California unclaimed property – apply for the Voluntary Compliance Program in 2023

As reported in a previous Insight article, California has enacted landmark legislation that, for the first time, creates a voluntary compliance program (VCP) for businesses with unclaimed property liabilities.

The commencement of this program was recently announced by the California State Controller’s Office (SCO). Holders of unclaimed property that fulfill all program requirements, including completing a training program and meeting reporting deadlines, will be eligible for waived interest on past-due unclaimed property. To participate in the program, you must apply and be accepted. Approved applicants must complete training by July 31, 2023, to take advantage of the program for this year.

California unclaimed property – a history of non-compliance

Compliance with California’s unclaimed property law has historically been low – it has been estimated that as few as 2% of companies file annual reports with the state. The mandatory 12% compound interest rates on all late-filed unclaimed property, and the lack of a voluntary compliance program have likely been a significant deterrent.

New legislation and incentives to address California unclaimed property

In 2021 California enacted AB 466, which requires franchise tax return filers to reveal their level of compliance with the state’s unclaimed property statute. As an additional measure to incentivize compliance, the Voluntary Compliance Program was created in 2022 through AB 2280. Companies that enroll and are accepted into the program will be qualified for a waiver of California’s annualized 12% interest on past-due filings.

Why you should apply for California’s Voluntary Compliance Program this year

The Voluntary Compliance Program is a long-awaited solution to resolve unclaimed property liabilities in California, without incurring heavy penalties. It is an ongoing program, and companies that are unable to meet the 2023 deadlines can apply for future reporting year cycles. There is still ample time to apply to enroll in the program for 2023, and we encourage all companies that may have an obligation to file unclaimed property reports in California to consider taking advantage of this opportunity as soon as possible.

How to benefit from California’s Voluntary Compliance Program for unclaimed property

Application process

Holders of unclaimed property in California who wish to apply for the Voluntary Compliance Program must first complete this form on the SCO’s website. There are eligibility requirements (listed below), and acceptance into the VDP program is at the Controller’s discretion.

After you are accepted into the program, the SCO will provide additional information including a timeline of due dates and a list of deliverables. The program is designed to mirror the well-established cycles of California’s unclaimed property reporting process.

Deadlines for applications filed in 2023

In order to participate in the VCP during the current reporting year, companies will be required to comply with the following published deadlines:

• July 31, 2023 – complete a required training session

• September 30, 2023 – complete mandated “due diligence” mailings to owners of unclaimed property

• November 1, 2023 – file a preliminary unclaimed property report with the SCO

• June 15, 2024 – file a final unclaimed property report with the SCO, and remit owed unclaimed property

Eligibility requirements

To be considered eligible for the VCP, companies must not be:

• Currently subject to an unclaimed property examination

• Currently subject to civil or criminal investigation

• Have current unpaid unclaimed property interest assessments from the past five years

How Altus Group can help

Altus Group’s Unclaimed Property Advisory Team is highly experienced in assisting companies in complying with the unclaimed property laws of all states.

We are experts at guiding our clients through unclaimed property voluntary disclosure agreement programs. Since the VCP does not protect companies from future audits by California, a strategic approach to self-reviewing potential unpaid unclaimed property liabilities is critical.

Altus can facilitate the review of high-risk areas to ensure an efficient and cost-effective enrollment in the VCP and help minimize risks associated with future audits.