Unclaimed Property: A Growing Compliance Risk

Why Managing Unclaimed Property Matters for Businesses

Once considered a back-office formality, unclaimed property has become a key focus for states and a rising concern for businesses. With tighter statutes, broader enforcement, and increased data-sharing across agencies, ignoring unclaimed property can lead to significant liabilities. Delaware alone collects hundreds of millions annually through its escheatment program, a state-run system that requires businesses to report and turn over unclaimed or abandoned property—such as uncashed checks, old bank accounts, and other financial assets—to the state to safeguard it until the rightful owner claims it. Many other states are following this model, expanding enforcement and audit activity. Audits can span 10 to 15 years of historical records and result in multi-million-dollar liabilities, making proactive compliance essential for businesses to avoid costly surprises.

The SALT Connection

The intersection with SALT compliance adds another layer of complexity. For instance, California requires businesses to verify the filing of Holder Remit Reports on state income tax returns. It also authorizes information sharing between the tax authorities and the state controller’s office. These efforts create additional cross-checks that increase audit exposure. Unlike traditional taxes, liability for unclaimed property generally follows the owner’s last-known address, not the tax nexus state, which means companies may face exposure even in jurisdictions where they have no conventional tax presence. Enforcement has also intensified through the use of third-party auditors and voluntary disclosure programs, underscoring the importance of understanding and managing potential risk before an audit arises.

Potential Mistakes

Many companies mismanage unclaimed property because it feels tax-adjacent but operates under different rules. Common errors include treating unclaimed property as additional business income, ignoring “zero” filings, or maintaining insufficient records. These missteps can trigger audits, inflate incomes, and become especially problematic in multistate examinations, where third-party auditors may employ estimation methods that expand perceived exposure.

A Proactive Approach

Businesses that proactively implement robust record retention and reporting procedures and identify exposure across accounts payable, accounts receivable, and payroll, are in a far better position to manage risk than companies that are not taking the proper steps to stay ahead of the situation. Voluntary disclosure programs can also help limit penalties, reduce audit lookbacks, and give businesses greater control over the timing and scope of their compliance efforts. Establishing clear processes and documentation standards helps reduce errors and demonstrates good-faith compliance in the event of an audit.

The Bottom Line

According to the National Association of Unclaimed Property Administrators, states hold an estimated $70 billion worth of unclaimed property, underscoring how aggressively state programs pursue holders. This, coupled with more forceful oversight, increases the risk of steep liabilities, audits, and disruptions for passive businesses.

In short, unclaimed property is not an afterthought, it’s an emerging state compliance battleground. For companies seeking to stay ahead, embedding unclaimed property into their state compliance risk framework is no longer optional. Handling it proactively today is far safer than scrambling during a multiyear audit tomorrow.

For businesses seeking guidance on unclaimed property and SALT compliance or insight into multistate examination risks, please contact Alan Goldenberg, Principal and Leader of the State and Local Tax and Tax Controversy groups, or their Anchin Relationship Partner.