Hold On To What You've Got: Unclaimed Property Reporting, Notice, and Remittance Requirements For Illinois Businesses

“Finders keepers, losers weepers” may be the law of the playground, but for businesses that hold “unclaimed property,” adopting such an attitude is fraught with legal and financial peril. A company holding goods or funds that belong to a customer, client, or other business or individual cannot simply pocket that property or money because its owner may have forgotten about it or is unaware of its existence.

The law in Illinois and most other states imposes specific and multifaceted obligations on the holders of unclaimed property. Failure to comply with unclaimed property laws can expose a business to significant and ongoing financial penalties and other legal risks.

Businesses, especially financial institutions and consumer-facing companies, often hold various types of unclaimed property. Uncashed checks, bank accounts, security deposits, safe deposit box contents, unredeemed gift cards or unused rebates, and customer credits are the most common. If a business holding such property loses contact with the owner for a certain period set by law (called the “dormancy period”), the company effectively becomes the trustee of that property, holding it for the benefit of the owner until they make a claim for its return.

In Illinois, that claim may come after the owner searches the Illinois State Treasurer’s unclaimed property database. The information in that database comes from businesses that must provide the Treasurer’s Office with detailed and frequent reports about any unclaimed property they hold pursuant to the requirements of Illinois’ Revised Uniform Unclaimed Property Act (the “Act”).

When Does Property Become “Unclaimed”?

As noted, property is considered unclaimed and abandoned if it has not had any activity within a designated “dormancy period” and the holder is unable to locate the property owner. Under Sec. 15-201 of the Act, the dormancy period is three years for most types of property, though others have longer or shorter periods. For example, there is a 15-year period for traveler's checks, a five-year period for money orders, and a one-year period for payroll checks.

Reporting and Notice Obligations For Holders of Unclaimed Property

Any for-profit and not-for-profit business entities that conduct business in Illinois are required to electronically report unclaimed property to the Treasurer’s Office on an annual basis. Even businesses not holding any unclaimed property must file a negative report advising as such if they meet any of the following criteria:

• Annual sales of more than $1,000,000;
• Securities that are publicly traded;
• A net worth of more than $10,000,000; or
• More than 100 employees.

The deadlines for filing unclaimed property reports are:

• For all business associations, utilities, and life insurance corporations: May 1 of each year. The report should reflect one year of account activity three years prior to the last calendar year. Example: If your report is due May 1, 2018, your report will cover activity from January 1, 2014, through December 31, 2014.
• For all banking and financial organizations, insurance companies (other than life insurance corporations), and governmental entities: November 1 of each year. The report should reflect account activity for the one-year period three years prior to June 30 of the report year. Example: If your report is due November 1, 2018, your report will cover activity from July 1, 2014, through June 30, 2015.

The detailed requirements as to what must be included in the report are set forth in Section 760.410 of the Illinois Administrative Code. At the same time the report is filed, unclaimed property must be remitted to the Treasurer’s Office.

Holders of unclaimed property also must make efforts to reach out to the owner before filing their report and remitting property. Specifically, the holder of property presumed abandoned shall send a due diligence notice to the apparent owner by first-class U.S. Mail between 60 days and one year before reporting the property. The required contents of the due diligence notice are set forth in Section 760.460 of the Illinois Administrative Code. 

Consequences of Non-Compliance

Holders of unclaimed property face significant penalties for failing to comply with the reporting, notice, and remittance requirements of the Act. Interest and penalties may be imposed on the failure to file, pay, or deliver property by the required due date. Specifically, the state can charge interest at 1% per month on the value of the unreported/unpaid property and impose a penalty of $200 per day up to a maximum of $5,000 until the date a report is filed or the unclaimed property is paid or delivered.

For businesses that may have neglected their obligations under the Act, Illinois offers a Voluntary Disclosure Agreement (VDA) program for unclaimed property holders. In exchange for voluntary compliance through an executed VDA, the Treasurer's Office will agree to forgo the right to assess penalties and interest outlined in the Act.

The Treasurer’s Office maintains a robust audit program to ensure compliance with the Act. The office offers the following tips for avoiding an audit or penalties for non-compliance:

• File your report annually. Even if you have no property to report, file a "negative" report as required by the Administrative Rules.
• Make sure your report and remittance balance.
• Make sure that your report gives complete owner information/detail.
• Report all types of property that you may have. Reporting of certain types of property and non-reporting of other types causes us to look closely at your reporting history.
• Make sure to perform your due diligence as required by the Act. Contact owners at their last known address or email address and have them reactivate accounts, cash dividend checks, etc. If contact cannot be established, remit the property.

Because of the legal complexities and risks involved for companies holding unclaimed property, businesses should consult with experienced counsel to help them navigate this significant and oft-neglected aspect of their finances and operations. 

If you have any questions regarding your company’s obligations regarding unclaimed property, please communicate with your contact at Latimer LeVay Fyock for assistance.