California ("CA") has long been considered among the few states that regularly imposes interest and penalties for late filing of unclaimed property reports, yet does not have a program which encourages companies to come forward and voluntarily remit amounts that may otherwise be due to the state.
In order to encourage corporations to come forward with any past due reports of unclaimed property, the California legislature has just introduced a new bill, which if passed, would initiate a Voluntary Disclosure Agreement Program ("VDA"). Corporate holders that are accepted into the program and complete the disclosure process in good faith will be rewarded with abatement of any interest and penalties that may otherwise have been imposed for late reporting.
Equally important, companies that come forward voluntarily, unless the Controller determines it has made a fraudulent or willful misrepresentation in its submission, will also be protected from audit by the Controller for all periods covered under the VDA.
The VDA program would be the first in the state since its amnesty program ended in 2002. The legislative move is a welcome option to Holders that may have unremitted property relating to prior years, given that under the current provisions, the state automatically assesses interest at 12% per annum (CA Unclaimed Property Law §1577) on both notices initiated by the State and late filed reports – among the highest interest rates in the country.
CA Assembly Bill 2773, as amended, would require the Controller to adopt regulations for the implementation and enforcement to assist holders wishing to come into full compliance with the state.
A holder with past due property, that is NOT under audit by the State, may enroll in the VDA program by:
- Executing a participation agreement with the Controller
- Completing an accurate review of its books and records for the past 10 years from the date the holder is accepted into the program by the Controller, and
- Making a payment of the property due in full – or entering into a payment plan – within 12 months.
If the Bill passes, it would remain in effect until its planned repeal on January 1, 2024.
Duff & Phelps will continue to monitor this development and update you as additional information becomes available.
To learn more about other state VDA programs:
- Unclaimed Property Professionals Organization: All VDA programs were not created equal
- State of Delaware Abandoned or Unclaimed Property VDA Program
- Office of the New York State Comptroller: Voluntary Compliance Program
- Illinois State Voluntary Disclosure Program
- Texas Unclaimed Property
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
