Abandoned Property

Unclaimed Property

The Uniform Unclaimed Property Act, T.C.A. § 66-29-101 et seq., governs the handling of unclaimed or abandoned personal property held by Tennessee local governments and other holders. The Act applies to various forms of tangible and intangible personal property but does not apply to real property. For municipalities, one of the most common applications of the Act involves unclaimed utility deposits, although it may also apply to uncashed checks, refunds, credit balances, payroll checks, vendor payments, and other amounts owed to individuals or businesses.

Property held for an owner by a political subdivision, public agency, public officer, court, or other governmental entity generally is presumed abandoned if it remains unclaimed for more than one year after the property becomes distributable to the owner, subject to exceptions and other abandonment periods established by law. See T.C.A. § 66-29-105.

The Tennessee State Treasurer administers the Act through the Division of Unclaimed Property. Holders of abandoned property must report and remit reportable property to the Treasurer in accordance with the Act and the Treasurer's rules and procedures. Municipalities should consult the Treasurer's current reporting requirements each year because filing procedures and administrative requirements may change.

Holders also have record-retention and owner-notification responsibilities. Records generally must be maintained for 10 years and should contain sufficient information to identify the owner, the owner's last known address, the amount or description of the property, and the circumstances under which the property became reportable. Before reporting certain property, the holder must make the owner-notification or due-diligence efforts required by the Act.

Return of Unclaimed Funds to Local Governments

T.C.A. § 66-29-146 provides a mechanism through which local governments may recover certain unclaimed funds previously delivered to the State Treasurer.

Beginning December 31, 2016, and for each report year thereafter, the Treasurer determines as of June 30 the amount of unclaimed funds reported and remitted by or on behalf of each local government and its agencies that have remained unclaimed for at least 18 months after delivery to the Treasurer.

If the aggregate amount attributable to a local government exceeds $100, the local government may request that the Treasurer return an amount equal to the eligible balance, less the local government's proportionate share of the cost of administering the unclaimed property program as determined by the Treasurer. The Treasurer also provides the local government with a report identifying the accounts represented by the returned funds.

To obtain the funds, the local government's governing body should adopt the resolution required by the Treasurer and submit the required information concerning funds remitted by the local government and its agencies. Municipalities should use the Treasurer's current forms and instructions when making the request.

Funds returned by the Treasurer must be deposited into the local government's general fund. However, the local government must retain sufficient funds and appropriate accounting records to ensure prompt payment of valid claims associated with the returned accounts.

The return of the funds to the local government does not extinguish the owner's interest in the property. After funds have been returned pursuant to T.C.A. § 66-29-146, a person claiming an interest in the property submits the claim to the local government rather than the State Treasurer. The municipality therefore assumes responsibility for reviewing and paying valid claims associated with the returned funds.

Practical Steps for Municipalities

Municipalities should establish written procedures to identify, report, remit, and account for unclaimed property in accordance with the Uniform Unclaimed Property Act. The following steps are recommended:

1. Identify potentially unclaimed property. At least annually, review municipal records for property that may be subject to the Act. Common examples include unclaimed utility deposits and refunds, uncashed checks, customer credit balances, payroll checks, vendor payments, and other amounts owed to individuals or businesses.
2. Determine whether the property is presumed abandoned. Determine the date on which the property became payable or distributable to the owner and apply the applicable statutory abandonment period. Property held by a political subdivision or other governmental entity generally is presumed abandoned if it remains unclaimed for more than one year after becoming distributable, unless another provision of the Act establishes a different period.
3. Conduct required due diligence. Before reporting property to the State Treasurer, review available records for the owner's name and last known address and make the owner-notification efforts required by the Act. The municipality should document its efforts and retain copies of correspondence or other records demonstrating compliance.
4. File the annual unclaimed property report. Report abandoned property to the Tennessee Department of Treasury in the manner and by the deadline prescribed by the Treasurer. Treasury currently requires holder reports and associated payments to be submitted electronically through its ReportItTN system. Municipalities should consult Treasury's current instructions each year before filing.
5. Maintain required records. Retain records sufficient to identify the owner, the owner's last known address, the amount or description of the property, the date the property became payable or distributable, and the date it was reported and remitted to the Treasurer. Records required by the Act generally must be retained for 10 years.
6. Consider requesting the return of eligible funds. Under T.C.A. § 66-29-146, a municipality may request the return of qualifying unclaimed funds previously remitted to the Treasurer after the funds have remained unclaimed with the Treasurer for at least 18 months and the aggregate eligible balance exceeds $100. The governing body should adopt the resolution required by the Treasurer and submit the request in accordance with current Treasury procedures.
7. Account for returned funds appropriately. Deposit funds returned by the Treasurer into the municipality's general fund as required by law. The municipality should maintain sufficient funds and accounting records to ensure that valid claims can be paid promptly.
8. Maintain individual account information after funds are returned. The municipality's records should continue to identify the individual owners and amounts represented by the returned funds. Returning the money to the municipality does not eliminate the underlying owner's right to make a valid claim.
9. Establish a procedure for subsequent claims. Once funds have been returned to the municipality, establish a consistent process for receiving claims, verifying the claimant's identity and entitlement to the property, documenting approval or denial of the claim, and issuing payment when appropriate.
10. Review procedures annually. The finance director, city recorder, or other responsible official should review the municipality's unclaimed property procedures annually and consult the Tennessee Department of Treasury's current guidance to ensure that reporting deadlines, due-diligence requirements, forms, electronic filing procedures, and local-government refund requirements remain current.

Municipalities should not treat the transfer of unclaimed property to the State Treasurer—or the subsequent return of those funds to the municipality—as eliminating the underlying obligation to the property owner. Accurate account-level records should be maintained so that a valid claim can be identified and paid even after the funds have been returned to the municipality.