BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1712
Author: Gomez (D)
Amended: 6/16/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 7-0, 6/10/14
AYES: Jackson, Anderson, Corbett, Lara, Leno, Monning, Vidak
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 73-0, 5/8/14 (Consent) - See last page for vote
SUBJECT : Unclaimed property
SOURCE : Author
DIGEST : This bill revises the definition of owner in the
Unclaimed Property Law (UPL) to include a nonprofit civic,
charitable, or educational organization that granted a charter,
sponsorship, or approval for the existence of an organization
that had a legal right to property prior to its escheat but that
has dissolved or is no longer in existence, if the charter,
sponsorship, approval, organization bylaws, or other governing
documents provide that unclaimed or surplus property shall be
conveyed to the granting organization, upon dissolution or
cessation to exist as a distinct legal entity.
ANALYSIS : Existing law:
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1.The UPL, requires property held or owing by a business
association that is unclaimed for more than three years, as
specified, to file a report with the State Controller and turn
over that property to the state.
2.Provides that if a banking or financial organization is the
holder of unclaimed property and has in its records an address
for the apparent owner of property valued at $50 or more, the
holder shall make reasonable efforts to notify the owner that
the owner's property will escheat to the state on a specified
date. The notice shall be mailed not less than six nor more
than 12 months before the time when the owner's property would
escheat and become reportable to the State Controller.
3.Permits escheated items of value under $25 each to be reported
by the holder to the State Controller in aggregate.
4.Authorizes the State Controller to bring an action to enforce
provisions of the UPL and provides for the imposition of
penalties and interest against holders who willfully fail to
comply with its provisions.
5.Authorizes any person, except another state, who claims to
have been the owner of property paid or delivered to the State
Controller to file a claim to the property.
6.Requires the State Controller to consider each claim within
180 days after it is filed and authorizes the Controller to
hold a hearing and receive evidence on the claim.
7.Defines "owner" to mean the person who had legal right to the
property prior to its escheat, his or her heirs or estate
representative, his or her guardian or conservator, or a
public administrator acting pursuant to the authority granted
in Sections 7660 and 7661 of the Probate Code.
This bill revises the definition of "owner" in the UPL to
include a nonprofit civic, charitable, or educational
organization that granted a charter, sponsorship, or approval
for the existence of an organization that had a legal right to
property prior to its escheat but that has dissolved or is no
longer in existence, if the charter, sponsorship, approval,
organization bylaws, or other governing documents provide that
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unclaimed or surplus property shall be conveyed to the granting
organization, upon dissolution or cessation to exist as a
distinct legal entity.
Background
The UPL as revised in 1968, provides for the "escheat" of
unclaimed personal property. Escheat is the reversion of
property to the state by reason of the failure of the owner to
inherit or claim it. There are three significant players under
the UPL: the owner, the holder, and the state. The "owner" is
the person to whom the property actually belongs. The "holder"
is the person who has possession of, but no interest in, the
unclaimed property. The holder is simply a trustee of the
property while the property is in the possession of the holder,
such as a bank that holds deposits of an owner's money, or a
business that has issued a check to an individual or other
business. The UPL has dual objectives: (1) to reunite owners
with unclaimed funds or property; and (2) to give the state,
rather than the holder, the benefit of the use of unclaimed
funds or property. (Bank of America v. Cory (1985) 164
Cal.App.3d 66, 74; Douglas Aircraft Co. v. Cranston (1962) 58
Cal.2d 462, 463.) The state, through the Controller, acts as
the protector of the rights of the true owner. (Bank of
America, 164 Cal.App.3d 66, 74.)
The UPL establishes procedures to be followed when property goes
unclaimed and reverts to the state. Under existing law, the
holder must annually report on unclaimed property and turn the
property over to the State Controller. Banks and financial
organizations are required to submit an annual report to the
State Controller that identifies all property that has escheated
to the state, and, for property valued at $25 or more, to
identify the name, if known, and the last known address of the
property owner. Escheated unclaimed property valued under $25
may be reported in the aggregate, and reporting entities need
not provide the name and address of the property owner in their
annual report even if they have such information. The UPL also
sets forth a procedure for the owner of the property, as
defined, to file a claim to recover the property from the state.
Prior Legislation
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AB 1275 (Chau, Chapter 128, Statutes of 2013) expanded the
definition of "owner" to mean a person who had legal right to
the property prior to its escheat, his or her heirs or estate
representative, his or her guardian or conservator, or a public
administrator acting pursuant to the authority granted in the
Probate Code, as specified.
AB 212 (Lowenthal, Chapter 362, Statutes of 2013) lowered, from
$50 to $25, the threshold in the Unclaimed Property Law at which
a person holding escheated property must include in his or her
annual report to the State Controller the name and last known
address of the owner of any escheated property. This bill also
clarified that banks and financial organizations may impose a
service charge up to $2 to cover the cost of providing required
notices to owners warning them that their unclaimed property may
escheat to the state only if the property has a value greater
than $2.
AB 1275 (Chau, Chapter 128, Statutes of 2013) revised the
Unclaimed Property Law to only allow an owner of, instead of a
person with an interest in, property to file a claim with the
State Controller's Office for recovery of property that has
escheated to the state. This bill also revised the definition
of "owner" to remove a personal representative and include an
estate representative, conservator, or guardian.
SB 1319 (Machado, 2008) would have relieved a holder of
escheated property of liability if the holder complied with
notification requirements, would have increased civil penalties
for non-compliance with the UPL, and would have revised
notification requirements for holders of unclaimed property.
This bill was vetoed by Governor Schwarzenegger.
AB 378 (Steinberg, Chapter 304, Statutes of 2003) reduced the
escheatment period from five years to three years for bank
checks and deposit accounts, and from three years to one year
for wages and salaries.
SB 673 (Speier, 2001) would have provided for notices to be sent
by mail from the State Controller to apparent owners of
unclaimed property, and for the Controller to take further
steps, including searches of other governmental records and
outreach to the general public, to alert owners that their
unclaimed property had escheated to the state. This bill was
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held in the Assembly Committee on Appropriations.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Unknown annual loss of General Fund revenues potentially in
the range of $65,000 to $130,000 assuming five to 10% of
unclaimed properties belonging to nonprofit entities no longer
in existence are claimed and paid each year. The fiscal
impact would be dependent on the number and value of
additional valid claims paid out as a result of the expanded
eligibility to nonprofit parent organizations.
Minor ongoing administrative costs of less than $20,000
(General Fund) to the State Controller's Office associated
with processing additional claims.
SUPPORT : (Verified 8/14/14)
California State Controller, John Chiang
American Legion - Department of California
AMVETS, Department of California
California Association of County Veterans Service Officers
California Association of Nonprofits
March of Dimes - California Chapter
Military Officers Association of America - California Council of
Chapters
Vietnam Veterans of America - California State Council
ARGUMENTS IN SUPPORT : According to the author:
Current law does not allow nonprofit civic, charitable, or
educational organizations to be able to file a claim with
the state controller's office to reclaim unclaimed property
escheated to the state after one of their chartered,
sponsored, or approved organizations ? dissolved.
This bill expands the definition of an "owner" to include
nonprofit civic, charitable, or educational organizations.
This bill would allow a nonprofit civic, charitable, or
educational organization that granted a charter,
sponsorship, or approval for the existence of the [now
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defunct] organization [to] file a claim with the state
controller's office to reclaim escheated property that was
left behind when the chartered, sponsored, or charitable
organization dissolved ?. They may file a claim if the
chartered, sponsored, or approved organization had the
legal right to the property prior to its escheat and if the
bylaws or other governing documents provide that the left
over property may be turned over to the granting
organization.
Without this bill nonprofit organizations will not be able
to reclaim the property left behind by their chartered,
sponsored, or approved organizations. The property after
its escheat goes to the State Controller's Office without
anyone being able to reclaim that property. This money
should be used for its original purpose which is to help
the people and communities it was intended to help.
ASSEMBLY FLOOR : 73-0, 5/8/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Grove, Hagman, Harkey, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande,
Olsen, Pan, Patterson, Perea, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.
Pérez
NO VOTE RECORDED: Eggman, Gorell, Gray, Hall, Mansoor, V. Manuel
Pérez, Vacancy
AL:nl 8/16/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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