BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 495|
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                                 THIRD READING


          Bill No:  SB 495
          Author:   Fuller (R)
          Amended:  5/10/11
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  5-0, 5/3/11
          AYES:  Evans, Harman, Blakeslee, Corbett, Leno

           SENATE APPROPRIATIONS COMMITTEE  :  9-0, 5/26/11
          AYES:  Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley, 
            Price, Runner, Steinberg


           SUBJECT  :    Unclaimed property

           SOURCE  :     California State Controller


           DIGEST  :    This bill makes various changes to the Unclaimed 
          Property Law.  Specifically, this bill (1) increases the 
          dormancy period for contents of safe-deposit boxes from 
          three to five years before they escheat to the state, and 
          increase notification requirements for holders of unclaimed 
          property; (2) requires the contents of safe-deposit boxes 
          held by a business association (holder) to escheat to the 
          state if unclaimed by the owner for more than five years 
          from the date on which the lease or rental period on the 
          box expired (rather than three years); (3) requires the 
          holder of an unclaimed safe-deposit box to provide notice 
          at two different times before the contents become 
          reportable to the state, rather than the single notice 
          required under existing law, by adding a notice at two and 
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          a half to three years prior to escheat to the state; (4) 
          requires the notice include a form that could be filled out 
          and returned by the owner of the property to declare an 
          intention to maintain the safe-deposit box, which would 
          prevent the contents from escheating to the state; the 
          owner could also contact the business association by phone 
          or electronic means to declare the intention; (5) 
          authorizes the holder to charge a fee of up to $2 to cover 
          the administrative costs associated with mailing the notice 
          and form; (6) authorizes a business association to provide 
          electronic notice to a person opening an account for a safe 
          deposit box that their property may escheat due to 
          inactivity, as specified, and requires written notice if an 
          electronic notice is returned undeliverable; (7) requires 
          the State Controller (Controller) to hold safe deposit box 
          contents with no commercial value for seven years, rather 
          than the current requirement of 18 months; and (8) requires 
          the Controller to establish a compliance program to 
          identify holder of unclaimed property who are not in 
          compliance with specified report filing requirements.

           ANALYSIS  :    Existing law, the Unclaimed Property Law, 
          provides that funds held by a business association in an 
          individual retirement account or under a retirement plan 
          for self-employed individuals or similar account or plan 
          established pursuant to the internal revenue laws of the 
          United States or of this state escheat to the state when 
          the owner, for more than three years after the funds become 
          payable or distributable, has not done any of the 
          following:  (1) increased or decreased the principal; (2) 
          accepted payment of principal or income; or (3) 
          corresponded electronically or in writing concerning the 
          property or otherwise indicated an interest. (Code of Civil 
          Procedure ÝCCP] Section 1513(a)(6).)  Existing law provides 
          that the above funds are not considered payable or 
          distributable unless, under the terms of the account or 
          plan, distribution of all or part of the funds would then 
          be mandatory. (CCP Section 1513(a)(6))

          Existing law provides that all tangible and intangible 
          personal property located in this state, as specified, and 
          the income on that property, held in a fiduciary capacity 
          for the benefit of another person escheats to the state if 
          after it becomes payable or distributable, the owner has 

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          not, within a period of three years, increased or decreased 
          the principal, accepted payment of principal or income, 
          corresponded in writing regarding the property, or 
          otherwise indicated an interest.  (CCP Section 1518.)  
          Existing law provides that funds in an individual 
          retirement account or retirement plan for self-employed 
          individuals or similar account are not considered payable 
          or distributable unless under the terms of the account or 
          plan, distribution of all or part of the funds would then 
          be mandatory.  (CCP Section 1518(b))

          This bill, instead, provides that the funds are not 
          considered payable or distributable unless:  (1) under the 
          terms of the account or plan, distribution of all or a part 
          of the funds would then be mandatory; or (2) for an account 
          or plan that is not subject to a mandatory distribution 
          requirement under the internal revenue laws of the United 
          States or laws of this state, the owner has attained the 
          age of 70 and one-half years of age.

          Existing law provides that the contents of a safe deposit 
          box or other safekeeping repository, held by a business 
          association in this state, escheats to the state if it 
          remains unclaimed for more than three years from the date 
          on which the lease or rental period on the box or other 
          repository expired, or from the date of termination of any 
          agreement by which the box or repository was furnished to 
          the owner.  (CCP Section 1514)

          This bill increases the holding period, from three years to 
          five years, of property contained in a safe deposit box or 
          other safekeeping repository before the property escheats 
          to the state.

          Existing law requires the holder of the property in a safe 
          deposit box or other safekeeping repository to provide 
          notice to the owner that the property may escheat to the 
          state.  That notice must be provided no less than six nor 
          more than 12 months before the property becomes reportable 
          to the Controller. The notice must contain a heading that 
          states "THE STATE OF CALIFORNIA REQUIRES US TO NOTIFY YOU 
          THAT YOUR UNCLAIMED PROPERTY MAY BE TRANSFERRED TO THE 
          STATE IF YOU DO NOT CONTACT US," or similar language, and 
          include specified information.  (CCP Section 1514)

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          This bill additionally requires notice to be given no less 
          than two and one-half years, but not more than three years, 
          before the date the property becomes reportable to the 
          Controller. 

          This bill requires the notice to include a form, as 
          prescribed by the Controller, by which the customer may 
          declare an intention to maintain the safe deposit box or 
          other safekeeping repository by either renewing the lease, 
          rental period, or agreement, or otherwise taking possession 
          of the property from the business association.  If that 
          form is filled out and returned, it shall be considered a 
          claim, as specified, and the contents shall not escheat.  

          This bill provides that, in lieu of returning the above 
          form, the business association may provide a telephone 
          number or other electronic means to enable the owner to 
          contact that organization.  The contact, as evidenced by a 
          record on file with the association, shall be considered a 
          claim and the contents shall not escheat, as specified.  

          This bill authorizes a business association to impose a 
          service charge on the safe deposit box or safekeeping 
          repository for the administrative costs of mailing the 
          above notice in an amount that shall not exceed $2 per 
          required notice.

          Existing law provides that for new accounts opened for a 
          safe deposit box or other safekeeping repository on and 
          after January 1, 2011, the business association shall 
          provide a written notice informing the owner that the 
          property may be transferred to the appropriate state upon 
          the running of the time period specified by state law.  
          (CCP Section 1514(j))

          This bill provides that if the person opening the account 
          has consented to electronic notice, the notice may be 
          provided electronically.

          Existing law requires the Controller to retain delivered 
          unclaimed property that has no apparent commercial value 
          for a period no less than 18 months.  Property may 
          thereafter be destroyed or otherwise disposed of, and no 

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          action against the Controller or the holder of the property 
          may be brought or maintained.  (CCP Section 1565) 

          This bill extends the Controller's holding period for 
          property that has no apparent commercial value from not 
          less than 18 months to not less than seven years. 

          Existing law requires that every person holding funds or 
          other property escheated to the state must report specific 
          information to the Controller, including the last known 
          address of each person appearing from records to be the 
          owner of any property with a value of at least $50 that has 
          escheated under the UPL, as specified.  (CCP Section 1530)

          This bill requires the Controller to establish a compliance 
          program to identify holders of unclaimed property who are 
          not in compliance with the above report filing 
          requirements. 

          This bill makes other technical, clarifying changes.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Senate Appropriations Committee:

                         Fiscal Impact (in thousands)

           Major Provisions       2011-12     2012-13    2013-14     Fund  

          Extended escheat period                           
          $1,200General

          Holding items of no value                         
          $152General

          Compliance program staff     $261       $528      
          $528General

           Compliance program revenues             ($5,021)  
          ($11,7110)           General
           NET costs/(revenues)         $261       ($4,493)  
          (9,831)General
          

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           SUPPORT  :   (Verified  5/26/11)

          California State Controller (source)

           ARGUMENTS IN SUPPORT  :    According to the author, "SB 495 
          is intended to further address the problems and concerns of 
          the state's unclaimed property program by ensuring that as 
          much personal property as possible never escheats to the 
          state while helping to return property that has escheated 
          to its rightful owners."


          RJG:kc  5/27/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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