California Escheat & Unclaimed Property Laws

Escheat reporting in California is anything but a modest task because, unlike every other state, California utilizes a two-tiered unclaimed property reporting structure.

Below are the steps that holders must take in order to comply with California unclaimed property reporting laws.

Step 1: Identify Unclaimed Property

California businesses must review financial records annually to determine if they are holders of any property that has remained dormant or inactive beyond the obligatory dormancy periods. Some of the more common types of unclaimed property include checking and savings accounts, customer overpayments, payroll checks, insurance proceeds, stocks, other securities, and utility deposits.

Step 2: Perform Holder Due Diligence

California unclaimed property laws mandate that holders of unclaimed property perform due diligence to try and reconnect with property owners. Holders are required to send notices to owners of securities, regardless of value, and for all safe deposit boxes and other property types valued at $50 or more prior to reporting accounts to the State Controller’s Office.

Step 3: Submit a California Holder Notice Report

The Holder Notice Report is the first step in the two-part California escheat reporting process. This report is due before November 1 of each year (May 1 for life insurance companies). California holders are NOT to remit any properties at this time. Any property received will be returned to the holder.

Step 4: Respond to Owner Claims Resulting from the State Controller’s Office Notices

The State Controller’s Office will send out its own form of due diligence to reported owners upon receipt of the Holder Notice Report. These notifications will inform owners to contact the holder to claim their unclaimed property before the mandatory Holder Remit Report period of June 1 to June 15 (December 1 to December 15 for life insurance companies). The holder must remit payment to the property owner once contact has been made.

Step 5: File a California Holder Remit Report and Final Remittance

The Holder Remit Report is the second step in the two-part reporting process. This report is due between June 1 and June 15 per annum (December 1 and December 15 for life insurance companies). Property not claimed by the owner must be remitted along with the report.

California Unclaimed Property Audits

The State Controller’s Office has the authority to perform holder audits if there is reason to believe the holder failed to report property that should have been reported pursuant to California escheat laws. California, like many other states, utilizes a combination of state employees and third-party auditors to conduct unclaimed property examinations to enforce compliance.

Violation of California Escheatment Law

Under Section 1530 of California’s unclaimed property law, holders who fail to timely report, pay or deliver unclaimed or abandoned property shall pay interest at a rate of 12% per year on the property or value thereof from the date the property should have been reported, paid or delivered.

If a holder pays or delivers unclaimed property in a timely manner, but files a report that is not in substantial compliance with the requirements of Section 1530, the interest payable shall not exceed $10,000.

A fine will be assessed after a reasonable amount of time has passed from the delivery of notice from the State Controller’s office to the holder notifying the holder that a report is required. The willful failure of a holder to deliver a report or perform other duties, including the use of the property report format, will result in a fine of $100 per day for each day the report is withheld or such duty is not performed. Additionally, a fine of anywhere between $5,000 and $50,000 will also be assessed for willfully refusing to pay or deliver the property.

California Dormancy Periods

Dormancy periods in California vary by property type. Generally, most property types have a three-year dormancy period. Accounts are considered dormant if the owner of a property has not indicated any interest in the property or if no contact has been made for the allotted dormancy period for that property. Dormancy periods in California for other common property types include:

• Wages, Payroll or Salary: One year
• Checking Account: Three years
• Money Orders (Non-Bank): Seven years

Still confused or overwhelmed? Try the Sovos UP Compliance Hub

Reporting unclaimed property in California, and other jurisdictions, can be a stressful process that consumes valuable internal resources. However, when properly managed, the annual reporting and escheatment process does not need to be a burdensome experience.

The Sovos UP Compliance Hub is a subscription-based service that includes access to multiple educational and operational resources. Sovos compliance experts continuously monitor and update these resources. Compliance Hub subscriptions can be customized to suit your company’s unique business needs and compliance objectives. Connect with the experts at Sovos today to learn more.