A new bill out of the Illinois legislature is looking to make several changes to the Illinois unclaimed property laws.
The changes would affect cryptocurrency and virtual currency, retirement accounts, holders’ negative reporting requirements, and more.
The Illinois bill is House Bill 4573 (opens externally).
HB 4573 was introduced on February 5, 2020 and was then assigned to committee on March 12, 2020.
Check back for more updates as the bill progresses (or dies).
Illinois and Unclaimed Virtual Currencies
One of the newest forms of intangible personal property to hit the world is cryptocurrency.
And as one would expect, the state laws regulating anything new are lagging behind.
HB 4573 defines virtual currency as
“any type of a digital unit, including cryptocurrency, used as a medium of exchange, unit of account, or form of digitally stored value, which does not have legal tender status recognized by the United States. The term does not include: (A) the software or protocols governing the transfer of the digital representation of value; (B) game-related digital content; or (C) a loyalty card or gift card.” (emphasis added)
“Game-related digital content,” “loyalty cards” and “gift cards” are all specifically defined within the Illinois unclaimed property statute.
Any property that falls within the definition of virtual currency would then be abandoned 5 years after the last indication of interest in the property.
As the state is not setup to hold virtual currency, the holder must liquidate the property and remit the proceeds as unclaimed property. Such liquidation would have to occur within 30 days prior to filing the unclaimed property report. Owners would have no recourse against either the state or the holder for any gains in value after the liquidation.
Changes to Abandoned Retirement Accounts
HB 4573 would also make changes to how retirement accounts are handled under Illinois unclaimed property law.
First, Section 15-202 would be amended to specifically include retirement accounts that are tax exempt, adding to the tax deferred retirement accounts that were previously included under the law.
The dormancy period would remain three years of either the last time mail was returned undeliverable or after the apparent reaches 72 years of age or one year after confirmation of the apparent owner’s death.
The change from 70 1/2 years to 72 years is to synchronize Illinois law with federal changes made by the SECURE Act effective in 2020.
Illinois Negative Reporting Requirement
Illinois requires an annual report to the state if a holder has abandoned property to report.
A new subsection (d) in Section 15-401 would require certain holders to report that it has no property to report (commonly referred to as a negative or zero report).
Holders would be required to file a report, whether with property or a negative report in Illinois, if it has annual sales greater than $1 million, publicly traded securities, a net worth of $10 million, or more than 100 employees.
This would continue to provide an exemption to the negative reporting requirement for “small businesses” that are privately held, have less than $1 million in annual sales, have fewer than 100 employees, and are worth less than $10 million.
Everyone else would be required to file a report every year.
Practice pointer: unless specifically instructed otherwise, it is the best practice for all large businesses to file a report in every state, every year. If there is no property to report, a negative report is a best practice for unclaimed property compliance, even if the report is optional in a state.
Other Changes to the Illinois Unclaimed Property Law
There are some other minor changes (at least for holders) in the Illinois unclaimed property law under HB 4573.
- Removing a requirement that US Savings Bonds be in possession of the administrator, thus allowing for the administrator to seek payment from the federal government for bonds that they do not have physical possession of.
- Exemption for the sharing of information between the state unclaimed property administrator and the Department of Revenue if the administrator does not believe that it will lead to information to establish the apparent owner of unclaimed property.
- Provides for the administrator to enter into inter-agency agreements with the Illinois Secretary of State and the State Board of Elections to facilitate the identification and location of apparent owners.
- If the administrator locates individuals through an inter-agency agreement with the Secretary of State or the State Board of Elections, it may automatically pay out certain claims to that person, without the need for the filing of a claim.
Do You Hold Potential Unclaimed Virtual Currency or Retirement Accounts?
Both virtual currency and retirement accounts are a hot topic in unclaimed property. Whether because they are new and need laws and then regulations to establish the conditions that the accounts are abandoned or because they are actively being changed, the landscape is ever changing.
Let a professional unclaimed property advisor guide you through the process to establish and maintain your unclaimed property compliance program.
Contact Kimberly DeCarrera to discuss how the Illinois law may affect your company and unclaimed property program.