BILL ANALYSIS Ó
SB 495
Page 1
Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 495 (Fuller) - As Amended: May 10, 2011
PROPOSED CONSENT
SENATE VOTE : 39-0
SUBJECT : Unclaimed Property
KEY ISSUE : Should the time period after which unclaimed
property in a safe-deposit box escheats to the state be
increased, and should notice to property holder be enhanced so
that as much personal property as possible is returned to its
owner?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
Existing law provides that property left unclaimed in a
safe-deposit box escheats to the state after three years if
unclaimed by the property owner, and it requires the business
that holds the property to notify the property owner not less
than six months and not more than three months before the
business would be required to report and transfer the property
to the Controller. Once the property escheats to the state, the
Controller must then hold the property for 18 months before
selling or otherwise deposing of the property. This
non-controversial bill would extend the period after which
unclaimed property in a safe-deposit box escheats to the state
from three to five years. In addition, this bill would require
the business that holds the property to send two notices to the
property owner: the first would be sent not less than
two-and-a-half years and not more than three years before the
property would escheat to the state; the second notice, as in
existing law, would be sent not less than six months and not
more than 12 months before that escheat date. The bill makes
other changes relating to the escheat of abandoned retirement
accounts, as to the triggering of distribution of those accounts
when abandoned; it increases the time that the Controller must
hold property from 18 months to seven years; and it requires the
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Controller to establish a compliance program to better identify
the owners of property and funds. According to the author, the
purpose of this bill is to ensure that as much unclaimed
property as possible is returned to its rightful owners. The
bill is sponsored by the State Controller's Office. There is no
known opposition to the bill.
SUMMARY : Amends the Unclaimed Property Law to increase the
period after which property left in a safe-deposit box or some
other repository escheats to the state, and makes other changes
relating to notices that must be sent to the holder of such
property and the role of the Controller in handling escheated
property. Specifically, this bill :
1)Lengthens the period of time for the escheat of the contents
of a safe-deposit box from three to five years.
2)Requires a business to provide notice to the apparent owner of
the contents of a safe deposit box that the contents of the
box will escheat to the state. Specifies that the business
shall give notice at each of the following two times: (1) not
less than 2 years and not more than three years before the
contents would be reportable to the Controller; and (2) not
less than six months and not more than 12 months before that
date.
3)Requires the notice to include a prescribed form, to be
completed and returned by the owner of the property to declare
an intention to maintain the safe-deposit box and prevent the
contents from escheating to the state.
4)Increases the amount of time that the Controller must hold the
safe-deposit contents from 18 months to seven years from the
date the property is delivered to the Controller. Specifies
that if the Controller determines that the property has no
commercial value, he or she may at any time thereafter destroy
or otherwise dispose of the property.
5)Requires the Controller to establish a compliance program to
identify the holder of unclaimed property who is not in
compliance with specified reporting requirements, in order to
bring a non-compliant holder into compliance with the
Unclaimed Property Law.
6)Modifies that manner by which funds held by a business in
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certain retirement accounts, or held in a fiduciary capacity
for another person, escheats to the state, so that the funds
are not considered payable or distributable unless
distribution has become mandatory under the terms of account,
or, if the account is not subject to mandatory distribution
under federal revenue laws, then when the owner has attained
the age of 70 and years.
EXISTING LAW :
1)Provides that funds held by a business association in an
individual retirement account or similar account or plan, if
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 Section 1513(a) (6).)
2)Provides that the contents of a safe-deposit box held by a
business association shall escheat to state if unclaimed by
the property owner for more than three years. Requires the
business association that holds the property to notify the
apparent owner, if known, no sooner than 12 months before the
property is reportable to the Controller and no later than six
months before that date. (Code of Civil Procedure Section
1514.)
3)Provides that any dividend, profit, distribution, interest,
payment, or other sum held by a business for a shareholder,
certificate holder, or other security holder who has not
claimed it, or has not corresponded with the business about
it, within three years after the date prescribed for payment
or delivery, escheats to the state. (Code of Civil Procedure
Section 1516.)
4)Provides that all 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 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. (Code of Civil Procedure Section 1518.)
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5)Provides that funds in an individual retirement account or
retirement plan for self-employed individuals or similar
accounts 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. (Code of Civil
Procedure 1518(b).)
6)Provides that all tangible property located in this state,
except as provided, that is held in the ordinary course of the
holder's business and has remained unclaimed by the owner for
more than three years after it became payable or distributable
escheats to the state. (Code of Civil Procedure Section
1520.)
7)Provides that property with no apparent commercial value that
is delivered to the Controller shall be retained by the
Controller for a period of not less than 18 months from the
date the property is delivered to the Controller. If the
Controller determines that any property has no apparent
commercial value, he or she may thereafter destroy or
otherwise dispose of the property. (Code of Civil Procedure
Section 1565.)
COMMENTS : The Unclaimed Property Law requires that funds held
by a business association in various accounts or in safe-deposit
boxes will escheat to the state after a designated period of
time if the apparent owner fails to take any actions to claim
that property or otherwise correspond with the holder of the
property. This can happen for a variety of reasons, but most
often it is due to a death, relocation, or transfer of property
to an heir or relative with little or no knowledge of the
account. At a certain point, usually after three years of
non-activity or abandonment, the business holder reports it to
the Controller and the property escheats to the state. The
Unclaimed Property Law also specifies the amount of time that
the Controller must retain the property before selling or
disposing of it, assuming the rightful owner cannot be located.
This bill seeks to extend the time that such property is held by
a business before it is reported to the Controller, and to
extend the amount of time that the property is held by the
Controller before disposal or liquidation. The object of the
bill is to ensure that more property is returned to the rightful
owner.
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More specifically, existing law provides that property left
unclaimed in a safe-deposit box escheats to the state after
three years if unclaimed by the property owner and requires the
business that holds the property to notify the property owner
not less than six months and not more than 12 months before the
business would be required to report and transfer the property
to the Controller. This non-controversial bill would extend the
period after which unclaimed property in a safe-deposit box
escheats to the state from three to five years. In addition,
this bill would require the business that holds the property to
send two notices to the property owner: the first would be sent
not less than two-and-a-half years and not more than three years
before the property would escheat to the state; the second
notice, as in existing law, would be sent not less than six
months and not more than 12 months before that escheat date.
The bill makes other changes relating to the escheat of
abandoned retirement accounts, namely as to what triggers the
distribution of those accounts when abandoned. This bill would
also increase the time that the Controller must hold property
from 18 months to seven years, and it requires the Controller to
establish a compliance program to better identify the owners of
property and funds.
ARGUMENTS IN SUPPORT : According to the author, this bill "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."
According to California State Controller John Chiang, the
sponsor of this bill, the Controller's office receives numerous
complaints about property that was turned over too quickly to
the state or which the state disposed of too quickly as property
with "no commercial value," even though that property had great
sentimental value to the owner. The Controller claims that he
has made the return of unclaimed property to its rightful owners
"one of Ýhis] top priorities." The Controller believes that AB
495 will aid him in this effort by (1) improving notification to
owners of safe deposit boxes that the box will be transferred to
the state if there is no activity; (2) increasing the time that
the business should hold inactive safe deposit boxes from three
to five years; (3) increasing the amount of time that the
Controller must hold the property from 18 months to seven years;
(4) and establishing a program to bring businesses that are not
complying with the unclaimed property law into compliance.
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REGISTERED SUPPORT / OPPOSITION :
Support
California State Controller (sponsor)
Opposition
None on file
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334