Michigan Unclaimed Property: What is it, and the New Reporting Requirements
Historically, businesses have been required to report unclaimed property to the Michigan Department of Treasury, Unclaimed Property Division. Recently, this filing has been expanded to include all businesses. Business that would not have filed previously are now required to file a zero or negative report to confirm to the state that they do not have unclaimed property.
What is unclaimed property?
Unclaimed property is any tangible or intangible property that has not been claimed by its rightful owner for an extended period of time, i.e., property that has been abandoned. This term commonly refers to savings or checking accounts, uncashed payroll checks, stocks, uncashed dividends, insurance payments or refunds, property in security deposit boxes, and other property that has been left in accounts in financial institutions or other companies without activity or contact from the owner for a specified period of time.
The period of time over which property may remain inactive before being considered abandoned is called the dormancy period. The dormancy period varies by type of property and by state. In Michigan, three years is the dormancy period for most types of property. For example, uncashed payroll checks are deemed abandoned when they go unclaimed for one year, while uncashed vendor checks are not deemed abandoned until they go unclaimed for three years. For more specific information on the types of property to be reported and their respective dormancy periods, see the Michigan Manual for Reporting Unclaimed Property, Chapter 2: Reporting Specific Property.
Unclaimed property that has connections to Michigan, or property with owner connections to the state of Michigan, must be turned over to the Treasurer.
I don’t have any unclaimed property. Do I have any filing obligation?
Yes, beginning in 2018, a business entity with no unclaimed property is required to file a report with the Michigan Department of Treasury.
Who is responsible for filing?
Any business entity, whether or not it has unclaimed property, must file a Report of Unclaimed Property.
How do I file?
Entities should submit a fully completed Form 2011, Michigan Holder Transmittal for Annual Report of Unclaimed Property, and Form 1223, Annual Report of Unclaimed Cash and Safe Deposit Boxes to the Michigan Department of Treasury, Unclaimed Property Division.
An entity reporting fewer than 10 properties, which will include those businesses with no unclaimed property, may file a paper or an electronic report. An entity with 10 or more unclaimed properties must file their reports via upload, CD-ROM or USB flash drive to the Unclaimed Property Division. However, the department encourages everyone to file electronically. Copies of the filed Unclaimed Property reports and any supporting documentation should be kept on record for 10 years.
When do I need to file?
Any property that will be considered abandoned as of March 31, 2018 must be reported on Form 2011 by July 2, 2018. If you have no unclaimed property, you must file your zero or negative report by July 2, 2018.
Are there penalties for not filing a report?
The willful failure to file a report results in a $100 penalty for each day the report is not filed (totaling not more than $5,000). This penalty applies to entities who are filing a zero or negative report as well as entities with property to report. A penalty of 25% of the property value shall be assessed on property that is willfully not paid or delivered in a timely manner. In addition, anyone who fails to pay or deliver property on time will have interest accrued on the payment.
If you did not file a report in the past, but determine that you should have, you may file the Voluntary Disclosure Agreement, Form 4869, and remit the payment or property to avoid a penalty. However, this option is not available after an audit notice has been issued.
If you have any questions or concerns about this new requirement, or any other unclaimed property requirements, contact Clayton & McKervey.