BILL ANALYSIS �
AB 1011
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Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1011 (Salas) - As Amended: May 7, 2013
Policy Committee: JudiciaryVote:8-1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Controller to add interest to payments
made to owners of unclaimed property. Specifically, this bill:
1)Requires the Controller to add interest, at the lessor of five
percent per year or the bond equivalent rate of 13-week U.S.
Treasury bills, to the amount of any claim paid to the owner
for the period the property was on deposit in the Unclaimed
Property Fund.
2)Requires a former holder of property, who exercises lawful
discretion to compensate the owner of property escheated and
been remitted to the state, to also pay interest as specified
above.
FISCAL EFFECT
The Controller's Office estimates-based on an assumption of
gradually increasing interest rates-that interest payments
(losses of General Fund revenue), will be about $80,000 in
2013-14, $350,000 in 2014-15, and $400,000 in 2015-16, and
slightly higher each year thereafter.
The Controller's Office notes that, in recent years, the average
cash amount paid has been around $750, thus adding interest
would add only a nominal amount to each payment, and would
provide no real incentive for owners to extend the time their
property is with the state. The current interest rate on 13-week
U.S. Treasury bills is only 0.075%.
COMMENTS
AB 1011
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1)Background . The Unclaimed Property Law (UPL), enacted in 1958,
establishes procedures for the escheat of unclaimed personal
property. Property escheated to the state means the state has
custody of the property in perpetuity, until the owner claims
the property. Under the UPL, the owner is the person to whom
the property actually belongs and the holder is the person or
entity that has possession of the property. The holder might
be a bank or other money depositary or a business that has
issued a check to an individual or other business, or a life
insurance or annuity.
The UPL is intended to locate owners and restore their
property to them and to give the state, rather than the
holders of unclaimed property, the benefit of its retention,
since experience shows that most abandoned property will never
be claimed. The state, through the Controller, acts as the
protector of the rights of the true owner.
2)Purpose . This bill, sponsored by the State Controller,
requires the Controller to add a specified interest payment to
the amount of any claim paid to the owner of property that was
on deposit in the Unclaimed Property Fund. In addition, this
bill extends the same interest requirement in circumstances
where the former property holder elects to pay the owner
directly after the property has already escheated to the
state, then seeks reimbursement from the Controller.
3)Legislative/Legal History . Payment of interest on unclaimed
property payments was first added in 1976. In 2002, AB 3000
(Chapter 1122) changed the interest calculation from
compounded annually to simple interest, and changed the low
end referenced interest rate from the Pooled Money Investment
Account rate to the 13-week U.S. Treasury bill rate. One year
later, however, AB 1756 (Chapter 228), deleted the
interest-payment requirement and simple stated, "No interest
shall be payable on any claim paid under (the Unclaimed
Property Law)."
AB 1011 re-enacts the language of AB 3000. It should be noted
that, in litigation regarding the state's non-payment of
interest following enactment of AB 1756, the federal appellate
court overturned a federal district court ruling and
determined that the state is not required to pay interest on
unclaimed property.
AB 1011
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Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081