Implications to Illinois Repeal and Replacement of Its Unclaimed Property Act

DALLAS, Jan. 25, 2018 /PRNewswire/ -- Illinois Senate Bill 9 was enacted on July 6, 2017 and became effective on January 1, 2018. Additional technical corrections impacting unclaimed property reporting were made in Senate Bill 868, which was enacted on December 15, 2017 and also became effective on January 1, 2018. The legislation repealed Illinois's Uniform Disposition of Unclaimed Property Act and replaced it with a version of the Revised Uniform Unclaimed Property Act (RUUPA). The revised act does not contain the previous, longstanding business-to-business ("B2B") exemption. Moreover, the new act contains a transitional provision potentially calling for retroactive reporting.

The retroactive provision requires that the initial report under the new law, due May 1, 2018, must contain previously exempted B2B items for the past eight years, including the preceding five years, but also factoring in the new dormancy period of three years. Therefore, this potentially could incorporate property dating back to January 1, 2010.

Transitional Provision

765 ILCS 1026/15-1503

Section 15-1503. Transitional provision.

(a) An initial report filed under this Act for property that was not required to be reported before the effective date of this Act, but that is required to be reported under this Act, must include all items of property that would have been presumed abandoned during the 5-year period preceding the effective date of this Act as if this Act had been in effect during that period.

Issues and Risks to Consider

From a practical perspective, reviewing detailed documentation to determine whether previously exempt properties are now reportable has the potential to be burdensome, time consuming, and resource intensive. Additionally, as this property was previously identified as statutorily exempt, the liability (or a portion of it) may have been taken into income after consultation with the holder's financial statement auditors. Under these circumstances, the exemptions would no longer be showing as open liabilities on holders' books and records.

Although difficult to measure, there might be a potential risk of being audited related to property that had previously been appropriately exempted, but now needs to be reported based on the retroactive application of the transitional provision. Additionally, companies are waiting for Illinois to provide administrative rules and further guidance, including audit guidance, on  new reporting requirements. Illinois officials have signaled the first notice of administrative rules may be released during first quarter of 2018. Many unclaimed property holders are looking forward to this guidance to discern more details about compliance and shed additional light on potential audit risk.

From a legal perspective, the retroactive provision raises constitutional concerns. As such, it is widely believed that this provision will face legal challenges. Another avenue that could open up is the possible repeal of the retroactive application of this law. 

Options

As it stands, holders that have historically applied the allowable B2B exemptions need to give internal thought and consideration about the potential effect of this retroactive provision, as well as determine an approach of addressing previously exempt property. Holders seeking guidance on the best alternative for their specific circumstances may contact their Ryan AUP representative.

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SOURCE Ryan