PROPERTY: Municipalities subject to reporting requirements
(from Maine Townsman, June 1999)
By Dale McCormick, Maine State Treasurer and Denise Decharme, Abandoned Property Manager, State Treasurers Office
Have you ever seen those tabloid inserts in the paper asking, "Misplace Something?" Perhaps you wonder who could possibly lose track of a bank account or forget to cash a payroll check. Maybe youve even seen your own name on the list. Last fall, one small Maine town appeared on a report sent to us from a bank. The balance of their highway fund exceeded $100,000 and they were very relieved to get those funds back!
Every year, the Maine State Treasury identifies and collects between $5 and $8 million in unclaimed property. Every year, in cooperation with Maine businesses, we return over a third of that to the lost or missing owner. But what exactly is unclaimed property? What are you supposed to do with it once you identify it? Why does the State get involved?
The states unclaimed property laws are, in essence, consumer protection laws that safeguard the owners property. Unclaimed Property laws: (1) protect the interests of the owner(s) of the lost property; (2) relieve the holder(s) from the expense and liability associated with the property; and (3) ensure that any economic windfalls benefit the public, not the chance possessor of the property. Until the money is claimed, the states use the money for the good of their citizens. They provide a mechanism for reuniting the owners with their property. Therefore, in addition to collecting unclaimed property, the Treasurer of State expends great effort to locate the missing owners and return their property to them.
Nearly all types of property can constitute "unclaimed property" including land, cash, items in safe deposit boxes, bank accounts, stocks and bonds, insurance proceeds, uncashed checks and money orders, unredeemed gift certificates, oil & gas royalties, utility deposits and property stored in warehouses.
By no means do these examples come close to being a complete list of what can be considered unclaimed property. However, it does point out that virtually any property not in the possession of its owner is potentially reported as unclaimed property.
In order for the state to return unclaimed property to the rightful owners, the property must first be reported to the state by the holder. What is a holder? Any entity in possession of property belonging to another person is potentially a holder. Examples of holders are: financial institutions, insurance companies, retailers, manufacturers, non-profit entities, government agencies and subdivisions, public corporations, private corporations, utilities and healthcare providers.
Municipalities are holders under Maines Unclaimed Property Law.
FILING UNCLAIMED PROPERTY REPORT
Maine State Treasurer's Office has a booklet on Unclaimed Property Reporting available which explains the entire process (see end of article for phone number and web site address).
Filing your Unclaimed Property Report has three important steps:
Identify the Unclaimed Property
Each year holders must check their records to determine if they are holding property belonging to another person that has become abandoned. Property becomes abandoned (or unclaimed) if it has been held for a specific period of time (dormancy period) without any action by the owner/payee. For municipalities, the dormancy period for all property types is one year. If your city or town has issued municipal bonds, for example, make sure that your bond administrator or paying agent keeps you informed as to what is outstanding or uncashed. These items will need to be reported by you or your agent after one year. Evaluate your administrators ability to track these items and report them on your behalf.
One of the most important obligations of a holder is that of due diligence, or "owner notification." Due diligence generally requires the holder to send a notification to the owner at the last address the holder has for the owner. That notice should alert the owner that his/her property has been determined abandoned and will be remitted to the state unless the owner contacts the holder within a specified period of time. It is the due diligence process, done correctly, which insures that the states get property only for those owners who are truly lost.
Try to locate the owners
If the holder finds unclaimed property, they are required to report that property to the Treasurer of State by November 1. If, after reviewing their records for reportable property, a holder does not find any reportable funds, the holder should send a note to that effect to the Treasurer of State. If you are holding property whose owner has a last known address in another state, report the property to that states Unclaimed Property Office or report it to us and well forward it on accordingly.
The Treasurer of State is offering a period of "Voluntary Compliance" or amnesty now through December 31, 1999. Holders may file first time reports or regular reports without fear of being assessed interest or penalties for late or non-filing. In addition, the Treasurers staff is available to assist holders in researching their records and actually filing the report. Several Maine businesses and organizations have already taken advantage of this great opportunity for "on-site" training of their own staff.
Send report and funds
Maine and some states require remittance at the time of report. Remittance means that holders must send in a check for the total amount of property that they are reporting when they send in the report. For Maine, the check should be made payable to the Treasurer of State. Other states require an initial report with the final remittance due at a later date. Only those amounts for which the owner was not located since the initial report must be remitted.
The origins of unclaimed property laws can be traced back to British Common Law, which dictated that abandoned land was to be given to the King. This permanent transfer of property was called "escheat." The American colonies incorporated the concept of escheat into their laws. Escheatment eventually was broadened to include not only land but also intangible personal assets like bank account balances, securities and paychecks. There are two distinct types of escheatment: (1) traditional escheat, where the property is permanently transferred to the government after passage of a specified period of time; and (2) custodial escheat, where the government holds the property, as a fiduciary, until it is claimed by the rightful owner. Custodial escheat is generally referred to as the laws of unclaimed property.
Private escheat is defined as "causing the loss of the owners property rights prior to the time the property becomes reportable." There are holders who, knowingly or otherwise, have established their own private escheats through the use of bylaws, contractual provisions or statements included on written instruments. An example would be a statement on a paycheck indicating the payees right would be forfeited if the check were not cashed within a specified period of time. Private escheats are clearly an attempt to deprive the owner, and the state acting in the owners behalf, of the rights to the owners property. Because private escheat contradicts what the unclaimed property laws stand for namely to insure owners have perpetual right to their property states take this matter very seriously. The courts have routinely ruled in favor of the states in matters involving private escheats.
In 1954, the Uniform Law Commission blended the various states unclaimed property laws into a model act the "Uniform Disposition of Unclaimed Property Act." This Act was supposedly dubbed "the W.C. Fields Act." The story goes that W.C. Fields was so afraid of theft and poverty that he put his money into banks in almost every town, big or small, where he performed. It is believed that after his death in 1946, much of his wealth was never found, having been tucked away in accounts all over the country. Thus having been designated as "unclaimed", his money reverted to the banks holding the funds. Without Abandoned Property laws, his heirs would have had no way of finding out about the money, much less collecting it.
The Uniform Act has gone through several revisions since 1954. Maines current Unclaimed Property law is modeled on the 1995 Uniform Act. Visit our website at http://www.maine.gov/treasurer/ to download a copy for your file.
Unclaimed property laws are nothing new. They have their basis in British common law. These laws allow the state to act in a fiduciary capacity and stand in the place of the owners of abandoned or unclaimed property.
Any entity holding property belonging to another is considered a holder and is therefore obligated to report and remit that property to the state.
Unclaimed property includes most types of property, both tangible and intangible.
Unclaimed property is reported to the state of owners last known address. If no address is known, the property is reportable to the state in which the holder is incorporated.
Before remitting property, the holder is obligated to perform due diligence to verify that the property is truly unclaimed.
The state holds the property until the rightful owner claims it. An owner never loses their right to their property.
Until the property is claimed, states use it in various ways for the good of all citizens.
Municipalities are not exempt from requirements to report unclaimed property held in their jurisdiction.
For more information or if you wish to take advantage of the Treasurers offer of staff assistance, call the Office of State Treasurer at 207-287-6668, or toll-free in Maine, 888-283-2808, or email us at firstname.lastname@example.org and we will gladly send you more detailed instructions.