California Voluntary Disclosure Program May Be on the Horizon Once Again

June 2022

BY

Andres MacellaroManager, Unclaimed Property

Joe CarrPartner, National Unclaimed Property Leader

California has not had an unclaimed property voluntary disclosure/amnesty program for nearly two decades. The resulting lack of a way for businesses holding past due unclaimed property to report it to the state without being subject to California’s 12% per year interest assessment on past due property has very likely deterred compliance with California’s Unclaimed Property Law[1] . On Feb. 16, 2022, CA Assembly Bill 2280 (AB 2280) was introduced with the aim of addressing this deterrent by providing a long-awaited means for businesses to come into compliance, interest-free, through the creation of the California Voluntary Compliance Program (VCP). 

If signed into law, AB 2280 will work in tandem with CA Assembly Bill 466 (AB 466), which became effective on Jan. 1, 2022, and authorizes the Franchise Tax Board to share certain information with the California State Controller’s Office (SCO) related to unclaimed property. The SCO will likely seek to increase compliance, currently estimated by the state to be 2%, through a combination of increased audit activity and voluntary compliance.
 

Who can enroll in the program? 

A business holding unclaimed property (holder) who wishes to report past due unclaimed property may request to enroll in the program. Acceptance into the program is at the SCO’s discretion; however, the following situations would make holders ineligible:
  • Holder is currently under examination or has received a notification from the SCO of a pending examination.
  • Holder is the subject of a civil or criminal prosecution related to compliance with the Unclaimed Property Law.
  • Holder has been notified by the SCO of an interest assessment under the Unclaimed Property Law in the last five years and it remains unpaid (Note: paying the interest assessment would allow the holder to once again request enrollment.).
  • The SCO has waived interest against the holder under the Unclaimed Property Law within the last five years[2].
 

What are the program requirements?

The SCO will waive interest under the program if a holder does all of the following:
  • Enrolls and participates in the SCO’s unclaimed property educational program within three months of enrollment in the VCP.
  • Completes a review of books and records going back 10 (report) years.
  • Complies with due diligence requirements to notify owners of reportable unclaimed property not less than 30 days from submitting the VCP filings.
  • Files an initial report within six months of enrollment into the VCP. (Note: an extension of time up to 12 months would be possible at the SCO’s discretion providing for a total of 18 months’ time to complete VCP from date of enrollment.)
  • Files a final report seven months to seven months and 15 days after the initial report, along with full payment.
 

What happens if you don’t meet the requirements?

The SCO can reinstate interest if the holder does not report, pay and deliver all reportable property within the required timeframes.
 

What else is in the bill?

In addition to establishing a VCP, the bill also provides for the following:
  • Limits interest to $10,000 if a holder files a report – after the initial report and before payment or delivery is made for property that may not be subject to escheat – that is not in substantial compliance with statutory requirements.
  • Allows the SCO to waive interest payable if the holder’s failure to report in substantial compliance with specified requirements is due to reasonable cause.
  • Invalidates certain finder’s fee agreements and requires certain agreements to include information about the nature and value of the property, that the SCO is in possession of the property, and the address where the owner can directly claim the property from the SCO.
  • Exempts records and information obtained by the SCO pursuant to the Uniform Property Law from disclosure under California Public Records Act, including financial records obtained during examinations, records related to statements of personal worth or personal financial data and personal information.
 

What is the status of this bill?

AB 2280 passed the CA Assembly on May 25, 2022, and is currently in the Senate for consideration. BDO will continue to monitor this bill and provide updates.

 



[1] Cal. Civ. Proc. Code §§ 1500 et seq.
[2] Notwithstanding the foregoing, if a holder acquired or merged with another entity within the five-year period, the holder may request to enroll in the program for the purpose of resolving unclaimed property that may be due and owing to the state as a result of the acquisition or merger.