Importance of Dormancy in Unclaimed Property

Danielle Herring
November 1, 2016

This blog was last updated on February 23, 2021

One of the things that make Unclaimed Property Reporting so complex is the aspect of Dormancy. According to the National Association of Unclaimed Property Administrators’ (NAUPA) website, Dormancy is “the period of time during which the owner of the property does not take action on his property”. This sounds simple enough except for the fact that Dormancy is dependent on the State to which you are filing, the type of property you are reporting, and the Last Activity Date of the property.
Dormancy is calculated by most reporting software systems. The number of years of dormancy required by the state is applied to your Last Activity Date value and records that have aged enough to be reported will be included in the state reports that are generated. State dormancy requirements can be viewed on state websites and your software vendor should have an easy list for you to look at. For example, the state may have a dormancy requirement of 5-years for bank accounts but only 1-year for payroll checks.
It’s important to understand the states’ dormancy requirements and follow them so that you are not reporting early. Some states will accept early reporting and others, such as Florida, have stated that early reporting is an audit trigger. It’s best to err on the safe side and trust your reporting software. So—when exactly does the clock start ticking? Again, this is a property type-specific and state-dependent question. If the property is a check, the dormancy clock starts ticking as soon as a check is issued (Last Activity Date) and subsequently not cashed.
If the property is a bank account then the Last Activity Date could be the last time the account was accessed, the last time there was a withdrawal/deposit into the bank account, the last time there was correspondence with the lost owner or the date in which you receive correspondence Returned by Post Office (RPO) due to a bad address. If you are unsure what to use as your Last Activity Date or what constitutes as communication-based on the Property Type code that you are using, then it is always best to call the State that you are ultimately filing to for their opinion.
Incorrectly assigning or calculating Dormancy periods can have serious repercussions in the form of disgruntled property owners or State administrators. It is always best to involve the State in which you are filing if you have questions or concerns about Dormancy.

Take Action

Get in touch with a Sovos unclaimed property expert to learn more about managing your unclaimed property compliance processes.

 

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

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.
Share this post

Hungary Supplemental Insurance Premium Tax
EMEA IPT
July 11, 2022
Extra Profit Tax: An Introduction to Supplemental IPT in Hungary

This blog was last updated on October 28, 2024 Update 7 October 2024 by Edit Buliczka Hungarian Tax Office Updates IPT Declaration Form for 2023 The procedure necessary to correct an underdeclared premium figure in Hungary can be complicated. The complexity of a correction for return form 2320 has become even more challenging. Following a […]

2025 bond project
North America Tax Information Reporting
November 4, 2024
The Insurer’s Guide to the 2025 Bond Project

This blog was last updated on November 4, 2024 The regulatory landscape for insurance companies is undergoing significant changes with the Principles-Based Bond Project which is set to take effect on January 1, 2025. These changes, driven by the National Association of Insurance Commissioners (NAIC), will impact how insurance companies classify and value bond investments, […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
November 1, 2024
New ViDA Proposal Set for ECOFIN Approval

This blog was last updated on November 1, 2024 The Council of the European Union has released a new proposal regarding the VAT in the Digital Age (ViDA) reform. The proposal aims to modernise and streamline VAT systems across the EU, notably e-invoicing and Continuous Transaction Controls (CTC). Members States will review it on 5 […]

what is peppol
E-Invoicing Compliance North America
October 29, 2024
What it is PEPPOL?

This blog was last updated on October 29, 2024 Peppol E-invoicing explained: What it is and how it works The global adoption of electronic invoicing is accelerating. Governments worldwide are pushing to adopt e-invoicing to digitally transform their national systems and, often, to close the VAT gap. While many countries have introduced their own e-invoicing […]

remote sellers sales tax
North America Sales & Use Tax
October 28, 2024
Will Congress Act to Simplify Remote Seller Sales Tax Collection

This blog was last updated on October 29, 2024 When the United States Supreme Court ruled in 2018, that South Dakota’s law imposing sales tax collection requirements on sellers without in-state physical presence was constitutional, it did not grant states free reign. States are still responsible for ensuring that their sales tax requirements are manageable, […]

dtc shipping laws for craft spirits
North America ShipCompliant
October 23, 2024
Why It’s Time to Reform DtC Shipping Laws for Craft Spirits

This blog was last updated on October 23, 2024 While wine lovers have enjoyed the convenience of direct-to-consumer (DtC) shipping for nearly two decades, the craft spirits market is still not afforded the same access. Outdated and restrictive spirits shipping laws have kept the spirits industry from fully leveraging the benefits of DtC shipping, leaving […]