The efforts of many states to disgorge businesses of funds – including accounts receivable, credit memos, and uncashed checks – that may be cast as “unclaimed property” have continued unabated. This is not surprising given the extent to which some states rely on unclaimed property returns as a source of revenue. For example, Delaware has collected nearly $500 million in unclaimed property per year for at least the last three years. With results like Delaware’s as the model, some states have become even more aggressive in their pursuit of so-called unclaimed property via widening use of third-party auditing firms, several of which work on a contingency basis.

State Unclaimed Property

The Firm understands the unique challenges facing our multi-state transportation clients regarding efforts by state unclaimed property departments and the third-party auditors they engage. Scopelitis attorneys are available to assist our clients with written policies aimed at achieving compliance with state unclaimed property laws and designed to reduce the potential liability exposure associated with unclaimed property.

Transportation companies’ frequent rate adjustments during any given day often result in credit memos that unclaimed property auditors will regard as subject to liability under various state unclaimed property laws. State unclaimed property auditors often view credit items related to duplicate and unidentified customer payments as subject to reporting and remitting under state unclaimed property laws, even though federal law governs how motor carriers must treat such payments.

For these and other reasons, third-party auditors seem increasingly apt to target transportation companies for multi-state unclaimed property law compliance reviews. The administrative burdens associated with participating in an unclaimed property examination may be substantial because the statute of limitations on such examinations is lengthy, often reaching back in excess of 10 years. And the potential for liability may be significant, particularly given the ability of the states to impose penalties and interest on unreported unclaimed property.

Federal Unclaimed Property Laws

Federal laws governing regulated motor carriers, property brokers, and freight forwarders protect some of the unclaimed property held by those businesses from the reach of state unclaimed property laws under certain circumstances. Some states also exempt certain types of unclaimed property from reporting and remitting requirements. Transportation companies should ensure they have implemented specific, written protocols for handling various types of accounts receivable and accounts payable credit items. If care is not taken, a company may find it difficult (if not impossible) to limit its exposure in the event a state unclaimed property auditor comes knocking.

When state unclaimed property auditors reach out, Scopelitis is ready to assist, including advising on and preparing responses to state unclaimed property audit information, coordinating document requests, and litigating complex unclaimed property matters.