The Michigan Department of Treasury is embarking on a public outreach campaign to improve both “holders” and “owners” compliance under the Abandoned and Unclaimed Property Law (Act 29 of 1995). Under this law, the State of Michigan is designated the legal custodian of “unclaimed property.”

The Department has developed a voluntary disclosure program that encourages holders to come into compliance by offering good incentives, including a reduced compliance period and a waiver of penalties and interest. Potential holders also can take advantage of a "grace period" to take advantage of the voluntary disclosure program.

Definitions
Simply stated, a “holder” is any person in possession of any property belonging to another. A holder can be a business entity, an individual, a trust or any other entity holding another’s property.

“Unclaimed property” is any property held by a person who does not own the property so held. It may be tangible property, such as unclaimed goods held in “lay away” by a business, or intangible property, such as money in bank accounts, uncashed checks, unredeemed deposits, credit balances, insurance claim payments or unused gift certificates.

The law clarifies when unclaimed property must be turned over to the State (“dormancy period”). Download a listing of typical unclaimed property types and dormancy periods.

Little-Known Law
While the Unclaimed Property Law has been in existence for decades, many holders are not familiar with their responsibility to transfer unclaimed property to the State after the expiration of the applicable dormancy periods. In addition, many holders are not aware of which state to transfer unclaimed property.

A U.S. Supreme Court ruling says that if the holder has the “last known address” of the owner, the property is transferred to the state of the last known address. If the holder does not have the last known address, the property is transferred to the state of incorporation in the case of a corporation, the state of registration for a non-corporate entity (such as an LLC) or the state of domicile of other holders.

Unclaimed Property Reporting, a brochure published by the Michigan Department of Treasury, provides basic information regarding a holder’s responsibility and frequently asked questions and answers regarding abandoned and unclaimed property.

Multi-Phase Approach Starts with Education
The current compliance level is considered to be low. Approximately 5,500 unclaimed property reports were filed for the 2004 reporting year. To increase voluntary compliance, the Department is taking a multi-phase approach to educate holders about their legal responsibility. Notice of unclaimed property filing requirements have been published in the annual Sales Tax and Single Business Tax booklets for the past few years and Department staff members are conducting speaking engagements.

Next Step: Voluntary Disclosure
The Department also has instituted a voluntary disclosure program. Under this program a holder may voluntarily come forward and file or amend four years of unclaimed property reports. The law allows the Department to demand compliance for ten years. However, under a voluntary disclosure agreement, the Department will not require filing for the other six years. Also, the Department will not impose penalties or interest on the voluntary disclosure even though the law provides for a penalty of 25 percent and interest calculated at one percent over the prime rate for delinquent reports.

The Department’s Discovery Division is in the process of developing a database of potential non-filers. During the next 30-45 days, letters will be sent to these potential holders. (A draft letter is available to MACPA members.) The potential holder may take up to 90 days to initiate and complete a voluntary disclosure. The Department is amenable to allowing an extension of time to file the voluntary disclosure if the holder requests.

If the potential holder does not respond to the Discovery Division, information will be forwarded to unclaimed property auditors for a full ten-year audit. At this time, the Department plans on using both Department employees and independent third-party contractors to conduct these audits.

From the property owner’s perspective, there is no statute of limitations barring the owner from petitioning the State to claim their property. In 2004, Michigan returned some $34,500,000 to 35,000 owners.

To learn more about Michigan’s unclaimed property laws or to see if the state is holding your property, visit the Unclaimed Property Division web site.

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