We recently were contacted by our state for an audit related to unclaimed property with dates for review years 1991-2007; is there any way to appeal the review period and is there way to stop the aggressive audit date requested?


We spoke with Karen Anderson, attorney and unclaimed property expert with years of experience, initially with the State of Illinois and then in private sector providing advisory services to unclaimed property holders — she is with Keane Unclaimed Property. Here is what she offers:

With regard to the start date of the audit, states will sometimes delay an audit start if provided a plausible reason to do so. I think with year-end financials being a focus for most companies the company could ask for an extension of time.

As for the audit, normally audit look-backs are about 10 years plus the applicable dormancy period. In June, 2008, APS conducted a survey of states regarding some of their audit practices including the look-back period. Dan Corcoran of Arizona unclaimed property answered that the AZ look-back period was 5 "report" years plus the applicable dormancy period. Note that the CK 13 (vendor check) dormancy period is 5 years in Arizona. I am not sure what Mr. Corcoran meant by report years but if the dormancy period is 5 years he could mean the 5 years that the property was dormant, plus 5 report years after it was reportable plus 5 more years ... this would be 15 years. Not atypical of reach back periods.

Note that the states and their third party audit contractors know that most companies do not have records as far back as their reach back periods. For this reason, the auditors look at current records and extrapolate what is due for the years where the company has no records. The extrapolated unclaimed property — as it is owner unknown — then goes to the company's state of incorporation due to the US Supreme Court decision of Texas v. New Jersey (1965). (This is why Delaware, a common state of incorporation for many companies, does more audits than just about any other state and is famous for these extrapolated findings. UP audit revenue is the 3rd highest source of revenue for the State of Delaware.)

Given your situation, should you want to consider advisory or consulting help.

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