On February 24, 2012, the South Dakota Legislature passed House Bill 1270 which shortens the period before unclaimed property is presumed abandoned. The legislation now goes to the desk of Governor Dennis Daugaard. The bill was introduced at the request of the Office of the Governor, and he is expected to sign the bill into law.
Unclaimed property is generally held under conditions in which ownership of the property is unknown or uncertain, or the holder of the property is unaware of the location of the property's apparent owner. The South Dakota Uniform Unclaimed Property Act ("the Act") provides presumptive holding periods, after which property is presumed abandoned and title to the property may vest to the state, or escheat.
Under House Bill 1270, the time for presumptive abandonment for certain categories of property will shorten from four or five years to three years. The law will impact several types of business, as detailed below.
For businesses operating in South Dakota:
- Intangible property that is held, issued, or owing in the ordinary course of a holder's business and has remained unclaimed by the owner for three years is presumed abandoned.
- Stock or other intangible ownership interest in a business association is presumed abandoned if a dividend, distribution, or other sum payable as a result of the interest has remained unclaimed by the owner for three years.
For banks and other financial institutions domiciled in South Dakota or with customers in South Dakota:
- Money orders that have been outstanding for more than three years after issuance are presumed abandoned.
- Checks, drafts, or similar instruments on which a financial institution is directly liable (including certified checks and cashier's checks) which have been outstanding for more than three years are presumed abandoned.
- A demand, savings, or matured time deposit account with a financial institution is presumed abandoned unless the owner has certain interactions with the financial institution within three years.
- Intangible property held in trust is presumed abandoned unless the owner has increased or decreased the principal or income within three years after it has become payable or distributable.
- Property held in a safe deposit box in South Dakota that remains unclaimed by the owner for more than three years after the lease or rental period on the box has expired is presumed abandoned.
For insurance companies domiciled in South Dakota or with customers in South Dakota:
- Funds held or owing under any life or endowment insurance policy or annuity contract that has matured or terminated are presumed abandoned if they remain unclaimed for more than three years after the funds became due and payable.
For retailers domiciled in South Dakota or with customers in South Dakota:
- A gift certificate is presumed abandoned if it remains unclaimed by the owner for three years.
- A credit memo issued in the ordinary course of business is presumed abandoned if it remains unclaimed by the owner for three years after becoming payable or distributable.
The Act also revises certain provisions regarding the publication notice for unclaimed property. After a business reports the unclaimed property, the Secretary of Revenue must publish at least one notice in a newspaper for any property in excess of $125. Previously, the Secretary was required to publish notice at least twice for all property in excess of $50. This change may result in more property remaining unclaimed and escheating to the state.
These changes in South Dakota are consistent with the trend among states nationwide to shorten holding periods before property escheats to the state. Businesses that hold, issue, or owe any of these types of property in the ordinary course of their business should consult legal counsel concerning any new obligations they may have or precautions they should take as a result of this new law. If you have questions about the impact of South Dakota's unclaimed property law on your business, please contact the authors or other Faegre Baker Daniels tax attorneys.