United States

Multistate: Proposed Legislation in Arkansas and South Dakota Would Require Liquidation of Shareholder Interests for Unclaimed Property Purposes

Jan 30, 2017
From KPMG TaxWatch

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The Arkansas and South Dakota legislatures are currently considering bills that would affect unclaimed property reporting and remittance procedures for certain types of securities-related property. These proposed changes could have a significant effect on both the corporations reporting investor holdings and on shareholders or beneficiaries seeking to claim said property from the state.

Arkansas House Bill 1142 would:

  • Increase the dormancy period for securities property from five to seven years;
  • Add an additional “trigger” date from which dormancy runs that correlates to the designation of a security holder as “lost,” as that term is defined in SEC Rule 17Ad-17;
  • Require businesses holding securities or their agents to liquidate securities prior to delivering the property to the state as unclaimed property;
  • Indemnify corporations reporting securities if they comply with Arkansas law and SEC Rule 17Ad-17; and
  • Mandate that the Arkansas unclaimed property administrator liquidate securities currently in her possession within 90 days of the effective date of the bill.

One effect of the bill is that property owners would have the ability to claim only the liquidated value of security positions from the state rather than their original positions, if reported as unclaimed property. Any subsequent appreciation or depreciation in value would not be recognized. The Arkansas bill carries an “emergency” clause and will be effective when signed by the governor. The bill has passed the House and been referred to the Senate Insurance and Commerce Committee.

South Dakota Senate Bill 34 does not change the securities dormancy period or the triggers for commencing a period of abandonment. However, it does require the state treasurer to sell all securities and negotiable instruments reported under the South Dakota Unclaimed Property Law within 90 days from confirmed receipt, unless the property is subject to a then-present claim. It also requires that any securities currently held as unclaimed property be sold after passage of the bill. Senate Bill 34 is also designated as emergency legislation, meaning it becomes effective upon passage and approval by the governor. Currently, Senate Bill 34 has been approved by the Senate and has been referred to the House Appropriations Committee.

Both the Arkansas and South Dakota bills appear to be motivated by the costs of managing unclaimed property received in the form of securities. For additional information on these proposed unclaimed property developments, please contact Karen Anderson at 317-523-5049 or Will King at 214-840-6107.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.