Gute und schlechte Nachrichten über nicht beanspruchtes Eigentum in Wisconsin

Wisconsin has adopted the Revised Uniform Unclaimed Property Act (the Uniform Act”), with a few local variations.  2021 Wisconsin Act 87, published November 6, 2021.  The new statute (the “Wisconsin Act”) will be good news for some businesses, but bad news for others.

1. The B to B Exemption

One piece of good news is a new exemption for payments or credits on the books of a business association which are owed to another business association in the ordinary course of business.¹ The term “business association” is defined broadly, and includes corporations, LLCs, business trusts, partnerships, sole proprietorships, banks, utilities, insurance companies, nonprofits, and other business entities.  But it excludes investment companies registered under the Investment Company Act of 1940.²

2. Unclaimed Securities and Indications of Owner Interest

On the negative side, the Wisconsin Act contains a strange non-uniform provision regarding calculation of the dormancy period, which is probably best explained by an example regarding unclaimed securities.

a. Securities: The General Rule.

Assume that a person (either an individual or a legal entity) has acquired a security either directly from the issuer or in a brokerage account.  In either case, under both section 177.0207 of the Wisconsin Act, and section 208 of the Uniform Act, the general rule is that the security would be presumed abandoned three years after the second consecutive letter, account statement, or other communication sent to the apparent owner by first-class mail is returned undelivered to the issuer of the security or the broker by the United States Postal Service.

b. Indications of Apparent Owner Interest.

The non-uniform provision relates to the treatment of indications of apparent owner interest.  Under both the Uniform Act and the Wisconsin Act, the dormancy period can be affected by indications of apparent owner interest in the security.³  An indication of apparent owner interest would include, for example, a letter from the apparent owner to the issuer or broker regarding the security or the account in which the security is held.  So far, so good.  (An indication of apparent owner interest also includes telephone calls and other oral communications if the issuer or broker makes and preserves a contemporaneous record of the fact, not necessarily the content, of the communication. So, issuers and brokers should ask their employees to make a note of those conversations.)

c. The Non-Uniform Provision in Wisconsin.

The non-uniform provision in Wisconsin relates to how the indication of owner interest affects the dormancy period.  Under section 210 of the Uniform Act, the dormancy period is measured from the later of the date and the property is otherwise presumed abandoned or the latest indication of interest by the apparent owner.  So, if two first class letters are returned undelivered in 2022, and the issuer or broker receives a letter from the apparent owner in 2023, the security is presumed abandoned in 2026–three years after the later of the date the security would normally be presumed abandoned (2025, which is three years after the letters were returned in 2022) and the date of the last indication of owner interest (2023).  Under the Wisconsin Act, the security:

“is presumed abandoned from the earliest of the following:

1. The date on which the property is otherwise presumed abandoned under this subchapter.
   
   
2. The date on which the dormancy period has elapsed following the last indication of interest by the apparent owner in the property.”⁴

So, in Wisconsin the same security would be presumed abandoned in 2025, not 2026 as under the Uniform Act, because 2025 is the date the security would be deemed abandoned without an indication of interest from the apparent owner, and 2025 is earlier than 2026, which is the date three years after the last indication of interest in 2023. This is a change from prior section 177.10(8), which provided that the dormancy period ceases (and so restarts) with each indication of interest.

3. Digital Assets

The Wisconsin Act clarifies the treatment of several categories of property which were not addressed specifically under the previous version of Chapter 177.  For example, the new definition of “money” includes virtual currency, so property in the form of Bitcoin or other crypto currencies may have to be reported if the holder can convert it into U.S. currency.  The Act provides specific exemptions for some intangible assets, including:

1. Game-related digital content that can be used only within the game.
   
   
2. Loyalty cards that are given without direct monetary consideration and cannot be redeemed for money.
   
   
3. Gift cards which do not expire; can only be decreased by redemption goods or services; and cannot be redeemed for money or otherwise monetized by the issuer.
   
   
4. Stored-value cards which are not payroll cards, do not expire; can only be decreased by redemption for goods, services, or money; and may be redeemed for money or otherwise monetized by the issuer.⁵

This is good news for businesses which qualify for the exemptions.  So, for example, issuers of gift cards and stored–value cards can avoid payment of unclaimed property to the State if there are no dormancy charges and the cards do not expire.  The bad news is that these kinds of intangible assets are probably reportable if they do not qualify for the exemptions.  So, issuers of game-related digital content, loyalty cards, gift cards and stored value cards can face substantial liabilities if they have outstanding cards or game-related digital content that do not qualify for the exemptions.  The initial report under the new statute will have to include all property that was not required to be reported before but would have been required to be reported during the last ten years if the new law had been effective during that period.⁶  

There is also some good news for issuers of payroll cards.  Unpaid wages, reimbursements, commissions, and other compensation for personal services must be reported after one year.⁷  But the basic reporting period for payroll cards is apparently five years.⁸  So, there is an advantage to the use of payroll cards if wages would otherwise be paid by check and not by direct deposit to a bank account.

There is also a new exemption for in-store credits for returned merchandise. Other credits from retail transactions must be reported after five years.

4. Conclusion

The unclaimed property laws impose real costs on businesses, and affect different businesses in different ways.  There are special provisions for retailers, banks and other financial institutions, insurance companies, and utilities, to name a few.  This blog post is not a complete summary.  It will be worth your time to see how the new Wisconsin Act will affect your business.

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¹ Wis. Stats. § 177.015(2)(b).

² Wis. Stats. § 177.01(5).

³ Uniform Act, § 210; Wis. Stats. § 177.0210.

⁴ Wis. Stats. § 177.0210(1).

⁵ Wis. Stats. § 177.01(13b)(c).

⁶ Wis. Stats. § 177.1502(2).

⁷ Wis. Stats. § 177.0201(11).

⁸ Wis. Stats. § 177.0201(13).