Reciprocal Filing – Proceed with Extreme Caution

Danielle Herring
July 29, 2013
This isn’t the first time I’ve blogged about the dangers of reciprocal filing, but I feel like it is a topic worth covering again for those who may have missed it. Reciprocal or exchange filing means reporting records to a state even though the last known addresses for the records are not in that state. For example, you are incorporated in Georgia so you send all states’ records to Georgia with the expectation that Georgia will forward them on to the appropriate states.
It is very tempting to just force all of the property records onto the report for your state of incorporation. That means you only have to file once and you’re done, right? Well…not really.
Read on for some information you probably never considered before that could impact your decision about which states to file.
State Restrictions
The Supreme Court decided in Texas vs. New Jersey that companies should always report records to the state of the owner’s last known address. Some states allow exceptions to this and some do not.
Some states simply do not allow you to send their records to other states. California is one of these states. They have a requirement to advertise to owners in California. If you send a California record to another state, you make it impossible for California to meet this requirement.
Some states will allow you to send them ‘incidental property’ for other states. Incidental property is usually defined as 10 or fewer records that add up to $1000 or less. This means the total for all records you may have for any other states.
Some states have agreements with other states and will accept an unlimited number of records for these other states.
Click here for NAUPA’s reciprocity matrix. Some states may have changed their rules since this document was compiled, but it will give you a general idea of the differences in reciprocity rules.
The Liability Is On You
What happens if the state you file to does not forward your records to the other states? The liability is on you. You could end up paying penalties because your records were not reported to the appropriate state in a timely manner.
You should also keep in mind that state dormancy requirements may differ. When filing reciprocally, you should follow the rules of each state. Often, this is not done and can cause you to pay penalties.
Let’s use vendor checks as an example. You have a vendor check for Arizona and you want to report it to New Mexico. Arizona vendor checks are reportable after 3 years. New Mexico vendor checks are reportable after 5 years. If you file using New Mexico’s requirement, you’ve just opened yourself up to penalties from Arizona as you are reporting the record 2 years late.
As you can see, sending all records to one state and crossing your fingers is probably not the best business decision. When UPExchange and other software programs make it so easy to file to each state individually, why not get it right the first time and not leave anything to chance? The extra time you take to run the individual reports could pay off or at least keep you from ‘giving away’ more money than necessary.
If you’ve read through all of these cautions and you still wish to file reciprocally, please contact all states involved and make sure it is ok for you to do this. A lot of people say that it is better to ask for forgiveness than permission, but this is definitely an exception!

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Danielle Herring

In her role as compliance manager for unclaimed property reporting, Danielle Herring oversees support of the product, researches changes in state unclaimed property laws so the system is updated to comply with them, and tests changes to the system before they are released. Danielle also completes some report and letter processing for current clients, assists with their direct support, provides customer training, and helps with troubleshooting and questions about using the product. Outside of work, Danielle loves to garden and is a master gardener.
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