A vendor check issued years ago that was never cashed. A customer overpayment that was never refunded. An employee’s final paycheck returned as undeliverable. Each of these can become reportable as unclaimed property, triggering compliance responsibilities.

Unclaimed property reporting and remittance obligations (also known as escheatment) span all 50 states and four U.S. territories, yet they often receive less attention than other compliance priorities. Large businesses routinely report millions of dollars in unclaimed property annually, with states then holding the property as custodians until owners come forward to claim in perpetuity.

For non-compliant businesses, unaddressed unclaimed property obligations can trigger state examinations, interest, and penalties, making proactive compliance well worth the effort.

Core Unclaimed Property Concepts

Definitions and Common Property Types

Unclaimed property generally refers to property held by a business that is owed to another person or entity. Property becomes reportable after remaining unclaimed for a specified dormancy period: the time during which the owner has not generated activity, contact, or shown interest in the property.

Under modern unclaimed property laws, the property most often at issue is not a family heirloom or an abandoned parcel; it is an outstanding financial obligation. Common examples include uncashed checks issued to vendors, customers, or employees; unresolved customer credit balances; and securities investments and distributions. Certain industries generate additional property types: dormant bank accounts, retirement accounts, and life insurance proceeds in financial services; unused gift cards and rebates in retail; patient credit balances in healthcare; and royalty obligations in oil and gas and entertainment.

Relevant Source Documents

Quantifying unclaimed property and supporting annual compliance generally requires access to a range of accounting and legal records. Common source documents include:

• Trial balances

• Check registers, bank reconciliations, and bank statements

• Accounts receivable aging reports

• Customer contracts and terms and conditions

• Data from third-party administrators

• General ledger detail for relevant accounts

A clearly defined record retention policy and procedures for maintaining supporting detail are key to effective compliance. With these foundational concepts in mind, let’s turn to the mechanics of unclaimed property reporting.

Key Reporting Considerations

Varying Requirements

Every state requires unclaimed property reporting. However, key requirements (dormancy periods, reporting deadlines, proactive owner outreach obligations, property type classifications and exemptions, and filing procedures) are jurisdiction-specific, reflecting each state’s statutory framework. For example, an uncashed payroll check might have a one-year dormancy period in one state and a three-year dormancy period in another. 

Additionally, property that is reportable in one state may be exempt in another. For example, exemptions may apply to transactions between businesses, property below a certain value threshold, or specific retail instruments such as gift cards or merchandise credits.

Because accurate reporting requires careful analysis of each jurisdiction’s statutes and regulations, a one-size-fits-all approach rarely works. Businesses should implement processes to track applicable requirements and support accurate, timely identification and reporting of unclaimed property.

Common Reporting Challenges

Companies commonly run into reporting issues due to these process gaps:

• Missed reporting requirements due to untracked legislative or procedural updates
• Incorrect application of dormancy periods
• Limited internal resources or staffing constraints
• Incomplete reports resulting from omitted property types
• Record and data availability issues, particularly those arising from system conversions or M&A activity. (Acquiring companies may inherit unclaimed property liabilities from predecessor entities, making pre-acquisition due diligence essential.)

Securing buy-in and assigning clear responsibility across relevant departments (accounting, treasury, tax, and legal) can help businesses address these challenges more effectively. A documented policy and procedures manual also supports a more consistent, repeatable approach.

Due Diligence

An important step in the unclaimed property reporting process is due diligence, which refers to the outreach businesses must conduct before reporting and remitting property to the state. This outreach serves as a final effort to contact owners and return property directly. It benefits the company by reducing the amount that must be escheated and potentially preserves customer and vendor relationships. Although due diligence requirements vary by jurisdiction, they typically include mailed notice to the owner’s last known address within a specified timeframe before reporting.

Conclusion

Unclaimed property compliance is a multijurisdictional obligation that touches nearly every business, regardless of size or industry. By understanding the core concepts, staying current with evolving state requirements, and establishing sound internal processes, organizations can reduce compliance risk and avoid common pitfalls. Organizations that have not recently reviewed their unclaimed property processes may benefit from evaluating alignment with evolving state requirements. For businesses seeking to strengthen unclaimed property compliance, proactive attention (whether managed internally or with experienced advisors) can help ensure reporting obligations are met efficiently and accurately.