A bill has been introduced in the Illinois Legislature that could significantly impact the escheat liability and recordkeeping requirements of any holder doing business in the state of Illinois. House Bill 2603 (“HB 2603”), introduced February 8, 2017, proposes to repeal Illinois’ existing unclaimed property law and replace it with a modified version of the Revised Uniform Unclaimed Property Act of 2016 (“RUUPA”). One issue of significant concern regarding Illinois’ proposed version of RUUPA is the failure to include a business-to-business exemption. Under current Illinois unclaimed property law, ”any property due or owed by a business association to or for the benefit of another business association resulting from a transaction occurring in the normal and ordinary course of business” is exempt from escheat.1 The introduced legislation would eliminate this language without providing a comparable exemption. Consequently, once-exempt commercial transactions would be subject to escheat reporting under the proposal.
Indeed, should HB 2603 be enacted, credits, overpayments, uncashed checks and rebates, and other similar property due to any business association in the state of Illinois would now be deemed reportable three years after becoming payable. A company’s escheat liability would thus be increased as this property has not previously been reportable. Furthermore, obligations that were previously reconcilable between two businesses will now be subject to onerous recordkeeping and proof requirements in the event of an audit.
Even more troublesome is the proposed retroactive application of the legislation. Section 1503 of HB 2603 provides a transitional reporting regime whereby property that was not escheatable prior to the effective date of the new law becomes escheatable. Specifically, under this regime, the first report to be filed after the effective date of the law would include all items that would have been presumed abandoned had the provisions of the new law been in effect for the 10 preceding years. The language is not clear on whether inclusion of such property in the report would also require remittance of such property.
Once the proposed January 1, 2018 effective date for HB 2603 is taken into account, along with the five-year dormancy period, the 10-year look-back period incorporated in section 1503 would require holders filing reports in 2018 to report business-to-business credits and obligations written off as long ago as 2003. While it is questionable whether Illinois can legally demand remittance of property previously deemed exempt, companies would be well served by retaining records until the fate of HB 2603 is determined, and clear instructions are provided as to the reporting obligations concerning previously exempted property.
After introduction, the bill was moved into committee February 22, 2017, and there has been no action on this bill since that time. Therefore, there is still opportunity to reach out to the state legislators sponsoring the bill in an effort to educate and persuade them as to the benefits of preserving a business-to-business exemption in Illinois unclaimed property law, and to request amendments to the legislation.