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Unclaimed Property Audits on the Rise in Alabama
– November 2009
As states continue to see declining tax revenues from the economic downturn, they are looking for additional sources of revenue. Alabama is not immune from this and is increasing the focus on "Unclaimed Funds" for added revenue. In fact, Alabama has recently contracted with a third party (Revenue Discovery Systems (formerly Alatax)) to perform Unclaimed Property Audits. If your business is not in compliance with the Unclaimed Property Rules, then you need to address the issue now. Businesses can enter into a settlement with the State under the State's Voluntary Disclosure rules and avoid punitive interest and penalties. However, in order to qualify the business has to approach the State before an audit begins.
Unclaimed Property Reporting
Under the Alabama Uniform Disposition of Unclaimed Property Act of 2004, all businesses are required to file an annual report with the State Treasurer's Office by November 1st of each year to report and remit unclaimed property held in their possession. The report covers the one-year period ending June 30. Compliance with this law, including filing reports and remitting unclaimed assets to the Treasurer, is a mandatory legal requirement. A business that does not have unclaimed property is not required to file a "Zero Report."
What is Unclaimed Property?
Property is presumed abandoned if it is unclaimed by the apparent owner within the time period set forth for the specific property type. Examples of unclaimed property include (but are not limited to): money orders, checks, deposits, credit balances, unpaid wages, customer overpayments, retirement accounts, interest or dividends. The period after which these types of property would be considered unclaimed generally ranges from one year to five years. Any property not specifically classified by the State of Alabama is subject to a three year dormancy period before it is deemed abandoned.
Penalties for Non-compliance
If a business fails to report, pay, or deliver property within the time prescribed, it will face a $100 penalty for each business day the report, payment, or delivery is late, up to a maximum of $5,000. Penalties of $500 to $1,000 per day, up to a maximum of $25,000, can be assessed for willful failure to comply with the law or intentional fraudulent reporting. Alabama's Voluntary Disclosure Program can be used to prevent the imposition of interest and penalties if your business discovers that it is not in compliance with the law. The Voluntary Disclosure Program allows you or your tax advisor to negotiate a settlement with the State. If your tax advisor approaches the State on behalf of your business, then the business remains anonymous until both parties reach a final agreement.
Record Retention
A reporter of abandoned property is required to maintain relevant records for 10 years after the report is filed. In addition, any business or financial organization that sells or issues traveler's checks, money orders or similar instruments on which the business is directly liable, should maintain records while the instruments are outstanding, indicating the State and date of issue, for 3 years after the report is filed. If you have questions or would like additional information on how this legislation may impact your business or your employees, please contact your Warren Averett advisor.
