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February 10, 2022

New requirement to begin disclosing unclaimed property compliance on 2021 California business tax returns could increase enforcement

Effective January 1, 2022, California business tax filers must disclose their compliance with the state's unclaimed property reporting requirements on their 2021 California business tax returns.1 Additionally, the California Franchise Tax Board (FTB) may share information from business tax returns with the California State Controller's Office (Controller). This information includes whether a taxpayer previously filed an unclaimed property report and, if so, the date the most recent report was filed and the amount that was remitted to the state.

Specifically, the questions on the 2021 FTB Form 100, "California Corporation Franchise or Income Tax Return," 2021 FTB Form 565, "Partnership Return of Income," and likely on the 2021 FTB Form 568, "Limited Liability Company Return of Income" (which is not yet available), are:

  • Has this business entity previously filed an unclaimed property Holder Remit Report with the State Controller's Office? [Yes/No]
    • If "Yes," when was the last report filed? [mm/dd/yyyy]
    • Amount last remitted?

Under the law, the Controller can only disclose unclaimed property information from business tax returns to (1) locate the unclaimed property's owner, or (2) determine compliance with the state's unclaimed property reporting requirements.


In a 2019 report, California's Legislative Analyst's Office (LAO) estimated the state's unclaimed property compliance rate to be extremely low (approximately 2% of all California businesses). The LAO attributed this very low rate of compliance to a lack of awareness of the reporting and remission requirements under California's unclaimed property laws and willful non-compliance due to the high rate of interest (12%) imposed on past-due unclaimed property reported.

The LAO recommended two options to increase compliance with California's unclaimed property laws:

  1. Include an unclaimed property question on California's business tax forms
  2. Provide a one-time voluntary compliance program (VCP) for noncompliant holders of unclaimed property

While California adopted the LAO's first recommendation, a bill to establish a VCP for noncompliant holders has not yet been successful. Some form of a VCP, however, is likely to be considered during this year's legislative session.


The new disclosure requirements and authorized information sharing between the FTB and Controller creates a direct link between a California business tax filer and its unclaimed property compliance reporting obligations. This process has not been enacted in any other state. The new law enhances the ability of California's unclaimed property law administrators to identify taxpayers that have not complied with the state's unclaimed property reporting laws either because they did not file an unclaimed property report or they underreported their unclaimed property. Consequently, enforcement of unclaimed property reporting and audit activity could increase. The increased identification of holders that have not reported unclaimed property could also spur the state to establish a VCP to encourage even greater compliance.

Although California does not currently require the filing of a Nil Report (i.e., a zero return) when a holder does not have any unclaimed property to report, the state unclaimed property authorities nevertheless recommend filing a Form USF-1 when there is no unclaimed property due.2 Filers that do so will have evidence they complied with California unclaimed property laws.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation
   • Sarah Toi (
   • Robert Bazata (
   • Sandy Tsang-Schuler (


1 Cal. Laws 2021, ch. 92 (2021 AB 466), enacted July 16, 2021.

2 See Cal. St. Controller, Unclaimed Property Division, "Other Report Types" (Oct. 2020). "A Nil Report indicates the business has no property to report to California or has reunited all property reported on the Notice Report to its rightful owner. Businesses that do not have reportable unclaimed property are not required to submit a Nil Report unless they have received a written request from SCO to report. However, businesses that reunite all properties reported on their Notice Report are still expected to submit a Nil Report. SCO recommends that holders file a Universal Holder Face Sheet (UFS-1) every year, regardless of whether they have unclaimed property to report."