Claiming Unclaimed Funds

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DECEMBER 2007 - This is in response to The CPA Journal article “Unclaimed Funds in Search of Their Owners” (August 2007). The article tends to downplay newspaper advertising by reporting organizations, as well as the New York State Comptroller’s Office efforts to return these unclaimed funds to the rightful owners.

Although advertising may not be as effective as it once was, it is still a useful means of contacting account owners. Moreover, advertising is required of many reporting organizations by the New York State Abandoned Property Law. The law was enacted in 1943 and has been amended over the years. It requires different notification procedures based on the type of reporting organizations (e.g., banks, brokers, corporations, insurance). Some are required to advertise in newspapers that funds will be turned over to the state. Some are required to advertise the names and addresses of account owners, and send them mailings. Others are not required to advertise or send mailings.

Since May 2003, the Abandoned Property Law has required all organizations to send notices to the last known addresses of all account owners 90 days prior to reporting the funds to the state. If the organizations do not receive responses to the initial mailing, when the value of the account exceeds $1,000 they must send a certified mailing. These rules requiring reporting organizations to exercise due diligence in notifying account owners have been effective.

We currently have more than $8 billion in unclaimed funds representing more than 22 million accounts. Over the last three state fiscal years, the Office of the State Comptroller’s Office has issued $450 million in refunds involving 680,000 accounts. Approximately 70% of the claims were initiated through the State Comptroller’s website (www.osc.state
.ny.us
). The website has been a tremendous outreach tool. In fact, during last fiscal year, more than eight million searches were conducted.

In addition, we conduct outreach events throughout the state to increase public awareness. We visit county fairs, malls, various festivals, conferences, and conventions. For state fiscal year 2006–07, we conducted 123 outreach events. One of the most prominent events is the New York State Fair. This year we performed 34,000 searches at the fair and 5,700 claim forms were printed. We also cooperate with the media on feature stories concerning unclaimed funds.

The idea proposed in the article, of developing a computer cross-referencing of names and addresses, appears to be sound. Unfortunately, many of the unclaimed funds have incomplete name and address information. However, we may explore this further for accounts in which the information is complete.

I should also note that we have identified approximately $3,000 that The CPA Journal may be entitled to claim. The funds are listed on our website and I have enclosed a claim package that can be completed by the appropriate person in your organization and returned to us for payment.

I hope this has been helpful.

Lawrence M. Schantz
Director, Office of Unclaimed Funds
Office of the State Comptroller
State of New York
Albany, N.Y.

Editors’ Note: The NYSSCPA is following through on filing this claim, and we encourage readers to avail themselves of the resources described in this letter and the referenced article to research their own, and their clients’, possible unclaimed funds.


Update on States’ Tax Credits for Research

The article “States’ Tax Credits for Company-Financed Research: A Current Comparison” (The CPA Journal, February, 2007), by B. Anthony Billings, contains a wealth of information involving the use of tax incentives by state governments. However, we disagree with the article’s portrayal of Hawaii’s research and experimentation (R&E) credit under current law. In our opinion, the article understated the effectiveness of Hawaii’s R&E credit.

The article summarizes the R&E (also known as research and development—R&D) credit for each of the 40 or so states that offer it. Then, using data from a sample company’s publicly available financial statements, the article develops a simulated “average effective rate” of R&E credit for each of these states for calendar years 2002–2004.

The article contains the following summary of Hawaii’s tax credit for research activities:

Hawaii’s credit mirrors the IRC section 41 federal credit and has a statutory rate of 20% of incremental spending, but it does not have the restrictions and limitations imposed by Arizona and California. Moreover, the Hawaiian credit is refundable and can be used against corporate or personal income taxes. As of July 1, 2004, only certain qualified high-technology businesses are eligible for the research activities credit.

The first sentence of this quote is somewhat at odds with current Hawaii law. While it’s true that the federal R&E credit under IRC section 41 is based upon incremental research expenditures, Hawaii’s research credit applies to all qualifying R&D expenditures. (See HRS section 235-110.91 at www.capitol.hawaii.gov/session2004/bills/HB2396_cd1_.htm ). Furthermore, this aspect of Hawaii law was in effect during the period in which the simulation was based (calendar years 2002–2004).

The article also contains an exhibit that sheds some light upon its computation of Hawaii’s simulated “average effective rate” of R&E credit. A footnote to this exhibit indicates that, for calendar years 2002–2004, the total amount of Hawaii’s R&E credit was capped at $7.5 million.

There is a credit in Hawaii that is capped at $7.5 million per year. It’s called the “Ko Olina Resort” credit. [See HRS section 235-110.46(b).] The “Ko Olina Resort” credit and the R&E credit are different credits. The $7.5 million credit cap applies to the former but not the latter.

In computing Hawaii’s “average effective rate” of R&E credit, the article should use actual—rather than incremental—R&E expenditures. In addition, the article should not use a $7.5 million R&E credit cap. As a result, the article appears to understate Hawaii’s average effective rate of R&E credit. Stated alternatively, Hawaii’s rate should be higher.

On a related note, Hawaii has both a refundable R&E credit and a nonrefundable investment tax credit. Under prior law, a company could qualify for the R&E credit without being a qualified high-technology business (QHTB). However, as of July 1, 2004, to claim the R&E credit in Hawaii, the company must be a QHTB. A separate credit, the investment tax credit, is available to certain investors in a QHTB. While the details of this generous (and sometimes controversial) credit are beyond the scope of this letter, a thorough explanation of it can be found on the Hawaii Department of Taxation website (www.state.hi.us/tax/a9_2trc_doc.htm). Thus, under current Hawaii law, it is quite possible for company-financed research in Hawaii to result in both a refundable R&E credit (to the company) and a nonrefundable investment tax credit (to certain of its investors).

Marcia Sakai, PhD
Dean, College of Business and Economics
University of Hawaii at Hilo
Hilo, Hawaii

Bruce M. Bird, JD, CPA
Richards College of Business
University of West Georgia
Carrollton, Ga.

The author responds:

After reviewing section HRS 235-110.91, I agree that the following changes should be made to the article regarding the state of Hawaii:

  • Hawaii’s credit mirrors the IRC section 41 federal credit and has a statutory rate of 20% of actual spending, but it does not have the restrictions and limitations imposed by Arizona and California. Moreover, the Hawaiian credit is refundable and can be used against corporate or personal income taxes. As of July 1, 2004, only certain qualified high-technology businesses (QHTB) are eligible for the research activities credit.
  • Footnote 7 in the Exhibit should be deleted, because there is not a $7.5 million limit on the credit, and the effective rate should be changed to 20%.

    B. Anthony Billings, PhD
    Wayne State University
    Detroit, Mich.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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