Illinois Unclaimed Property

With the passage of Senate Bill 9 on July 7, 2017, Illinois made substantial changes to its treatment of unclaimed property. These changes affect the reporting responsibilities of unclaimed property holders, including the types of property covered by the law. The following is FGMK’s overview of the state of unclaimed property law in Illinois for use in determining your business’ reporting requirements.

 

What is Unclaimed Property?

Under Illinois law, unclaimed property typically includes intangible personal property held by a business that remains unclaimed by its rightful owner for a certain length of time. Such property may include uncashed payroll checks, dividends, “open loop” gift cards that charge fees or have expiration dates, layaways, refunds, rebates, credit balances in accounts receivable, vendor payments, retirement accounts, security deposits, suspense accounts, and other accounts and financial instruments.

 

Who Gets Unclaimed Property?

The purpose of Illinois’ unclaimed property law is to ensure that property is returned to its rightful owner rather than retained by the property holder. Consequently, unclaimed property does not constitute additional revenue for the property holder. Rather, unclaimed property is reported and remitted to the appropriate state where the public can benefit from the use of those funds until the true property owner is found. In general, under the United States Supreme Court’s 1965 Texas v. New Jersey decision, the state where the property owner’s last known address is located takes priority; if this is unknown, then the property is reported and remitted to the state where the company holding the property is domiciled.

When to Report?

Most companies must file before May 1st in the year in which reporting is required. Even if a company has nothing to report, a “negative” or “nil” filing is still encouraged to run the statute of limitations.

When Does Property Become Unclaimed?

In general, property will constitute unclaimed property if it has been held inactive for three years without any property owner generated activity or contact. See the Holding Periods Addendum for Illinois’ dormancy periods for various unclaimed property types. Due Diligence Requirement Under the new Illinois law, if unclaimed property is worth more than $50 (up from $10), the property holder must send out a due diligence letter by first class mail 60 to 365 days before reporting the property to Illinois. A due diligence e-mail will also be required if the property owner agreed to receive e-mails. The due diligence materials must state the name, address, position, and phone number of a person with the property holder that the property owner can contact; how the property owner can reclaim the property from the property holder or have the property holder maintain it; and that the property may be reclaimed indefinitely once it has been remitted by filing a claim with the State Treasurer’s office.

Radical Illinois Changes

In Senate Bill 9, the Illinois General Assembly shortened the general dormancy period from five years to three years, eliminated the previous business to business or “B2B” exemption, authorized contingent fee auditors, and imposed new penalties and interest. Furthermore, the General Assembly provided that these changes would apply retroactively to property held in the five years prior to the effective date of the legislation.

With the Revised Uniform Unclaimed Property Act, Illinois has cast a wider net in terms of those required to report and remit unclaimed property. Shorter holding periods and a greater variety of property covered will expose more businesses to Illinois’ unclaimed property system. If you believe your business may be holding unclaimed property, please contact FGMK. Our tax professionals will help you determine your exact reporting requirements and will file any reports or voluntary disclosure agreements your situation may require. The summary information in this document is being provided for education purposes only. Recipients may not rely on this summary other than for the purpose intended, and the contents should not be construed as accounting, tax, investment, or legal advice. We encourage any recipients to contact the authors for any inquiries regarding the contents. FGMK (and its related entities and partners) shall not be responsible for any loss incurred by any person that relies on this publication.

If you have additional inquiries about this article, please contact Matthew Fuller at MFuller@fgmk.com.

 

 

 

Illinois Unclaimed Property – Holdings Periods Addendum

The list below indicates the holding period for various types of unclaimed property at which time the property is deemed abandoned and must be turned over to the state of Illinois, pursuant to the Uniform Unclaimed Property Act as recently revised.

 

Traveler’s check

15 years after issuance.

Money order

7 years after issuance.

Any instrument on which a financial organization or business association is directly liable

3 years after issuance.

State or municipal bond, bearer bond, or original-issue-discount bond

3 years after date bond matures/is called, or the obligation to pay the principal arises, whichever is earlier.

Debt of a business association

3 years after the obligation to pay arises.

Demand, savings, or time deposit

3 years after the later of maturity or last indication of interest in the property by the apparent property owner.

Deposit that is automatically renewable

3 years after initial date of maturity unless the apparent property owner consented in a record on file with the holder to renewal at or about the time of the renewal.

Money or a credit owed to a customer as a result of a retail business transaction, other than an in-store credit for returned merchandise

3 years after obligation arises.

Amount owed by insurance company on a life or endowment insurance policy or an annuity contract that has matured or terminated

3 years after the obligation to pay arises.

Amount owed on a life or endowment insurance policy where the amount has not matured by proof of the death of the insured or annuitant

3 years after the death of the insured, OR 2 years after the insured has attained or would have attained the limiting age under the mortality table on which the reserve for the policy is based

Amount owed on an annuity contract where the amount has not matured by proof of the death of the annuitant

3 years after the death of the annuitant.

Funds on deposit or held in trust pursuant to the Illinois Funeral or Burial Funds Act Earliest of 2 years after:

• The date of death of the beneficiary
• 1 year after the date the beneficiary attained or would have attained the age of 105 where the property holder does not know whether the beneficiary is deceased; OR
• 40 years after the contract for prepayment was executed.

Property distributable by a business association in the course of dissolution

1 year after property becomes distributable.

Distributions from the termination of a retirement plan

1 year after property becomes distributable.

Property held by a court

3 years after the property becomes distributable.

Property held by a government or governmental subdivision, agency, or instrumentality

3 years after the property becomes distributable.

Wages, commissions, bonuses, reimbursements, or other compensation for services 1 year after the amount becomes payable.

Deposit or refund owed to a subscriber by a utility

1 year after the deposit or refund becomes payable.

Capital credits or patronage capital retired, returned, refunded or tendered to an electric cooperative or a telecommunications cooperative that has remained unclaimed by the person appearing on the records of the entitled cooperative for more than 2 years

May be used by the cooperative for the benefit of the general membership of the cooperative.

Other property not specified

3 years after the earlier of:

• The owner’s right to demand the property arises
• The obligation to pay or distribute the property arises.

Tax-deferred retirement account (additional mailing requirements apply)

The later of 3 years after the following dates:

• The date a communication sent by the property holder by first-class United States mail to the apparent property owner is returned to the property holder undelivered by the United States Postal Service or if such communication is re-sent within 30 days after the date the first communication is returned undelivered, the date the second communication was returned undelivered by the United States Postal Service
• The earlier of the following dates:
  • 3 years after the date the apparent property owner becomes 70.5 years of age, if determinable by the property holder
  • 1 year after the date of mandatory distribution following death if the Internal Revenue Code requires distribution to avoid a tax penalty and the property holder receives confirmation of the death of the apparent property owner in the ordinary course of its business or confirms the death of the property apparent owner.

Other tax-deferred account

3 years after the earlier of:

• The date, if determinable by the property holder, specified in United States income tax laws and regulations by which distribution of the property must begin to avoid a tax penalty with no distribution have been made; or
• 30 years after the date the account was opened.

Other tax-deferred account when the property owner is deceased 2 years from the earliest of:

• The date of the distribution or attempted distribution of the property;
• The date of the required distribution stated in the plan or trust agreement; or
• The date, if determinable by the property holder, specified in United States income tax laws and regulations by which distribution of the property must begin to avoid a tax penalty.

Custodial account for minor (additional mailing requirements apply)

Not earlier than 3 years after the minor attains legal age; but aside from that, 3 years after the later of:

• The date a communication sent by the property holder by first-class United States mail to the custodian of the minor on whose behalf the account was opened is returned undelivered to the property holder by the United States Postal Service;
• If a communication is re-sent within 30 days after the date the first communication is returned undelivered, the date the second communication was returned undelivered; or
• The date on which the custodian is required to transfer the property to the minor or the minor’s estate in accordance with the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act of the state in which the account was opened.

Custodial account for minor where communication required by statute was returned undelivered to the property holder by the United States Postal Service

3 years after the later of:

• The date a communication to contact the custodian by first-class United States mail is returned to the property holder undelivered by the United States Postal Service; or
• The date on which the custodian is required to transfer the property to the minor or the minor’s estate in accordance with the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act of the state in which the account was opened.

Tangible property held in a safe-deposit box

5 years after the expiration of the lease or rental period for the box.

Stored-value card The latest of:

• 5 years after December 31st of the year in which the card is issued or additional funds are deposited into it;
• The most recent indication of interest in the card by the apparent property owner; or
• A verification or review of the balance by or on behalf of the apparent property owner. The card must be honored on presentation indefinitely.

Security (additional mailing requirements apply) The earlier of:

• 3 years after the date a communication sent by the property holder by first-class United States mail to the apparent property owner is returned to the property holder undelivered by the United States Postal Service (3-year period does not begin to run until it is returned as undeliverable if the holder re-sends the returned communication within one month); or
• 5 years after the date of the apparent property owner’s last indication of interest in the security.

Security where required mailings have been returned undelivered

5 years after the date of the apparent property owner’s last indication of interest in the security.

Security where the death of the apparent owner has been confirmed

2 years after the date of death of the property owner.

United States savings bond

Unclaimed and unredeemed for 5 years after its date of final extended maturity.