by: Rachelle Fenwick, Asst. Accounting Manager
Most businesses have unclaimed property resulting from normal operations. Any asset, tangible or intangible, belonging to a third party that remains unclaimed for a specified period of time is considered unclaimed property. For example, uncashed payroll checks must be turned over to the State after one year. Most other property types, such as vendor checks and accounts receivable credit balances, must be turned over after three years. Government entities must turn over all unclaimed property, regardless of property type, after one year.
Michigan’s Uniform Unclaimed Property Act, Public Act 29 of 1995, as amended, requires businesses and government entities to report and remit to the Michigan Department of Treasury abandoned and unclaimed property belonging to owners whose last known address is in Michigan. In addition, every business or government entity that is incorporated in Michigan must report and remit abandoned property belonging to owners where there is no known address.
An outstanding payroll or commission check has a one year dormancy period. A refund due to a patient or a credit on your accounts receivable has a three year dormancy period. For a complete list of property dormancy periods, see the dormancy chart in Appendix A of the Treasury website. That website is www.michigan.gov/unclaimedproperty.
The due date this year for filing the unclaimed property annual report is July 1, 2017, for property reaching its dormancy period as of March 31, 2017. The recommended timeline for Unclaimed Property Review is as follows:
March 31
Identify properties that could be reportable as unclaimed property as of March 31
April 15
**Prepare and mail due diligence letters to those property owners identified as inactive.
May 15
Determine property owners with whom contact has not occurred (i.e., returned mail, no response, etc.)
June 1
Begin preparing the annual unclaimed property report using reporting software. A free version of the software may be downloaded at the website listed above located in the Reporting Unclaimed Property section.
On or Before July 1: Mail the electronic media containing the annual unclaimed property report, Michigan Holder Transmittal for Annual Report of Unclaimed Property (Form 2011) and remittance to the Unclaimed Property Division. If your entity has no unclaimed property to report, you do not need to file anything.
**Michigan law requires holders to send written notice to owners at their last known address informing them that they hold property subject to being turned over to the State. This requirement only applies if all of the following conditions exist:
- The address for the owner does not appear to be inaccurate
- The property has a value of $50 or more
- The statute of limitation does not bar the claim of the owner
Notice must be sent not less than 60 days, nor more than 365 days, before the filing of the report. See the Appendix for samples of due diligence letters.
Complete instructions and forms are available in the Manual for Reporting Unclaimed Property.
The amount of properties that a holder reports determines the method for reporting.
Those reporting 10 or more properties – File using free third-party software Those reporting less than 10 properties – File using free third-party software or paper forms.
Holders who have previously filed unclaimed property reports with the State of Michigan now have the ability to remit payment for their unclaimed property report. Since this payment method requires validation, this payment method is not available to first time filers.
Treasury is providing entities that have not previously reported or have underreported unclaimed property in the past with an opportunity to voluntarily comply with the requirements of the Michigan Unclaimed Property Act (Act) by offering a Voluntary Disclosure Agreement.
Entities that submit a Voluntary Disclosure Agreement indicate their desire to be compliant with the Act. Accordingly, the holder agrees to voluntarily comply with the Act by reporting and remitting previously unreported unclaimed property due the State of Michigan. In accordance with the Voluntary Disclosure Agreement, the holder agrees to accurately complete and file unclaimed property reports and remit payments for the current reporting year and the previous four reporting years within six months from the date the form is filed with the Unclaimed Property Division. Holders will not be assessed penalties or interest.
If a property holder fails to properly file a report, penalty and interest may be assessed as follows:
- Interest at one percentage point above the adjusted prime rate per annum per month on the property or value of the property from the date the property should have been paid or delivered, and /or
- Penalty at 25 percent of the value of the property that should have been paid or delivered.
The information for this article can be found online at www.michigan.govunclaimedproperty located in the Reporting Unclaimed Property section. If you have any questions, please call your accountant for further details.
What’s NEW?
Senate Bill 538 amends the Uniform Unclaimed Property Act of 1995 effective 12/22/15. Properties with a value of $25.00 or less are not required to be escheated per Section 567.224a Sec 4a.
- Does not apply to dividends or stock- related properties defined in Section 567.231a Sec. 11a.
- These properties can still be voluntarily escheated.
New streamlined audit option described in Section 567.25 1b Sec. 31b for businesses whose principal place of business is in Michigan as defined by Section 567.222 Sec. 2. This is retroactive and applies to audits in progress as of August 15, 2015, but does not retroactively apply to contested determinations in litigation before the date of enactment of this amendatory act.