March/April 2022 Issue

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Wisconsin Legislature Initiates Unclaimed Property Voluntary Disclosure Agreements

03.20.22

When a party (a holder) is holding property presumed to be abandoned (that is, unclaimed property), the holder must first send notice to the apparent owner and then file a report with the Wisconsin Department of Revenue (DOR) summarizing the held property. See Wis. Stats. §§ 177.0401, 177.0501 et seq. After filing a report, the holder must generally pay or deliver to the DOR the property described in the report. Wis. Stats. § 177.0603(1). What constitutes ​“property” under this Chapter is expansive and, of particular interest to municipalities, includes municipal bonds issued by a municipality or any other subdivision of a state and any deposits or refunds owed to customers by utilities. Id. § 177.01 et seq.

It is only necessary to file a report after the property in question is presumed abandoned, however. For example, for a state or municipal bond, this time period is three years after the bond matures or is called, or when the obligation to pay the principal arises – whichever is earliest. For other properties, such as deposits or refunds owed to a subscriber by a utility, the time period is one year after the deposit or refund becomes payable.

Failure to file may lead to various financial penalties. Wis. Stats. § 177.1204. Therefore, it is in a holder’s best interest to promptly file an appropriate report.

If a holder forgets to file a report, is there any way to avoid the penalties? Previously, no. However, the Wisconsin Legislature recently provided a means to potentially avoid liability by passing 2021 Wis. Act 87, which amends Wisconsin Chapter 177 (the Uniform Unclaimed Property Act).

Act 87 provides a means by which a holder of presumed-abandoned property can avoid the financial penalties associated with failing to file or improperly filing a required report. To benefit from Act 87, the holder must enter into a voluntary agreement with the DOR between February 1, 2022 and February 28, 2023 and further demonstrate that the holder:

1. Failed to file a report or failed to include all relevant property in a filed report.
2. Is not under examination or investigation by the DOR.
3. Has not received notice from the DOR of an impending investigation.
4. Has not received any notices of assessment under Chapter 177, Subchapter X or XI.
5. Is not subject to civil or criminal prosecution under Chapter 177.
6. Agrees to report and deliver, if possible, any identified property within sixty days of executing the agreement.
7. Agrees to perform all duties under Wis. Stats. §177.0501 within 30 days of executing the agreement.
8. Agrees to prospective compliance with Chapter 177.
9. Agrees to waive all appeal rights under Chapter 177 for the applicable time periods.

If an agreement is executed between the holder and the DOR, the holder is relieved of any and all liability related to the property identified in the agreement for the five reporting periods immediately preceding the agreement’s filing date. In addition, the holder must maintain all records relating to the identified property.

A holder entering into an agreement with the DOR should further understand that the DOR may render a prior agreement null and void if at least one of the following applies:

1. The holder committed fraud or intentionally misrepresented information to the DOR.
2. The DOR determines that the prior-reported property is less than 75% of the value of reportable property for the relevant time period.
3. The holder fails to remain in compliance with Chapter 177 for at least the four reporting periods following the final reporting period covered by the agreement.

Practically speaking, entering into an agreement with the DOR for any presumed-abandoned property that has either been improperly reported or that has not been reported at all is a viable means of avoiding potential financial liability and directing any subject property to its rightful owners.

For Wisconsin municipalities, Act 87 may be especially useful when managing municipal bonds, operating municipal utilities, or returning any other forms of property that may end up in their possession. In addition, municipalities should review the separate section on disposal of abandoned personal property, Wis. Stats. §66.0139.