On January 10, 2018, a bill was introduced in the Washington State Legislature that would substantially enact the Revised Uniform Unclaimed Property Act (RUUPA) finalized by the Uniform Law Commission (ULC) in late 2016. The bill, House Bill (HB) 2486, is sponsored by Representative Paul Graves at the request of the ULC and would be effective beginning January 1, 2019. The House Committee on Finance conducted a public hearing on the bill on January 16, 2018, but only the sponsor testified and the bill was held for further consideration. While similar (or identical) to RUUPA in most respects, the bill contains a number of significant deviations. Below is a brief summary of several provisions that we flagged in our initial review and the potential impact on Washington holders.

  1. Scope of Property Subject to Act

The legislation would define “property” consistent with the RUUPA definition. Based on the existing Washington unclaimed property law, the enactment of this definition would result in a number of property types becoming specifically defined as property subject to the law for the first time in 2019, including payroll cards, virtual currency, stored-value cards (that are not exempt “gift cards”), municipal bonds, health savings accounts, commissions, employee reimbursements, custodial accounts for minors and mineral proceeds. The existence of the RUUPA “transitional provision” should raise concerns for any holders of these property types that have not historically reported the property to the state. HB 2486 also contains many of the RUUPA carve outs, including “gift cards” (but defined consistent with current law—not RUUPA), loyalty cards and game-related digital content. Other property types that would be exempt include unused tickets without obligation for refunds, worthless securities, non-freely transferrable securities and property held in Achieving a Better Life Experience Act of 2014 (ABLE) accounts. While RUUPA contains an optional carve out for in-store credits for returned merchandise, the introduced Washington bill does not incorporate it. Thus, holders of in-store credits for returned merchandise in which a gift card is offered may have to grapple with whether this property is an exempt “gift card” or returned merchandise credit subject to remittance.

  1. Dormancy Periods

Consistent with RUUPA, HB 2486 would reduce the dormancy periods required before a presumption of abandonment arises for a number of specific property types from five to three years, including securities, debt obligations, deposit accounts, and miscellaneous types of intangible property that fall within the catch-all provision. The only existing property type that would see an increased dormancy period would be non-exempt gift certificates, which would see the dormancy period increased from three to five years.

  1. Periods of Limitation and Repose and Holder Record Retention

While HB 2486 would adopt the periods of limitation and repose (Section 610) and holder record retention (Section 404) contained in RUUPA, the impact of doing so will be an increase in both periods for holders. Specifically, holders will be required to retain records for 10 years, while existing law generally requires records to be retained for 6 years. See Wash. Rev. Code Ann. § 63.29.310. Current law also provides that no action or proceeding may be commenced by the department with respect to any duty of a holder more than six years after the duty arose. See Wash. Rev. Code Ann. § 63.29.290(2). HB 2486 would extend this period to 10 years after the duty arose; however, the period would be reduced to 5 years if the holder files a nonfraudulent report with the department. Thus, if enacted, holders would be wise to ensure that negative reports are filed every year in which no property is due to preserve the five year period of limitation.

  1. Transitional Provision

Unfortunately, HB 2486 contains the problematic RUUPA “transitional provision” (Section 1503) that was carried over from the ULC’s 1995 Uniform Act. This provision states that property not required to be reported before the effective date of the legislation (e.g., not subject to escheat under current or prior law), but that would be required going forward, would have to be included on the holder’s initial (i.e., 2019) report as if it had been presumed abandoned during the preceding 10 year period. To the extent holders have not historically reported certain property types that would expressly become subject to escheat (such as virtual currency, health savings accounts, and stored-value cards), this provision presents a serious risk of retroactive application of the law. Aside from its questionable legality, a strict interpretation of this provision represents poor public policy and would result in a windfall to the state at the expense of compliant holders.

  1. Administrative and Judicial Appeals

HB 2486 does not mirror the administrative and judicial review provisions of RUUPA, but instead adopts a complex (and arguably, at least partially, illegal) review process. Specifically, the judicial review provisions do not apply to “one who has failed to keep and preserve records as required in this chapter” (i.e., maintain records for 10 years). Denying a holder their day in court because they failed to comply with a records retention requirement is poor public policy and unconstitutional. Unlike RUUPA, the judicial appeal provisions also requires a holder or owner to pay or deliver the property to the administrator prior to appealing the decision of an administrator and require the notice of appeal to occur within 30 days of the denial of a refund request.

  1. Liquidation of Securities

Contrary to RUUPA (which provides that the administrator may not sell or otherwise liquidate securities until three years after receipt and notice to the apparent owner), HB 2486 would require the administrator to sell all securities delivered as soon as practicable but gives the administrator significant discretion to not sell securities in certain instances (i.e., not cost-effective to sell). The bill also would not allow the owner to receive dividends, interest and other increments up to the time of the claim when the security is sold or liquidated by the state. This is distinguishable from RUUPA, which allows the owner to recover these items in certain instances.

  1. Other Provisions of Note

A few other provisions to note in HB 2486 include the incorporation of the RUUPA provisions governing “knowledge of death of insured or annuitant” and the requirement that life insurance companies validate death of insured if there is a Social Security Administration (SSA) “death master file” match. The bill also omits a business-to-business exemption, consistent with RUUPA and current law. Practice Note This is a very brief summary of a few of the provisions in HB 2486 that deviate from RUUPA or could impact holders beginning in 2019, if enacted. Because no two holders are the same and this list is not exhaustive, holders are encouraged to contact the authors for a more in-depth review and analysis of the potential impact tailored to your business model and transactions. In the meantime, we will closely monitor HB 2486 as it advances through the Washington Legislature.