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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.
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.
If you have additional inquiries about this article, please contact FGMK.
Matthew T. Fuller
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.