SALT trends The impact of technology

PwC's Tax
SALT
trends
A state and local tax
publication from PwC
The world is changing at an
ever increasing rate. Several
key trends, or megatrends,
acting together are
contributing to this pace of
change. We believe the
following five megatrends will
shape and impact our world
and the business decisions
around them: demographic
shifts, shifts in global
economic power, resource
scarcity and climate change,
technological breakthroughs,
and accelerating
urbanization. Successful
organizations will have to
adapt to these trends and
understand how to treat them
as opportunities.
The impact of technology
on unclaimed property
This article explores how one megatrend—technological breakthroughs—is
transforming business practices and opening up new opportunities. One such
opportunity can be found in the abandoned and unclaimed property area. New
technologies allow companies greater freedom to shift resources away from
compliance and towards value-enhancing activities. Companies that
acknowledge the impact of technologies in unclaimed property and embrace
the opportunity for improved internal processes will be best positioned for
success. Innovative unclaimed property technologies help companies:
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manage changing state electronic reporting requirements, identify
valuable exceptions, and better defend audits by storing and organizing
critical data to generate supportable documentation
negotiate with state authorities
participate in voluntary disclosure agreements
identify whether certain property is required to be escheated to the
state
refocus internal resources from manual compliance activities to
automated electronic reporting systems that allow those resources to
spend more valuable time on strategic pursuits.
Additionally, companies will have to adjust to constant change as states
embrace and implement newer technology requirements relating to unclaimed
property reporting.
SALT trends
Business focus on unclaimed
property compliance
Traditionally, unclaimed property
compliance had received less
attention than federal and state tax
compliance. As a result, many
compliance processes associated
with unclaimed property were
primarily manual and significantly
time-consuming, requiring the
dedication of many resources using
antiquated systems. With states
increasing their unclaimed property
audit activity, businesses are seeking
out, and providers are developing,
technology solutions that offer the
same efficiency, reliability, and costsavings that have historically been
reserved for federal and state tax
compliance solutions.
Unclaimed property
compliance software
For unclaimed property reporting,
technology advances center on
sophisticated compliance software.
Today’s compliance software allows
companies to:
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manage workflow, data, and
communications all in real time
monitor items that have been
escheated and track items that
remain outstanding
increase success in obtaining and
accessing required audit
documentation
improve employee, customer,
and vendor relationships by
more efficiently responding to
inquiries regarding amounts
owed
associate documentation, review,
and approval on remediated
items
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retain access and visibility to
both current and historical
unclaimed property data
access comprehensive reporting
capabilities that aid in
reconciling outstanding
escheatable items to the general
ledger
utilize robust search and filter
functions to quickly find needed
data.
State-of-the-art software allows
companies to automate unclaimed
property processes—such as tracking
unclaimed property records and
accounts, monitoring changing state
laws, and complying with reporting
requirements. As technology
automates processes, employees who
previously dedicated their time to
manual compliance matters may be
free to allocate their time to strategic,
value-added tasks such as
researching and remediating
unclaimed property records,
addressing inquiries from the states,
and ensuring proper policy and
procedures are in place to reduce
accounting errors that can result
when records are escheated
inadvertently. Additionally,
technology allows more employees
access to data that previously was
viewed only by those with reporting
function responsibilities.
Sophisticated compliance software
also assists companies in preparing
for unclaimed property audits and
state negotiations, such as voluntary
disclosure agreements. For example,
an audit typically requires a holder of
unclaimed property to provide its
prior unclaimed property filing
history and supporting
documentation to substantiate its
positions. Companies that utilize
sophisticated software to organize
critical data may more efficiently
present the required information to
auditors. Additionally, instant access
to data and analysis provides
companies with an advantage when
negotiating with states.
Software features assist in
decision making
Certain innovative features of
unclaimed property compliance
software offer not only the ability to
automate the reporting function, but
also the ability to automate decision
making. For example, software can
assist in identifying and applying
valuable exemptions that may have
otherwise been overlooked. With this
automated process, companies may
be less likely to report items not
subject to escheatment.
Technology reduces
likelihood of property
becoming abandoned
The evolution of new payment
methods over the years has played a
significant part in reducing the types
of properties being reported to the
states as unclaimed. As companies
move away from manual checks and
embrace payment methods such as
direct deposit for payroll and various
securities payments, these property
types now rarely result in unclaimed
property. With ACH debit/credit and
other online and virtual payment
methods becoming more widely
accepted, property types such as
accounts payable vendor checks are
less likely to be escheated to the
states in the future.
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SALT trends
Updated technology aids in
due diligence
States require companies holding
unclaimed property to contact the
rightful owner through the use of a
due diligence letters mailed to the
owners. This often results in letters
returned to sender as undeliverable
to the extent the owner’s last known
address was insufficient or no longer
valid. To reduce the number of
undeliverable letters, companies are
turning to other means to try to
reunite owners with their property.
More and more companies are using
email as a means to make contact
with owners. This cuts down on the
cost of mailing due diligence
letters—but only when the sender
successfully makes contact with the
owner, since most states do not
recognize email communication as
an acceptable form of contact for the
statutory due diligence requirements.
With the wealth of accessible
information available via the
internet, companies are also turning
to it as a means for reuniting owners
with their property by using search
engines and websites for updated
contact information. Some
companies are even utilizing
sophisticated address database
services to determine owners’ most
recent updated address information
in order to minimize the number of
undeliverable due diligence letters.
Technology upgrades aid
and complicate companies
reporting information to the
state
States have made strides to
implement technology solutions to
improve state reporting
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requirements. For example, there has
been a continued progression in the
types of electronic media required for
submission. This progression has
evolved from the use of magnetic
tapes, floppy discs, and CDs to states
accepting (or even requiring as is the
case with Texas, Oklahoma, and
Indiana) encrypted electronic files
that are uploaded to the state’s
website.
Although the migration from manual
reporting processes to
technologically enhanced methods
may appear to simplify state
reporting responsibilities, the
updated technology raises more
complex issues for companies. This is
especially true for companies
required to file in states where
companies have to: (1) navigate
multiple websites, (2) comply with
varying upload applications, (3)
maintain and monitor numerous
login credentials, and (4) potentially
still have a requirement to submit
hard copy reports.
The states’ use of such technology
demands that businesses implement
their own technology solutions in
order to best comply with and adapt
to changing state requirements.
Future unclaimed property
technology advances
In unclaimed property reporting,
data management takes center stage
in any discussion of future
technology improvements. The need
to organize and process data often
requires companies to consider
outsourcing the data management
function to third-party technology
providers. Companies that choose to
outsource save time and resources,
but must still understand unclaimed
property requirements. Often,
technology providers offer unclaimed
property services along with the
technology to assist with reporting
requirements.
Cloud computing and database
management tools also help
companies manage data. These
technology methods allow companies
to centralize data, store and share
records and files, and simultaneously
access the data at any time from
virtually any location. Companies
should evaluate whether current or
alternative technology options will
help meet unclaimed property
reporting needs. Companies with
limited resources and / or a lack of
expertise in unclaimed property
reporting should also consider the
cost and benefits of technology
adoption.
The takeaway
Cutting-edge unclaimed property
reporting technology is transforming
how companies manage their
unclaimed property departments.
Personnel responsibilities are
shifting from manual tasks to
automated tasks that take less time
to monitor but still require strategic
focus. Companies must evaluate the
best use of technology to transform
traditional processes and improve
their customers’ experiences. As
companies evaluate whether thirdparty unclaimed property technology
providers and assistance makes
sense for their organization, they
must consider the costs and benefits.
The companies that adopt unclaimed
property technology innovation will
be well positioned to increase
efficiencies, productivity, and
profitability.
pwc
SALT trends
Let’s talk
For a deeper discussion on unclaimed property, please contact:
Janet Gagliano
National Abandoned and
Unclaimed Property Leader
(678) 419-1068
[email protected]
James Kutz
Abandoned and Unclaimed
Property Director
(713) 356-4169
[email protected]
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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