State and Local Tax
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Beginning with the 2021 tax returns (due in 2022), the California Franchise Tax Board (FTB) is requiring businesses to disclose their unclaimed property reporting status on their state tax returns.
This new legislation will be holding businesses operating in California accountable to State unclaimed property laws. Specifically, businesses will need to answer the following questions:
These questions are included on the following tax forms: 100, 100S, 100W, 565 and 568.
According to a report issued in 2019, California estimates that only about 2% of eligible holders are following the State’s unclaimed property laws, which may explain the new questions. This is a significant development in California as now companies located in the state are facing additional scrutiny regarding their escheat compliance history. Based on a company’s responses, the company could be subject to a state or even a multi-state audit.
It should also be noted that California does not currently offer a Voluntary Disclosure Agreement (“VDA”) program to holders. Instead, the State charges 12% interest (per annum) for late property reported. While holders do have the ability to appeal any interest assessments issued, the State only tends to waive the charges under extraordinary circumstances.
If you are a business that operates in California and have never filed an unclaimed property return to California or believe that you may not be in full compliance with State laws, we urge you to take this new development seriously and prepare. One important step is to perform a diagnostic review of books and records to determine the extent of liability owed to owners in the state of California.
We have a team of experts at Clearview with many years’ experience in California unclaimed property law. We are available to answer any questions and point holders in the right direction.
Please contact Eric Mauldin for questions regarding this new development in California and for information on a diagnostic review.
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Request Your ConsultationClearview Group is an award-winning, dynamic management consulting and CPA firm offering services that are flexible and scalable to meet the specific needs of our clients of all sizes and industries. Committed to providing real solutions that offer practical and efficient improvements to processes, procedures and operations, Clearview Group delivers exemplary client services normally associated with national firms, but with the hands-on, personalized feel of a local firm.
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