BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 495 (Fuller)
Hearing Date: 05/23/2011 Amended: 05/10/2011
Consultant: Mark McKenzie Policy Vote: Jud 5-0
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BILL SUMMARY: SB 495 would increase 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. Specifically,
this bill would:
Require 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).
Require 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 a
half to three years prior to escheat to the state.
Require 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.
Authorize the holder to charge a fee of up to $2 to cover the
administrative costs associated with mailing the notice and
form.
Authorize 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.
Require the State Controller (SCO) to hold safe deposit box
contents with no commercial value for seven years, rather than
the current requirement of 18 months.
Require the SCO to establish a compliance program to identify
holder of unclaimed property who are not in compliance with
specified report filing requirements.
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SB 495 (Fuller)
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Extended escheat period $1,200 General
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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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing law, the Unclaimed Property Law (UPL), generally
requires financial institutions to transfer account balances to
the State Controller (SCO) if the account has had no activity
for three years. Other "holders" (such as insurance companies
holding policies, publicly-traded companies holding stock and
employers holding wages) are subject to similar transfer rules.
After they are transferred, the accounts are managed by the SCO,
and the account owners may apply to the state for return of
their money and property. The transfers are often referred to
as "escheats." The purpose of the UPL is to return property to
its rightful owners, prevent the holders of unclaimed property
from transferring it into their business income, and provide a
single source to check for unclaimed property that may have been
reported by holders. The Controller receives approximately $633
million annually as escheated property, and currently maintains
accounts of approximately $6.1 billion for monies that have been
remitted to the SCO and transferred to the General Fund. Claims
on escheated property are processed within 180 days, and valid
claims are paid from the General Fund. A total of 276,000
claims are filed annually, with an average claim payment of
$1,395.
SB 495 would extend the escheat period from three to five years,
thereby delaying transfers of unclaimed property in safe deposit
boxes to the General Fund for two fiscal years. This provision
SB 495 (Fuller)
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would delay the receipt of approximately $1.2 million in cash
from safe deposit boxes beginning in 2013-14. Also, the two
year delay and additional notice requirements would likely
result in some property being reunited with owners, thereby
preventing it from ever escheating to the state.
The bill also requires the SCO to hold onto property of no
commercial value for seven years, rather than 18 months
specified in current law, before disposing of those items. This
provision would increase SCO staffing costs by 2.6 PY beginning
in 2013-14 at a cost of $151,748.
SB 495 would also require the SCO to establish a compliance
program to identify holders of unclaimed property who are out of
compliance with reporting requirements. In 2009, the SCO
Division of Audits issued a comprehensive analysis of holder
compliance by using records from the Franchise Tax Board. Using
these records, the SCO identified 851,000 businesses that should
file an unclaimed property report pursuant to current law. The
analysis revealed a minimal compliance rate of approximately 2%,
since the SCO typically receives only about 17,000 unclaimed
property reports annually. By contacting these non-compliant
businesses, and alerting them to reporting responsibilities and
potential penalties, the SCO expects to achieve increased
compliance. The SCO indicates that the program would require a
total of 5.2 PY at an annual cost of $528,000, and the program
is expected to result in increased revenues of about $5 million
in 2012-13 and $11.7 million on 2013-14.
Staff notes that the Governor's May Revise Budget includes staff
and resources for the SCO to initiate a comprehensive UPL
"Holder Compliance Initiative." The proposal would provide
$2.41 million and 22.6 positions in 2011-12, and $2.4 million
for 23.6 million in 2012-13 and ongoing, for a full program that
includes outreach, increased compliance efforts, and an audit
program. Over 5 years, the program is projected to result in
the return of $113 million in property to owners, and the
remitting of $136 million in property to the state. Staff notes
that if this proposal is enacted, there would be no need for the
compliance program in this bill.
SB 495 (Fuller)
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