California legislature passes unclaimed property voluntary compliance program

August 2022

Update

The legislation was signed by Governor Gavin Newsom (D) on September 13, 2022.

In brief

The California legislature passed a bill on August 17 authorizing the Controller to establish a voluntary compliance program (VCP) for eligible unclaimed property holders. The proposal directs the Comptroller to waive the 12% interest imposition if a holder participates in the program and completes all the VCP requirements. The bill will be sent to Governor Gavin Newsom (D) for his consideration.

Be aware: Companies that have not filed unclaimed property reports historically or have gaps in their filing history have an opportunity with the VCP to come into compliance without paying interest. However, holders are ineligible for the VCP if they are under examination for unclaimed property compliance or have been notified of an impending examination.

Next steps: Important upcoming compliance dates include November 15 for reporting unclaimed property compliance on Corporation Franchise Tax Form 100 (click here for PwC’s Insight on this requirement) and October 31 for filing unclaimed property Notice Reports with the Controller. Due to the increased scrutiny of unclaimed property reporting, companies should review their compliance history and consider the potential benefits (and timing) of the upcoming VCP.

In detail

Effective 90 days after enactment, A.B. 2280 allows eligible unclaimed property holders to participate in the VCP at the Controller’s discretion. In order to qualify for an interest waiver, holders must:

  • Enroll and participate in an unclaimed property educational training program provided by the Controller within three months of enrolling in the VCP.
  • Review their books and records for the previous 10 years.
  • Make “reasonable efforts” to notify owners of reportable property at least 30 days prior to submitting the required unclaimed property report.
  • Make an initial unclaimed property report within six months of the date of VCP enrollment. However, the Controller may postpone the reporting date for up to 18 months upon request.
  • Submit an updated report and pay or deliver all escheated property specified in the updated report no sooner than seven months and no later than seven months and 15 days after the Controller received the initial report. The Controller would be authorized to reinstate 12% interest if the holder fails to pay or deliver all escheated property specified in the updated report within the prescribed time frame.

Observation: Because the lookback period for California unclaimed property audits generally is 10 years, assessed interest can exceed the actual unclaimed property owed. Holders should be aware of the additional scrutiny from the FTB through the new reporting requirement and should consider whether the VCP would limit liability.

The VCP is open to holders that have failed to report unclaimed property to the state as required by law. A holder would be ineligible, however, to participate if any of the following apply at the time of the holder’s request to enroll:

  • The holder is the subject of an examination of records or has received notice from the Controller of an impending examination.
  • The holder is the subject of a civil or criminal prosecution involving California unclaimed property compliance.
  • There is unpaid interest on a California unclaimed property assessment from within the previous five years. However, a holder subject to an outstanding interest assessment may file or refile a request to enroll in the program after resolving the outstanding interest assessment.

Further, a holder would be ineligible to participate in the VCP if the Controller waived interest assessed against the holder within the previous five years. However, if such a holder acquired or merged with another entity within the five-year period, the holder may request to enroll in the VCP for the purpose of resolving unclaimed property that may be due and owing to the state as a result of the acquisition or merger.

Contact us

Jack Schwartz

Principal, Abandoned and Unclaimed Property, PwC US

Loredana Pfannenbecker

Principal, Abandoned and Unclaimed Property, PwC US

Heela Popal

Principal, Abandoned and Unclaimed Property, PwC US

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