Uncashed employee paychecks, unreturned security deposits, unpaid insurance policy proceeds. What do they all have in common? Under Illinois state law they are all considered unclaimed property under the Illinois Uniform Disposition of Unclaimed Property Act (the "Act").
Every corporation, partnership, limited liability company, not-for-profit, court or public official, or unit of government in Illinois that holds these and other types of abandoned and unclaimed property is obligated to file an annual report with the Illinois State Treasurer's Office. Even if you believe your business does not hold property subject to the Act, you are required to file a "negative" report.
Summary of the Act
The basic statutory scheme of the Act requires that any business or unit of government that holds abandoned or unclaimed property must turn that property over to the Treasurer's Office after a certain amount of time. The term "property" is defined in the Act and varies by the type of business.
The length of time that the property can be held before a presumption of abandonment varies by the type of business as well. Once the time period for presumption of abandonment has passed, the holder of the property must send a letter to the true owner at their last known address notifying them that the property will be turned over to the Treasurer's Office if it is not claimed.
After the property has been remitted to the Treasurer's Office, the state holds it as the permanent custodian until the true owner claims it. The Act requires the Treasurer's Office to give notice to the owner through publication in a newspaper that it has the property and it will be sold if it is not claimed from the
Certain Business Transactions Exempt from the Act
The Act specifically exempts any property due or owed that result from a transaction occurring in the normal and ordinary course of business between commercial entities. This exemption essentially permits businesses with ongoing relationships to manage account credits, discounts, and partial payments without the need to report these transactions on an unclaimed property report to the state.
Penalties for Non-Compliance
Under the Act, any business or governmental entity that fails to fulfill the reporting requirements is guilty of a business offense and subject to a fine of $500 per day it is not in compliance.
If a business profile indicates that there is reason to believe it may be holding unclaimed property and does not report holding any, the State Treasurer's office is authorized to conduct an audit using generally accepted estimation techniques to determine liability under the Act.
Businesses that suspect they may have liabilities under the Act should determine whether they might be eligible to remedy past compliance problems by entering into a Voluntary Disclosure Agreement ("VDA") with the Treasurer's office. If the Treasurer's office determines an entity is eligible for a VDA, interest and penalties for past violations may be waived if certain conditions are met.
Take Steps to Comply with the Act
Businesses that suspect that they may hold unclaimed or abandoned property ought to consult an attorney or accountant familiar with the Act and its implementing regulations to detect and avoid any administrative or compliance problems.
Other steps a business can take to comply with the Act include:
1. Designating one person within the organization, probably the Chief Financial Officer or Controller, to be responsible for administering the internal process of uncovering and reporting any unclaimed property that the company is holding.
2. Direct and train accounting and payroll staff to spot instances where your business might be holding unclaimed property that needs to be reported to the state.
3. Ask your auditors to check for unclaimed property part of any audit of the business finances.
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