In mid-February we wrote to warn you about California legislation that requires taxpayers filing a corporation franchise/income tax return, a partnership return, or an LLC return to disclose whether they have historically filed unclaimed property reports with the California State Controller’s Office (SCO) (Read past article here.) The law, passed in Summer 2021, effective as of January 2022, and applicable to 2021 tax returns, is significant, we noted, “because it allows California’s Franchise Tax Board (FTB) to share information with the SCO that will likely lead to unclaimed property audits of taxpayers that have not filed unclaimed property returns.”
New legislation, California AB 2280, has been proposed that would modify the mandate. Among its provisions, AB2280 would, according to the bill’s Abstract, “allow the Controller to establish the California Voluntary Compliance Program, for the voluntary compliance of holders for the purpose of resolving unclaimed property that is due and owing to the state under the Unclaimed Property Law”. As such, it would allow certain unclaimed property holders to report past-due unclaimed property without having to pay interest.
To be eligible for the Voluntary Compliance Program—and for the SCO to waive interest assessments—an unclaimed property holder would be required to:
- Participate in an unclaimed property training and education program
- Review of its books and records for the previous 10 years for unclaimed property
- Report unclaimed property to the SCO within six months of entering the program
- Perform due diligence notifying property owners of unclaimed property
- Provide unclaimed property reports and payments to SCO
As we advised in our earlier article, if your business has California unclaimed property or you are unsure, now is the time to review your records. Assessing the potential liability for the unclaimed property will allow you to evaluate risk and prepare for the voluntary compliance program if AB2280 becomes law. Please contact HBK’s SALT Advisory group at HBKSalt@hbkcpa.com with questions.