It’s Time for Businesses to Get an Unclaimed Property Game Plan

For most businesses, unclaimed property only comes into focus when a state or auditor calls. That’s a risky posture. With states tightening statutes and broadening enforcement, unclaimed property should be a front-line concern.

What was once viewed as lost money is now a central compliance target. As more audits seem to be popping up across industries and geographies, being proactive is far better than being reactive.

Unclaimed property audits can last three or more years, cover 10 to 15 years of records, and cost millions in liabilities. States, facing mounting budget shortfalls, are leaning harder on unclaimed property as a revenue source. The pressure peaks each autumn, when nearly 40 of the 54 reporting jurisdictions require filings by Oct. 31.

Delaware alone collects hundreds of millions of dollars in escheat revenue each year, and other states are aggressively following suit. Third-party auditors are driving multistate exams, while policymakers are linking compliance to other filings.

In California, AB 466 requires businesses to answer unclaimed property questions on their income tax returns and authorizes data-sharing between agencies. Other states are increasing their enforcement as well by sending out reporting inquiries, and a non-response could flag you for an audit.

The good news: Finance leaders can take some steps now to manage exposure and avoid the long, costly drain of an audit.

Common Pitfalls

Even seasoned finance teams often stumble on unclaimed property’s quirks. A common misconception is treating it like a tax. It feels tax-adjacent: annual reporting, penalties, and state administrators, but it isn’t nexus-based or tied to revenue.

Instead, rules hinge on the owner’s last-known address or, if unknown, the company’s state of incorporation. That distinction can create exposure in jurisdictions you may not be thinking about, even without a traditional tax footprint.

As for annual reporting, companies may not realize they have a responsibility to file unclaimed property reports annually.

Another pitfall is underestimating audit scope and the burden of proof. States often outsource exams to third-party firms, and some pay on contingency. That model drives expansive estimation, leaving companies pressured to “prove a negative” on long-voided checks and credits. Without complete records, liabilities can balloon well beyond actual exposure.

Record-retention gaps amplify the risk. With lookbacks stretching up to 15 years, routine enterprise resource planning migrations often make grabbing historical data nearly impossible. Incomplete records invite estimation, which advisory groups warn can magnify exposure.

Filers frequently neglect “zero” or negative reports. Some states, such as Georgia, require them to do so; others, including Texas and Pennsylvania, conditionally do; while states like Washington and Louisiana don’t.

The key is treating negative reports as a state-by-state compliance item and remaining consistent with filing them. Improper reports can be a red flag and potentially can accelerate your audit risk.

A Pragmatic Playbook

You received a voluntary disclosure agreement or audit notice—now what? The most effective first steps are performing a risk analysis and designating a company administrator (typically the tax director or treasury lead) to coordinate accounts payable, accounts receivable, payroll, human resources, information technology, and legal.

Multistate unclaimed property audits cut across functions, and having one accountable lead reduces rework and inconsistencies. Focus initial triage where issues are most common: Stale vendor checks or recurring voids in AP; unresolved credit balances in AR; uncashed payroll checks; and customer-facing programs like gift cards, stored value, loyalty points, and digital wallets.

Given lookbacks of up to 15 years, it can be a cumbersome and tedious process, so knowing who is in charge is critical to moving things along.

If exposure is material, a voluntary disclosure agreement can limit lookbacks, eliminate penalties and interest, and allow your firm to control pace and scope. Delaware’s program is the most visible example, and the invitation cycle underscores the urgency.

If an audit letter does arrive, pause before producing records. Consider engaging outside counsel or specialists and put confidentiality agreements in place.

Overproducing early can weaken privilege and make it harder to narrow the scope later. There is reasonable logic, fact dependent, that it may make more sense to risk waiting for an audit rather than entering into a voluntary disclosure agreement.

A records strategy is essential. While most companies have a seven-year record retention policy, consider altering policies to preserve up to 15 years of data, retrieve archives from legacy systems, and close unavoidable gaps with defensible sampling before auditors impose their own methods.

Refresh due diligence procedures to ensure outreach timing matches each state’s dormancy rules and centralize reporting into files compliant with National Association of Unclaimed Property Administrators rules to minimize rejections.

Finally, tie unclaimed property into broader risk planning. Buyers in mergers and acquisitions should evaluate target practices, and sector-specific enforcement trends mean industries such as fintech, gaming, and crypto should assume heightened scrutiny.

This matters now because states are investing heavily in audit infrastructure. NAUPA reports that states returned $4.49 billion to owners in fiscal year 2024 evidence of the size of the reservoir and the aggressiveness of the programs designed to identify holders.

With data-sharing, outreach letters, and multistate audit teams multiplying, proactive preparation before Oct. 31 is the surest way to stay ahead of an issue that is usually at the bottom of tax and finance departments’ priority list—until it’s not.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Robert Joseph Jr. is a senior director at Armanino specializing in state and local taxes, and abandoned and unclaimed property.

Write for Us: Author Guidelines