Texas House Bill 2593 would amend the current unclaimed property law by adding a Section 74.3062, which would allow for the recovery of property held by other states or by residents of other states, and permitting the payment of a finders fee of 15% of the property recovered.
Why Contingent Fee Auditing is Bad for Holders
Historically, Barganier and Associates has seen such contingent fee contracts valued at 12% of the property recovered. At any rate, third party audit firms, such as Kelmar Associates, are encouraged by their compensation agreements to issue as high of an audit assessment as possible. In this process, outside audit firms may ignore valid holder arguments or positions that would lower such assessments.
A holder may have difficulty challenging high audit assessments, particularly when the third-party auditor represents many different states. In large audits, the third-party auditor acts as a manager, of sorts, with each state issuing a final audit assessment. If the holder does not agree with an assessment, they may have to challenge the assessment first in each states' administrative appeals process, if any, and then in each states' courts. Since the states and the auditors do not issue a joint assessment, consolidating the cases into one case may be difficult, depending on the particular facts and circumstances of the audit.
Some States Are Moving The Other Way
Meanwhile, some states have moved towards a more business friendly approach. North Carolina has limited contingent fee audits and reduced record retention periods for companies in compliance. Michigan has also reduced record retention periods. Minnesota recently began a voluntary compliance program for holders out of compliance.
What Should You Do?
Corporate holders should maintain a full, robust unclaimed property compliance program, regardless of their state of incorporation or where their headquarters are located. Large companies have operations in many jurisdictions, some of which may be on the aggressive end of the audit scale. A full compliance history and strong internal processes are the best way to avoid high assessments under an audit, no matter the jurisdiction.
If, upon starting or reviewing a compliance program, you find that your company has large amounts of overdue unclaimed property to be reported, your company may be able to take advantage of the limited voluntary compliance programs that some states are currently offering. It would also behoove your company to act fast to explore other ways of resolving potential unclaimed property, by discussing your options with Barganier and Associates.
If you are in compliance, you do not have to lay awake at night worrying that an audit notice could come your way any day. Because if that audit notice does come, and it will, you know that there is no additional property for an auditor to find and no bad news to give the Board of Directors or shareholders.