I’ve got a new post at Cato at Liberty noting that Justices Samuel Alito and Clarence Thomas, in a concurrence this spring, appear to be inviting a constitutional challenge to states’ administration of escheat (unclaimed property) law on due process grounds. [More on Taylor et al. v. Yee from Daniel Fisher at Forbes] While the immediate questions posed would likely be whether states are doing too little to notify owners and using too short a period of idleness (three years is becoming common), the fact patterns might conceivably implicate some of the other problems noted by businesses on the receiving end of these laws, which we discussed back in 2013 (more): creative redefinitions of unclaimed property and outside “auditors” incentivized by contingency fees to overreach in assessments.
The Associated Press took a look at the issue last fall; more background at Maria Koklanaris, Tax Analysts and Odds and Means.
Reflecting widespread business discontent, the U.S. Chamber has addressed the issue in a series of papers and its publications have covered problems in states like Illinois, as well as in California as well as profiling the firms that specialize in these collections, which in some cases have filed qui tam (bounty-hunting) suits for a share of the proceeds.
On Delaware in particular see the Wall Street Journal (more), Forbes, and Delaware State News. And the Wilmington News-Journal has published an extensive investigation of the escheat contractors’ ties to the Delaware political class.
2 Comments
Thoughts on Delaware’s request for the Supreme Court to take the dispute between Delaware and Pennsylvania, Wisconsin and others over the MoneyGram official checks?
When I was in law school, I never thought that I would be so concerned with these types of Constitutional Law issues as a business lawyer than I am now that I work in unclaimed property – due process, original jurisdiction, takings, etc.
This happened to my HOA in AZ where the idle period is apparently only 2 years. We had a sizable portion of our reserves invested in a CD, which is by its very nature and purpose inactive. You can’t add to it and you can’t withdraw from it without a penalty being imposed. As it happened we had a 3-year CD and all of a sudden the money was gone. Neither the state nor the bank where we had invested made any attempt to contact us. We had to petition the state to return our money, which they did after about 4 months. We now keep all of our funds liquid in a money market account, which doesn’t pay much less interest than CDs these days anyway.