Illinois continues to intensify its unclaimed property compliance enforcement, with plans to issue approximately 100-150 self-audit notices each quarter.
Companies that have not filed unclaimed property reports regularly or that might have submitted incomplete reports could be contacted by the Illinois State Treasurer’s Office and directed to come into compliance through the self-audit process. (See our previous Alert.)
Taxpayers should treat those notices as urgent. For example, a letter from the Treasurer’s office noting, “Response Required to Avoid On-Site Examination Notice” generally provides only 15 days to respond, while one noting, “Unclaimed Property Compliance and Reporting Outreach Notice,” typically allows 30 days.
Failure to respond timely could result in the matter being escalated to a third-party examination of the company’s books and records. Under the current program, holders are generally given 90 days to complete the self-audit process and file the required return, although extensions may be granted at the state’s discretion.
Importantly, under Illinois S.B. 338, which was signed in August 2021 and modernized the state’s Revised Uniform Unclaimed Property Act (RUUPA), Illinois now requires some businesses to file unclaimed property reports even when they have no property to report. That negative reporting requirement applies to businesses that meet any of the following criteria:
- Annual sales exceeding $1 million;
- Publicly traded securities;
- Net worth of at least $10 million; or
- More than 100 employees.
S.B. 338 expanded the scope of Illinois unclaimed property law by adding financial deposits, including auto-renewing deposits, to the definition of unclaimed property, subject to a three-year dormancy period. It also granted the administrator expanded authority to examine certain financial organizations in specified circumstances.
Before filing any unclaimed property reports with Illinois, holders should carefully review their historical filings, accounting practices, and internal policies and procedures to help ensure their reporting positions are complete and supportable. That step is especially important, given Illinois’s 13-year lookback period; filing $0 reports without a thorough analysis of books and records or appropriate due diligence could increase audit exposure and create significant financial risk.
How to Prepare for a Self-Audit
Companies that receive notices of noncompliance should be prepared to conduct a comprehensive self-review of all property potentially reportable to the state for the 10 most recent report years based on company records. The self-audit program is administered with assistance from a third-party audit firm, making a prompt and well-documented response particularly important.
BDO Insights
Illinois enforcement is accelerating, and self-audit notices carry short response windows. Companies should triage any Treasurer correspondence immediately to avoid escalation to a third-party examination.
Negative reporting can itself create risk under Illinois’s updated RUUPA rules, so businesses should confirm whether they are required to file even if they have no reportable property and avoid submitting $0 reports without a defensible records-based analysis.
Proactive readiness review is recommended. Taxpayers should assess the last 10 report years of potentially reportable property; validate historical filings and accounting treatment; and document policies, due diligence, and support before responding or filing.
Please visit BDO’s State & Local Tax Services and Unclaimed Property pages for more information on how BDO can help.