The California Franchise Tax Board (FTB) is requiring certain business taxpayers to attest to their unclaimed property reporting compliance when filing their 2021 business tax returns. These returns include the corporation franchise/income tax return, partnership return, and LLC return.
Be aware: The legislation enabling the FTB’s inquiry authorizes it to share the information gained with the State Controller’s Office (SCO) to aid in its enforcement of unclaimed property laws. Based on responses on their business tax returns, taxpayers may be contacted by the SCO and potentially be subject to California and/or multistate unclaimed property audits. California historically has not offered a voluntary disclosure program and levies interest at a 12% rate. Because the lookback period for California unclaimed property audits generally is 10 years, the interest assessed can eclipse the actual unclaimed property owed.
Next steps: Companies that have not filed unclaimed property reports historically or have gaps in filing history may wish to undertake an internal review of unclaimed property compliance and potential liability. Being proactive can help companies effectively advocate during the California unclaimed property audit process as well as take advantage of voluntary disclosure opportunities on a multistate basis.