BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 495| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED SB 495 Page 2 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 CONTINUED SB 495 Page 3 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) CONTINUED SB 495 Page 4 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 CONTINUED SB 495 Page 5 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 CONTINUED SB 495 Page 6 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 **** END **** CONTINUED