Beware of Unclaimed Property

Alabama businesses would be well served to remember that Alabama’s State Treasury Department requires businesses to review their records annually and report all unclaimed property to the state by November 1 or face hefty penalties.

The State of Alabama Unclaimed Property Act of 2004 specifically requires that all businesses review their records each year to determine whether they are in possession of any reportable unclaimed property, file an annual report of their findings, and remit the unclaimed property due to the State of Alabama Treasurer’s Office, Unclaimed Property Program.
Businesses not holding any reportable unclaimed property are not required to file a report with the state.

The report must be filed with the State Treasurer by November 1 of each year and cover the 12 months preceding July 1 of that year. Businesses are also obligated to report and remit unclaimed property which was due from earlier years but not reported.

What is unclaimed property? Under Alabama law it is all intangible property and the tangible and intangible contents of safe deposit boxes that have remained unclaimed by owners for a specific period of time. The “specific period of time” property must be unclaimed before it is reported is called the “dormancy period” and the dormancy period is different depending on the type of property.

For example, the dormancy period for checking and savings accounts is three years, for wages or commissions it is one year, and for official bank checks it is three years.

While many businesses are unaware of their obligation to report unclaimed property, the penalties are serious and should not be taken lightly. The penalties are $100 for each business day up to $5,000 for failure to report, pay, or deliver property within the required time period; $500 for each business day up to $25,000 for willfully failing to report, pay, or deliver property; and $1,000 for each business day up to $25,000 for an intentional fraudulent report.

Common forms of unclaimed property include cash, savings or checking accounts, stocks, bonds, uncashed dividends or payroll checks, refunds, traveler's checks, and trust distributions.

Also, remember that Alabama law requires businesses to maintain records containing information required to be included in the annual report for a period of 10 years after the report is filed with the state.

It is our understanding that audits of uncliamed property are on the rise in Alabama, so consider yourself warned.