a penalty is imposed for the failure to retain records
● interest and penalties imposed for failure to act in a timely manner
● enforceable agreements to locate property are clarified
● transitional provisions are specified.

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IRS Withholding Requirements - IRAs

● IRS Ruling 2018-17 indicates the escheatment of IRAs constitutes a designated distribution
that is subject to federal tax withholding (May 29, 2018)
● Intended to be effective January 1, 2019, the effective date has been extended to January 1,
2020 due to challenges in implementation
● Designated distributions are subject to a 10% withholding and reporting to the IRS on Form
1099-R

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Areas of
Dispute

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Challenges To Estimation
Estimation
● States have issued large assessments based on estimation/extrapolation for years where the
holder does not have complete records.

Areas of Dispute
● What is included in the “base” testing period?
○ What can be excluded, if anything?
● Sourcing of estimated liability
○ To one state vs. multiple states
○ Sampling methodologies - attributes of the sample/population
● Delaware Audit Regulations
○ New regulations (2017) restate mostly the same methodology declared invalid by a federal court in 2016.
○ Consistency between the voluntary disclosure process and the audit process were desired, but ultimately not
reached.
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Challenges to Priority Rules and Sourcing

● Federal Disposition Act versus Priority Rules

○ Escheatment of official checks, money orders, traveler’s checks
○ Request for a re-examination of the Priority Rules
● Escheatment of Foreign Addressed Property
● Mailing Address versus Indication of State of Last Known Address

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Challenges Impacting Gift Card Property
• What is a “gift card?”
• Availability of Customer Addresses
• Online accounts/apps
• Card registrations
• Legal Entity Structure Planning
• Transfer of liabilities to an affiliate, subsidiary, or external party
• Who is the “holder” of the property and how is that determined?
• State False Claims Acts

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Industry
Focus -
Nuances of
the
Insurance
Industry

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Insurance Industry
• Life Insurance and Annuities
Social Security Administration Death File Matching
Global Resolution Agreements/ Regulatory Settlement Agreements
• Retirement Accounts
ERISA Preemption
• Financial Services
Contact Standards and Maintaining the Audit Trail
• Property and Casualty Insurance
Offer to Settle versus Fixed and Certain Liability
Volume of Checks
• Healthcare Insurance
Insurance Rate Changes
Systematic Adjustments

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Insurance Industry
Common Insurance Industry Considerations:

● Dormancy Triggers (Date of Death, Knowledge of Death, Maturity Date, RPO, etc.)
● Use of the Death Master File
● Limiting Age Policies
● Lapsed Policies
● Multiple Beneficiaries
● Contingent Beneficiaries
● Retained Asset Accounts

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The Future of
Unclaimed
Property

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5
The Future of Unclaimed Property
● Dormancy Triggers
● Electronic Contact Standards
● Adoption of the 2016 Uniform Act
● Emerging Issues
○ Game-Related Digital Content (Virtual Wallet, Points (gems, tokens, gold, etc), Digital Codes)
○ Crytocurrency
○ Loyalty, Award and Promotional Programs

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Inside Tax Policy: Watch policy unfold

PwC’s on-demand video podcasts cutting through the

rhetoric on the Hill to give you the inside story on tax
policy changes as they unfold.

Learn more or sign up for a free trial at:

www.pwc.com/us/insidetaxpolicy

PwC | Tax readiness 24

Tax Readiness series
The latest on tax issues from across our network of specialists

• Register for our upcoming webcasts

pwc.com/us/taxreform
• Keep connected with real time updates
from our specialists:
https://twitter.com/PwC Tax
Don’t forget to register for next week…
Tax Readiness:
Understanding the new Opportunity Zone guidance
and how it applies to businesses and investors

Date: April 30, 2019

Time: 02:00 PM EST
Register at: pwc.com/us/taxreform

PwC | Tax readiness 25

Thank you

pwc.com

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