UPdate Special Issue:
California Passes UP Legislation in Response to Injunction; Controller Announces Filing Procedures
In response to the U.S. District Court for the Eastern District of California’s injunction barring California from accepting, taking title to, or possessing any unclaimed property, California has enacted Senate Bill 86, which amends the California Code of Civil Procedure to modify the state’s unclaimed property law, and the Controller has announced procedures holders should follow for upcoming filings.
Law Changes
The new law amends Section 1532 of the California Code (the Code) to provide that holders filing reports under section 1530 of the Code must pay or deliver all escheated property to the Controller no sooner than 7 months and no later than 7 months and 15 days after the final date for filing the report, thus eliminating the requirement that property be remitted to the state when the holder files the report. This change creates a delay between when the reports are filed, and when the property is actually sent to the state. Note, however, that at this time, the injunction is still in force, and the state currently cannot accept any property.
The law also requires that within 165 days of the final report due date, the state must contact owners entitled to property valued at $50 or more who are listed on holder reports, providing the owners with information on how to contact the holder to make a claim. In addition, the notice will inform the owners that if a claim is not made to the holder by a specified date, the property will be placed in the custody of the Controller and may be sold or destroyed, as provided by law. Thus, between the time the holder files the report and the time the property is remitted, owners will have an opportunity to submit a claim to the holder. In the event such a claim is made, the holder must file a report with the Controller containing information pertaining to the previously reported property that is no longer subject to escheat. The law provides that any property not paid or delivered in response to a claim which the holder later determines is in fact subject to escheat will not be subject to interest.
Filing Requirement
- Holders are required to file a report – without remitting property – before November 1, 2007 (or before May 1, 2008, for life insurance companies). Note that a holder’s responsibility to notify owners of their property 6 – 12 months before the property becomes reportable remains in effect.
- The Controller has implemented the UPS 2000 reporting system, and will accept the following formats: Standard NAUPA II (recommended), CA NAUPA II (2007 report year only), CA Magnetic Media (including Diskette Reporting Program) (2007 report year only); Paper (when reporting for fewer than 50 properties only).
- Holder requirements to list all known owner and property information are still in effect.
- Form UFS-1, which has been revised, is required with all unclaimed property reports, regardless of format used. Section C of the new form captures information for a second holder contact. The Controller will use the first holder contact information to contact the holder with questions about the report. The second holder contact information will be included in the notices sent to owners. If a holder only provides information for one contact, then that information will be used for both purposes.
- Form SS-1, used to summarize securities transferred to the Controller, will not be required with the upcoming reports because property is not being remitted.
Property for Other States
Holders with property for owners with a last known address in another state cannot report and remit that property to California because the injunction prohibits the state from receiving the property. Holders must now report and remit property to the other state, even though they may have previously filed with California under a reciprocity agreement.
Additional Information
The Controller has posted a number of resources for the holder community on its Web page (www.sco.ca.gov/col/ucp/holder/index.shtml), including reporting instructions and guidelines, and information regarding the various acceptable reporting formats.
Remitting Property in 2008
The Controller indicates that, assuming the court will approve the new reporting process, holders will be required to remit property – as reported in November 2007 (or May 2008 for life insurance companies) – to the Controller between June 1 and June 15, 2008 (or between December 1 and December 15, 2008, for life insurance companies). Although this schedule is not applicable until the court approves the reporting process, holders should be prepared to remit under these time frames.
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