Benefits Rise with New California Voluntary Compliance Program

Historically, California had the authority to charge a 12% interest assessment per year on late unclaimed property filed. Even with this high interest penalty, first time filers and regular filers were not incentivized to report past due property because of lofty standards California requires for waiver.‍

With this program comes certain criteria to determine eligibility. To participate in the VCP:

• The holder cannot be currently under audit, or received a state notice with intent to audit
• The holder cannot be subject of a civil or criminal examination related to compliance
• The holder has no unpaid interest assessment from the last five years
• The holder cannot have a past interest assessment waived by the State within the last five years (Does not apply to acquired entities)

With the enactment of AB 2280, California joins a list of other states that already offer formal self-audit programs.  These programs allow unclaimed property holders to submit past due unreported property without the threat of interest and penalty.

‍The following is a list of parameters for the California VCP program:

• Complete an educational training program provided by the State within three months of acceptance into the program
• Review books and records for at least the last ten reporting years, or 13 transaction years
• Issue due diligence letters (where applicable) at least 30 days prior to submitting report (Holders can get up to a 12-month extension upon request and would be decided on a case-by-case basis)
• File Preliminary report within six months after notification of program acceptance
• Submit Final Report and Remittance between seven months and seven months and 15 days, from the filing of the Preliminary report

If any of the previous conditions are not met, California could potentially issue an interest assessment. It is important to note this law does not appear to direct the Controller to enact the program, it simply gives her the authority to do so. So, this implies the program would not necessarily commence right away.

Benefits

The VCP provides the opportunity for huge savings for organizations with operations in California that are not in compliance and/or not under audit. The 12% per year interest assessment could at times exceed the amount of the property being reported.

This program could also help holders avoid audit based on new questions found on the Franchise Tax Board form regarding annual UP compliance.

‍AB 2280, along with the new line item on the Franchise Tax Board form, show that California has a renewed sense of urgency in getting more organizations into compliance with state unclaimed property laws. While there are some potential sticking points that lie ahead, this VCP should be viewed as a positive development. If your organization may not be in compliance, reach out to Eric Mauldin to learn more about the benefits of this new program.