Article | by Geffen Mesher

Unclaimed property compliance applies to businesses operating in every state, yet it remains one of the most frequently overlooked regulatory obligations. As states continue to increase audit activity and enforcement efforts, failing to comply with unclaimed property requirements can expose businesses to significant penalties, interest, and audit liability that many do not see coming until it is too late.

Unclaimed property generally consists of funds or other intangible assets that a business owes to an individual or entity but that remain unclaimed after a specified period, known as the dormancy period. When those funds are not returned to the rightful owner, the property becomes unclaimed and must be remitted to the appropriate state by law. Common examples include uncashed payroll checks, credit memos, refunds, and security deposits.

Every business holding potentially unclaimed property should be asking the right questions: Does the business have property that may qualify as unclaimed? What state should the property be reported to? What is the applicable dormancy period? Have all reasonable efforts been made to locate the rightful owner, and are those efforts properly documented?

Because dormancy periods, reporting requirements, and due diligence standards vary by state and property type and are subject to change, businesses should verify current requirements in each jurisdiction where they must report. As a point of reference, currently in Oregon, assets like payroll and credit memos must be remitted to the state after a three-year abandonment period. California applies a one-year abandonment period for both payroll and credit memos, while Washington requires payroll to be reported after one year and credit memos after three years.

Reporting Requirements and Deadlines

Each state sets its own annual reporting deadline and filing requirements for unclaimed property holders. In Oregon, for example, holders are required to file their annual unclaimed property report with the Oregon State Treasury’s Unclaimed Property Program by November 1 each year, covering property that reached the end of its dormancy period as of the prior June 30. Regardless of the state, missing applicable deadlines can expose a business to penalties, interest charges, and increased audit risk.

Most states also require holders to make a diligent effort to locate the rightful owner before remitting property to the state. In Oregon, this requirement applies to any property valued at $100 or more and must be completed at least 60 days before filing the annual report. This generally includes sending written notice to the owner’s last known address and making reasonable follow-up contact attempts using available information such as an email address or phone number. All outreach efforts, including dates, methods of contact, and any responses received, must be thoroughly documented and retained, as these records are subject to review during a state audit. While the specific thresholds and timeframes vary by state, the expectation to attempt owner outreach and maintain detailed records is consistent across jurisdictions. Failing to perform and document a diligent search is one of the most common compliance missteps businesses make, and one that can carry significant consequences.

The Cost of Noncompliance

Noncompliance with unclaimed property laws can result in interest charges, civil penalties, and extensive audits that may examine years of historical records and reporting obligations. Because unclaimed property audits can reach back many years, the financial impact of noncompliance can be far greater than businesses anticipate, particularly for those operating in multiple states.

As states continue to increase enforcement activity, now is an ideal time for businesses to evaluate their compliance processes, identify potential exposure, and address any reporting gaps before they become larger liabilities. For businesses that have not been reporting consistently, a voluntary disclosure or self-audit may be worth considering as a proactive step to limit exposure. Geffen Mesher’s SALT professionals are ready to help businesses navigate these obligations, assess current exposure, and put the right processes in place to stay compliant going forward. Learn more at gmco.com.

About Geffen Mesher: Geffen Mesher is a Portland-based CPA and advisory firm with nearly a century of experience serving businesses, families, and investors across the Pacific Northwest. We provide ongoing financial strategy, accounting, and tax advisory services for businesses and individuals across a wide range of industries.

Geffen Mesher’s team is available to assist you with questions related to these updated rules. Please contact professionals for more information at INFO@GMCO.COM.