Wipfli Alerts & Updates | Wisconsin State Tax Alert: Wisconsin and Unclaimed Property Obligations
April 24, 2013
There has been a recent rise among states in enforcement of unclaimed property laws. Now, within the last six months, the State of Wisconsin is no longer an exception to this movement.
What is unclaimed property?
Unclaimed property is a financial or property asset that belongs to an individual, business, or governmental entity. Property is considered abandoned when there has been no owner contact for a set period of time, known as the dormancy period (usually five years). If contact with the owner cannot be established, the organization must report and remit the unclaimed property to the Office of the State Treasurer. Examples of unclaimed property include: stocks, bonds, dividends, checking and savings accounts, uncashed wage checks, security deposits, unused subscriptions, and funds owed under life insurance policies. The Office of the State Treasurer serves as custodian of the property until it is claimed by the owner. Once reported to the State Treasurer, unclaimed property is available forever for refund to the owners or legal claimants.
Increased enforcement of unclaimed property laws
The Office of the State Treasurer has recently increased enforcement action by hiring six national firms that specialize in auditing unclaimed property compliance. These national firms contract with the State of Wisconsin and up to thirty (30) additional states, and they are paid based on a percentage of the findings they identify in the compliance audits. If property is found reportable to another state where the contract auditors have a current agreement in place, the property will be reported to the respective state, and penalties and interest would likely be forthcoming. Consequently, audit targets can expect aggressive auditors and a significant commitment of their time in the management of these audits.
The targets of these audits may include banking and financial organizations (including credit unions), insurance companies, utility providers, investment companies, temporary staffing agencies, manufacturers, contractors, distributors, and nonprofits. Almost every business may have some type of reportable unclaimed property. Wisconsin businesses have already been contacted for audits by these third-party contingency firms. In addition, the Wisconsin compliance auditors will request records going back ten years (five years of dormancy and five years of reporting). In other states, these requests can go back 15, 20, or more years. If records are missing or incomplete, auditors will estimate potential liabilities or project results back from more current periods. With the potential dollars involved in an audit, now is the time to make sure you are aware of the reporting obligations not only to Wisconsin, but to other states as well. Failure to report and remit unclaimed property can result in significant assessments (including interest at 18% and negligence penalties).
“Amnesty program” legislation pending
According to the Wisconsin Unclaimed Property Administrator, legislation is currently pending that would create an “amnesty program” here in Wisconsin. The amnesty program would provide an opportunity for those organizations that have not properly reported unclaimed property in the past to receive a reduced rate of assessment interest from 18% to 12%, and negligence penalties would not be assessed. Once more information is made available on this proposed amnesty program, we will update this alert.
If your business organization is contacted for an unclaimed property compliance audit, please reach out to your Wipfli relationship executive or one of the individuals listed below with questions or for assistance. Upfront planning, organization of business records, and managing the auditor’s requests are crucial steps in bringing these audits to a quick and efficient resolution.
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