Unclaimed property: Continuing trends and new developments

Unclaimed property is a dynamic—and often challenging—area for businesses to navigate. But within it, there are also opportunities. 

With more changes inevitably ahead, all companies need to stay up to date on evolving regulatory requirements but at the same time remain aware of opportunities they can pursue to recover their own funds. Following is an overview of recent unclaimed property activity in the areas of compliance, state enforcement, and asset recovery and insights into the remainder of the year ahead. Knowing what to expect will help you think more proactively and strategically about the ever-changing unclaimed property landscape and its effect on your business operations—and bottom line.

Compliance: More state scrutiny ahead 

Increased enforcement by states continues to be a trend. Overall, most states have ramped up enforcement activity, from penalties and interest all the way to self-audit notices (more on that later). 

A notable trend in 2024 that continues to develop in 2025 is the increased number of states imposing penalties for noncompliance. Historically, states like California and Nevada have automatically assessed interest on late-reported unclaimed property. More states are joining their ranks, including Washington, D.C., Texas, Montana, and Washington. This includes automatically assessing interest regardless of the company’s filing history. 

Of interest to companies located in or doing business with Texas is the state’s recent move away from its historically easygoing approach to waivers. In the past, companies could submit a waiver requesting abatement of penalties and interest for late filings. The current trend in Texas, however, is that the state is no longer accepting waivers if an unclaimed property holder has submitted one in the past. And California continues to be inflexible with such waivers, as their statute requires that such interest “shall” be assessed. Their relatively new amnesty program, however, is one avenue to consider. 

Exemption opportunities continue to be a popular way for companies to reduce past due unclaimed property liability and/or offset penalties. There are many exemptions and deductions the states offer—amounts the states themselves do not expect to receive and as such are not subject to escheatment. Increased numbers of companies are also employing “search and location” services to find updated information—such as addresses and phone numbers—to locate and contact unclaimed property owners and reunite them with their property. Doing so before funds are even sent to the state helps businesses not only stay compliant and avoid otherwise applicable penalties and interest but maintain their relationships with customers. 

Another prominent compliance trend we saw in late 2024 that has perpetuated into 2025 is some states questioning consolidated reporting. States are increasingly showing a preference for companies to submit their unclaimed property filings at the subsidiary level rather than at the more traditional consolidated (or parent company) level. In recent months, there has been an uptick in some subsidiary entities receiving state notices requesting nonconsolidated filings. This creates obvious administrative challenges (for companies and the states alike), but certain states actually require consolidated unclaimed property reports at the parent level, so keeping up to date with each state’s individual requirements is essential, and separate handling may be impractical.  

Self-audits were another big trend in 2024 that does not seem to be fading. Several states have been issuing self-audit requests, and in our experience, there doesn’t seem to be a lot of rhyme or reason as to which businesses receive these notices. We’ve seen states mailing self-audit notices in bulk and others issuing them based on certain filing triggers, such as a company reporting for the first time and/or reporting amounts that are asymmetric to prior years. 

Many of the self-audit requests are asking to review the business’ books and records—looking for anything out of the ordinary—or seeking confirmation that all potential liabilities are being submitted to the states and that responses are typically being routed directly to the states’ contract auditors, which, presumably, are advising the states on good audit candidates. 

Moving forward, states’ enforcement of unclaimed property compliance is only expected to increase. Companies will want to make sure their unclaimed property reporting procedures, including documentation of policies, are robust and organized in case they receive a self-audit notice.

State enforcement actions ramp up 

Unclaimed property remains a big revenue generator for states. Examinations, the aforementioned self-audits, and other enforcement actions by states continue to dominate the unclaimed property arena this year. Many of the state enforcement trends align with the compliance trends noted above, and we expect that to continue. 

To bolster their enforcement programs, many states have gone the self-audit route, typically employing external audit firms to administer them. Companies should treat self-audits like mini audits, responding promptly to the notice and taking time to carefully gather and provide all the information the state is requesting. Information commonly requested in self-audits includes identification of the entities or operational areas that are responsible for the creation of unclaimed property and specific property types (accounts payable, vendor checks, payroll checks, accounts receivable credits, etc.). Businesses should also remember to include any industry-specific property types, including gift cards, stored value cards, and rebate checks. 

It wouldn’t be a discussion about unclaimed property trends if it didn’t include information about the state of Delaware. There are thousands of companies that are formed or incorporated in the state of Delaware. Similar to the increase in self-audit notices, there has been an increase in the state’s now famous “Verified Reports” requesting verification of entities’ unclaimed property compliance. Companies will want to promptly—and thoughtfully—collect the requested information and respond to the state. 

Businesses should note that if they receive a Verified Report request, the state is typically seeking information on transactions more than five years back from the current year. If a company fails the Verified Report, the next step could be a voluntary disclosure agreement or audit, which have a longer lookback period (typically 10 years plus the applicable dormancy period), an escalation most companies will want to avoid if possible.  

Another trend expected to continue this year for Delaware and other states is increased opportunities for organizations to enter into voluntary disclosure agreements. The rules for these voluntary programs vary state by state but are all designed to help organizations come into compliance with unclaimed property reporting and potentially avoid penalties and interest. California has a newer VDA program, and states like Delaware and New York have robust programs. Companies should do a thorough assessment of the benefits afforded by the programs against the requirements to complete them in an effort to determine the best path forward.  

Unfortunately, self-audits remain the more common trend for states to send before offering VDAs. Receiving one of these is truly a matter of when, and not if, for most organizations. Therefore, businesses should take a proactive look at their processes to make sure that requested information is easily attainable and that their compliance overall is robust and meets the requirements of the current unclaimed property environment. Get ahead of these requests by: 

• Determining what entities within your organization are driving unclaimed property and the specific property types most common in your business. 
• Identifying unclaimed property risk areas and taking steps to proactively mitigate them. 
• Ensuring you have policies and procedures in place, as most of these notices request them and are a good way of showing you are aware of your compliance requirements. 
  
  

Asset recovery: UCP’s silver lining 

Asset recovery is the reuniting of funds to the appropriate parties. That is, locating and bringing money back into your organization. Companies should not think narrowly—asset recovery has various dimensions: 

• State recovery: unclaimed property held at the state level 
• Nonstate recovery: unclaimed property held at the local level (cities, counties, or municipalities, tax refunds, bankruptcy proceedings, etc.) 
• Reverse recovery: recouping money that was previously reported that may have been exempt 
• Client-to-client recovery: recovering your funds from another business before they report it to the states 

That said, companies should make sure they are filing unclaimed property and compliant with the states’ reporting requirements before seeking to recover their own unclaimed property. It can be difficult to recover money from the states who are, unsurprisingly, not thrilled to give it back when the companies themselves are not filing. Or worse, it could trigger a state examination, meaning you must pay to play. 

All companies should employ strategies to speed up the claim process and expedite the return of money to their own organization. Some tips as you consider asset recovery opportunities in 2025 include: 

• Have a compliance procedure in place before pursuing asset recovery. Recovering funds when you are not filing is a surefire way to receive an audit notice, so having solid policies and procedures in place will go a long way toward prevention. 
• Understand state requirements for providing supporting source information to evidence your claims. Requirements vary widely from state to state for the types of documentation required and the formatting accepted when reaching out to states to claim property. Submitting incorrect or insufficient information will delay or invalidate your claims. 
• Consider working with third-party experts, like Kodiak, who can use advanced search technology to locate often overlooked unclaimed property (lesser-known sources, detection of name anomalies and misspellings, etc.), handle state correspondence, and monitor status of claims submissions. 
  
  

Get your unclaimed property house in order 

Unclaimed property’s fast-moving nature makes staying up to date and being proactive critical, whether you’re thinking about compliance for the first time or finding your own unclaimed property through asset recovery. 

Kodiak’s experts help more than 2,100 companies across all industries think more strategically about unclaimed property. Reach out today for more information on the above and for help strengthening your unclaimed property program to meet the needs of current—and future—trends.