The State of California is Applying Pressure to Improve Compliance with Reporting Requirements on Unclaimed Property
If you have a business or unclaimed property in California, prepare to witness an upsurge in audit activity and questions from the California State Controller’s Office (SCO), starting in 2022. In an effort to raise awareness and escalate compliance with California’s Unclaimed Property Law, the SCO passed CA Assembly Bill 466, which effectively authorizes the California Franchise Tax Board (FTB) to pass information along to the SCO which relates to the unclaimed property of corporations, banks, insurance companies, and other entities.
WHAT IS UNCLAIMED PROPERTY?
The SCO defines unclaimed property as that which has not generated activity for an extended period of time, or about three years.
“Common types of unclaimed property are bank accounts, stocks, bonds, uncashed checks, insurance benefits, wages, and safe deposit box contents.”
– Betty T. Yee, California State Controller (“Unclaimed Property”)
On their website, the SCO maintains that it is easy to search for unclaimed property, which the Controller is protecting, and encourages relevant parties to utilize the SCO’s user-friendly Unclaimed Property Database» to begin the process of claiming it.
BUSINESS TAX RETURNS WILL REQUIRE ANSWERS TO A FEW NEW QUESTIONS
Starting with business income tax filings due in 2022, business entities will be required to answer:
- whether they previously filed an unclaimed property Holder Report with the SCO, and
- if they did, when the last report was filed, and
- the amount of monies remitted to the Controller’s Office.
The FTB will start asking these unclaimed property questions on the following business tax returns:
- Form 100 (Corporation Franchise/Income Tax Return);
- Form 100S (S Corporation Franchise/Income Tax Return);
- Form 100W (Corporation Franchise/Income Tax Return – Water’s Edge);
- Form 565 (Partnership/Income Tax Return);
- and Form 568 (Limited Liability Company/Income Tax Return).
The Takeaway: As a result of this new reporting requirement being asked by the California Franchise Tax Board, California will be able to identify businesses to audit that have not been in compliance with California’s unclaimed property laws.
TRUSTED ADVISORS ON REDW’S STATE AND LOCAL TAX TEAM CAN HELP
It is important that California businesses prepare to meet these rising compliance standards. For further assistance or review of your unclaimed property reporting requirements, please contact the trusted advisors of REDW’s State and Local Tax (SALT) team. We welcome your questions.
