Tax Notes State

Every state has unclaimed property laws requiring holders of presumed abandoned property to report and turn over that property to the state. One important purpose of these laws is to place unclaimed property with the state, which, in contrast to private holders, is expected to be a better custodian and more likely to reunite owners with their lost or forgotten property. These laws dissuade private holders from silently keeping property owned by others for personal gain and allow states to put otherwise idle property to use for state purposes.

A less altruistic reason for state unclaimed property laws is that most property turned over to the states is never reunited with its true owners. Thus, unclaimed property can create a substantial windfall for a state because states can often use unclaimed property while holding it as a custodian for its owner. For several states, unclaimed property is an important part of their fiscal forecasting and is viewed (at least behind closed doors) as an annual revenue line item for the state. This inflow of new unclaimed property is used by states to close budget gaps, pay down state pension deficits, and for other purposes. These are not necessarily bad uses of idle property. However, viewing unclaimed property as “free” money creates opportunities for abuse.

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