Existing law, the Unclaimed Property Law, governs the disposition of unclaimed property, including the escheat of certain property to the state. Existing law requires the Controller, within one year of receiving unclaimed property, to cause a notice to be published in a newspaper of general circulation that the Controller determines is most likely to give notice to the owner of the property. Existing law requires that notice to have a specified title and to state that the owner of the property may obtain information regarding the property by inquiring with the Controller, as specified.

This bill would instead authorize the Controller to cause notice to be published in a manner he or she determines to be reasonable. The bill would prohibit the Controller, in carrying out this duty, from using (1) money appropriated for the Controllers audit programs, (2) more than the amount appropriated by the Legislature for publishing this notice, (3) a photograph, or (4) an elected officials name.

Existing law, the Unclaimed Property Law, governs the disposition of unclaimed property, including the escheat of certain property to the state. Existing law requires the Controller, within one year of receiving unclaimed property, to cause a notice to be published in a newspaper of general circulation that the Controller determines is most likely to give notice to the owner of the property. Existing law requires that notice to have a specified title and to state that the owner of the property may obtain information regarding the property by inquiring with the Controller, as specified.

This bill would instead authorize the Controller to cause notice to be published in a manner he or she determines to be reasonable. The bill would prohibit the Controller, in carrying out this duty, from using (1) money appropriated for the Controllers audit programs, (2) more than the amount appropriated by the Legislature for publishing this notice, (3) a photograph, or (4) an elected officials name.

Existing law, the Unclaimed Property Law, governs the disposition of unclaimed property, including the escheat of certain property to the state. Existing law requires the Controller, within one year of receiving unclaimed property, to cause a notice to be published in a newspaper of general circulation that the Controller determines is most likely to give notice to the owner of the property. Existing law requires that notice to have a specified title and to state that the owner of the property may obtain information regarding the property by inquiring with the Controller, as specified.

This bill would instead authorize the Controller to cause notice to be published in a manner he or she determines to be reasonable. The bill would prohibit the Controller, in carrying out this duty, from using (1) money appropriated for the Controllers audit programs, (2) more than the amount appropriated by the Legislature for publishing this notice, (3) a photograph, or (4) an elected officials name.

Existing law, the Unclaimed Property Law, governs the disposition of unclaimed property, including the escheat of certain property to the state. Existing law requires the Controller, within one year of receiving unclaimed property, to cause a notice to be published in a newspaper of general circulation that the Controller determines is most likely to give notice to the owner of the property. Existing law requires that notice to have a specified title and to state that the owner of the property may obtain information regarding the property by inquiring with the Controller, as specified.

This bill would instead authorize the Controller to cause notice to be published in a manner he or she determines to be reasonable. The bill would prohibit the Controller, in carrying out this duty, from using (1) money appropriated for the Controllers audit programs, (2) more than the amount appropriated by the Legislature for publishing this notice, (3) a photograph, or (4) an elected officials name.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 772

Author:(Daly)

As Amended Ver:June 12, 2017

Majority vote

Original Committee Reference: JUD.

SUMMARY: Permits the State Controller to publish a specified notice regarding unclaimed property in any manner that the Controller determines to be reasonable. Specifically, this bill:

1. Repeals a mandate that the Controller publish the notice in a newspaper of general circulation which the Controller determines is most likely to give notice to the apparent owner of the unclaimed property.
2. Repeals the requirement that the notice contain a statement that information concerning the amount or description of the property may be obtained by any persons possessing an interest in the property by addressing any inquiry to the Controller, and be entitled "notice to owners of unclaimed property."
3. Establishes that the Controller may publish the notice in a manner that the Controller determines to be reasonable, which may include, but not be limited to, newspapers, Internet Web sites, radio, television, or other media.
4. Prohibits the Controller, in carrying out this duty, from using any of the following:
   1. Money appropriated for audit programs.
   2. More money than was appropriated by the Legislature for this purpose.
   3. A photograph in a notice.
   4. An elected official's name in a notice.

The Senate amendments clarify that a reasonable manner of publication of the notice may include, but is not be limited to, newspapers, Internet Web sites, radio, television, or other media.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: This bill, sponsored by the State Controller's Office (SCO), seeks to provide the SCO with greater flexibility in the methods it may use to inform owners about their unclaimed property. Specifically, the bill allows the SCO to publish a specific notice to owners of unclaimed property in any manner the Controller determines to be reasonable, instead of only being allowed to publish the notice in a newspaper of general circulation. According to the author, "The SCO has a limited budget in which to perform the required advertisement for the Unclaimed Property Program, and the permanent flexibility sought by this bill has been granted over the course of numerous budget cycles. The State Controller believes that the public is better served by a statute that clearly lays out how the program operates."

Background of the Unclaimed Property Law (UPL): The UPL, enacted in 1958, establishes procedures for the escheat of unclaimed personal property to the state. Once escheated to the state, the property is in state custody in perpetuity, until the owner claims the property. Under the UPL, there are three significant parties: the owner, the holder, and the state. The "owner" is the person with the legal right to own the property. The "holder" is the person or entity who has possession of the property (such as a bank or other money depositary), or a business that has issued a check to an individual or other business, or a company that holds the proceeds of a life insurance policy or annuity. Holders of unclaimed property have no ownership interest in the unclaimed property. (Bank of America v. Cory (1985) 164 Cal.App.3d 66, 74.) A holder is simply a trustee of the property until it is reclaimed by its owner. However, while the property is in the custody of the holder, the holder generally has the right to use the funds or property as an asset. The state, through the Controller, acts as the protector of the rights of the true owner. (Bank of America v. Cory, supra, at 74.) A person with an interest in escheated property may file a claim to recover the property from the state. The Controller maintains a Web site (http://www.sco.ca.gov) where members of the public may search a database to discover if the state holds any of their property, and may submit claims to recover the funds or property.

The UPL establishes the procedures which must be followed once property goes unclaimed, generally for a period of three years, and then — as a consequence — escheats to the state. Under existing law, the holder must annually report on unclaimed property and turn the property over to the Controller. In turn, the Controller is required to mail a notice to each person who appears to be entitled to the unclaimed property, according to the report filed by a holder, as well as to publish a notice about the property in a newspaper of general circulation. Since at least 2001, however, the requirement to publish the notice in a newspaper of general circulation has been preempted by language in the SCO's budget, which authorizes the Controller to publish the notice in any manner determined by the SCO to be reasonable.

This bill essentially codifies, in the CCP, Legislative authorization provided to the SCO through the annual Budget Act for over 15 years. Existing law, established through the Budget Act of 2016, allows the SCO to publish notices in a manner the Controller determines to be reasonable. (Budget Act of 2016, 0840-001-0970.) The provisions of this bill mirror the language that has been incorporated in every Budget Act since at least 2001, and thus this bill essentially codifies SCO policy. In addition to seeking increased efficiency in the operations of the SCO, the purpose of codifying this process is to make the policy permanent. This bill will provide a clear articulation of the law and reduce any confusion and ambiguity that exists in current law.

This bill codifies the SCO's ability to establish alternative methods for publishing public notices relating to unclaimed property. Originally, the policy articulated in this bill was adopted due to fiscal concerns that the SCO's limited funds would stifle its outreach efforts. For example, according to the SCO, its budget for public notifications in 2016 was approximately $61,000, while historically costing $50,000 to $60,000 in previous years. According to the SCO, its budget only allows the SCO to publish one notice each year, for one day, in 40 California newspapers. This one-time publishing event accounts for the SCO's entire annual budget for publishing notices, and presents a severe limitation in outreach efforts of the SCO.

Despite already having the ability to explore alternative methods for providing notice of unclaimed property to the public, the SCO has continued to publish notices in newspapers of general circulation. According to the SCO, it has continued to do so and may continue to do so in the future, if such notice is determined to be reasonable. It is apparent that the SCO has determined, despite the discretion to use other methods that was previously granted to the SCO, that newspaper publications remains an effective method of providing notification of unclaimed property to the public. Nevertheless, newspaper publication may not be the only effective potential method of public notification. Under this bill, the SCO would have the flexibility to implement other methods of publishing public notices and explore new options for providing notice to the public which may be more effective or efficient.

This bill seeks to provide the SCO with greater flexibility to utilize methods of informing owners about possible unclaimed property other than newspaper publication. According to the SCO, the need for flexibility in publishing notifications is a response to the statutory limitation requiring publication in newspapers. The SCO would like to expand outreach efforts with innovative, and potentially more effective, methods to provide notice. Since the emergence of the internet and other electronic means of communication and information sharing, newspaper publication is not the only method of communication with the general public. Indeed, newspapers are of similar opinion, as shown through their adoption of other methods of providing access to their content, including online platforms, an increasingly popular medium for dissemination of the news. Recent amendments to the bill clarify that a reasonable manner of publishing the notice may include, but is not be limited to, newspapers, Internet Web sites, radio, television, or other media. With these amendments, the California News Publishers Association has removed its opposition and is now neutral on the bill.

This bill would allow the SCO to adopt similar methods to notify the public about unclaimed property. These methods may be necessary to address the growing inventory of unclaimed property under the control of the SCO. According to the SCO, it has more than 32 million items of property — worth more than $8 billion — that remain unclaimed by their owners. Proponents contend that alternative outreach methods should therefore be used to increase the likelihood that owners will claim their property.

Conclusion. The SCO faces real challenges in attempting to inform the public about escheated property while using cost effective methods to provide notice. There are millions of items of escheated property that remain unclaimed, and the statutory requirement for the SCO to notify owners of such property via newspaper publication may not be as effective as it potentially could be. The flexibility that SCO seeks in this bill, outlining how to fulfill her duty to provide notice to the public about escheated property, would codify what the SCO has been able to do for years. In short, as the Legislature has determined in budget trailer language time and again, the Controller would have the authority to determine the best method for notifying the public about escheated property. This bill will codify that principle and clarify that the Controller may use her existing authority to determine the most reasonable method of providing notice about escheated property to the public, including, but not limited to, notice by newspaper publication.

Analysis Prepared by: Anthony Lew / JUD. / (916) 319-2334 FN: 0001139 FN:

 CONSENT  

Bill No: AB 772

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 7-0, 6/20/17

AYES: Jackson, Moorlach, Anderson, Hertzberg, Monning, Stern, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 76-0, 4/20/17 - See last page for vote

SUBJECT:

SOURCE: California State Controller, Betty Yee

DIGEST:

This bill authorizes the California State Controller to cause notice, regarding disposition of unclaimed property, to be published in a manner the Controller determines to be reasonable, rather than require notice to be published in a newspaper of general circulation. This bill prohibits the Controller from using (1) money appropriated for the Controller’s audit programs, (2) more than the amount appropriated by the Legislature for publishing notice, (3) a photograph, or (4) an elected official’s name while causing notice to be published.

ANALYSIS:

Existing law:

1. Requires, under the Unclaimed Property Law (UPL), property held or owing by a business association that is unclaimed for more than three years, as specified, to file a report with the State Controller and turn over that property to the state. (Code Civ. Proc. Secs. 1513, 1513.5, 1530-1532.)
2. Authorizes the Controller to bring an action to enforce provisions of the UPL and provides for the imposition of penalties and interest against holders who willfully fail to comply with its provisions. (Code Civ. Proc. Sec. 1576.)
3. Authorizes any person, except another state, who claims an interest in property paid or delivered to the Controller to file a claim to the property. (Code Civ. Proc. Sec. 1540(a).)
4. Provides that within one year after payment or delivery of escheated property, the Controller shall give notice to be published in a newspaper of general circulation which the Controller determines is most likely to give notice to the apparent owner of the property. (Code of Civ. Proc. Sec. 1531(a).)
5. Provides that each published notice shall be entitled “notice to owners of unclaimed property” and shall contain a statement that information concerning the amount or description of the property may be obtained by any persons possessing an interest in the property by addressing any inquiry to the Controller. (Code of Civ. Proc. Sec. 1531(b)-(c).)
6. Provides that within 165 days after the final date for filing the report required, the Controller shall mail a notice to each person having an address listed in the report who appears to be entitled to property of the value of $50. If the report filed includes a social security number, the Controller shall request the Franchise Tax Board provide a current address for the apparent owner on the basis of that number. (Code of Civ. Proc. Sec. 1531(d).)
7. Provides that the mailed notice shall contain all of the following:
   1. a statement that, according to a report filed with the Controller, property is being held to which the addressee appears entitled;
   2. the name and address of the person holding the property and any necessary information regarding changes of name and address of the holder;
   3. a statement that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the notice, the property will be placed in the custody of the Controller and may be sold or destroyed pursuant to this chapter, and all further claims concerning the property or, if sold, the net proceeds of its sale, must be directed to the Controller. (Code Civ. Proc. Sec. 1531(e).)

This bill:

1. Provides that the Controller shall cause a notice to be published in a manner that the Controller determines to be reasonable, which may include, but not be limited to, newspapers, Internet Web sites, radio, television, or other media.
2. Provides that the Controller shall not use any of the following while providing notice:
   1. money appropriated for the Controller’s audit programs;
   2. more money than the Legislature appropriates for this subdivision’s purpose;
   3. a photograph in a notice; or
   4. an elected official’s name in a notice.

Comments

Purpose of the bill. The State Controller’s Office has a limited budget in which to perform the required advertisement for the Unclaimed Property Program, and the permanent flexibility sought by this bill has been granted over the course of numerous budget cycles. The State Controller believes that the public is better served by a statute that clearly lays out how the program operates.

Causing notice to be published. Existing law requires the Controller cause a notice to be published in a newspaper of general circulation which is most likely to give notice to the apparent owner of the property. (Code Civ. Proc. Sec. 1531(a).) However, for the past ten years, language voted on in the Senate Budget Committee has stated that “notwithstanding subdivision (b) of Section 1531 of the Code of Civil Procedure, the Controller may publish notice in any manner that the controller determines reasonable, provided that (1) none of the moneys used for this purpose is redirected from funding for the Controller’s audit activities, (2) no photograph is used in the publication of notice, and (3) no elected official’s name is used in the publication of notice.” (SB 286, Leno, Chapter 23, Statutes of 2016, Item 0840-001-0903.) This bill amends Code of Civil Procedure Section 1531(a) to reflect the language included in the Senate Budget Bill.

According to the SCO the language included in the Senate Budget Bill:

Allows SCO to publish a more general notice in any manner it deems reasonable and, limits the amount SCO can spend on informational notices. Additionally, SCO is required to send an individualized notice to each apparent owner using their last known address to let them know SCO may be safeguarding their lost property.

Communications and outreach have changed substantially since 1959, and the people receive their news and information through many sources. Having the ongoing flexibility to advertise this program across different media platforms will give SCO the ability to alert more people to the property being held on their behalf.

In working with the California Newspaper Publishers Association (CNPA), who were formerly opposed to this bill, amendments were taken which moved this bill from mirroring the language utilized in the Senate Budget Bill. Instead of providing that the notice may be published in any manner that the Controller determines to be reasonable, this bill now provides that the Controller may cause notice to be published in a manner the Controller determines to be reasonable, which may include, but not be limited to, newspapers, Internet Web sites, radio, television, or other media. This would allow the Controller to utilize more than just a newspaper of general circulation, but highlights the options the Controller may utilize, including the continued use of newspapers.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 7/10/17)

California State Controller, Betty Yee (source)

California Association of County Treasurers and Tax Collectors

OPPOSITION: (Verified 7/10/17)

None received

ASSEMBLY FLOOR: 76-0, 4/20/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Brough, Maienschein, Mathis, Ridley-Thomas

Prepared by:

7/12/17 11:28:47

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2017-2018 Regular Session

Bill No: AB 772 (Author:Daly)

Version: June 12, 2017

Hearing Date: June 20, 2017

Fiscal: Yes

Urgency: No

Consultant: MS

SUBJECT

Unclaimed property: publication of notice

DESCRIPTION

This bill would authorize the California State Controller to cause notice, regarding disposition of unclaimed property, to be published in a manner the Controller determines to be reasonable, rather than require notice to be published in a newspaper of general circulation. This bill would prohibit the Controller from using (1) money appropriated for the Controller’s audit programs, (2) more than the amount appropriated by the Legislature for publishing notice, (3) a photograph, or (4) an elected official’s name while causing notice to be published.

BACKGROUND

The Unclaimed Property Law (UPL), as revised in 1968, provides for the “escheat” of unclaimed personal property. Escheat is the reversion of property to the state by reason of the failure of the owner to inherit or claim it.

The UPL specifies conditions when unclaimed property held by a third party may escheat to the state. For banks and financial organizations, unclaimed property may escheat to the state when an owner fails to act on an account for more than three years after the date the funds became distributable or payable. Existing law requires a person holding escheated property to include in his or her report to the Controller the name and last known address of the apparent owner of any escheated property, except travelers checks and money orders, worth at least $25. (Code Civ. Proc. Sec. 1530). Additionally, existing law requires these entities send owners of unclaimed property valued at $50 or more specified notices that identify the property and warn the owner that their property may escheat to the state unless they take certain specified actions to reclaim the property. The law permits banks and financial organizations to impose a service charge of up to $2 to cover the cost of providing such notices.

The UPL also establishes procedures to be followed when, after the above notices have been sent, the property goes unclaimed and reverts to the state. Under existing law, the holder must annually report on unclaimed property and turn the property over to the State Controller. (See Code Civ. Proc. Secs. 1530-1533.) Banks and financial organizations are required to submit an annual report to the Controller that identifies all property that has escheated to the state, and, for property valued at $50 or more, to identify the name, if known, and the last known address of the property owner. Escheated unclaimed property valued under $50 may be reported in the aggregate, and reporting entities need not provide the name and address of the property owner in their annual report even if they have such information. The UPL also sets forth the procedure for any person who claims an interest in the property to file a claim to recover the property from the state. (Code Civ. Proc. Secs. 1540-1542.)

According to the State Controller’s Office (SCO), the SCO is currently holding over 32 million properties worth more than $8 billion that they are trying to reunite with their apparent owners. The SCO is required, within a year of receiving a property, to place an advertisement in a newspaper of general circulation that is “most likely to give notice to the apparent owner of the property.” (Code Civ. Proc. Sec. 1531(a).) The SCO believes that this requirement, has been preempted by control language placed into the SCO’s budget for more than 10 years. The language found within the SCO’s budget (1) allows the SCO to publish a more general notice in any manner it deems reasonable and, (2) appropriates the specific amount the SCO may spend on informational notices. (SB 826 (Leno, Ch. 23, Stats. 2016; AB 93 (Weber, Ch. 10, Stats. 2014); SB 852 (Leno, Ch. 23, Stats. 2014); AB 110 (Blumenfield, Ch. 20, Stats. 2013; AB 1464 (Blumenfield, Ch. 21, Stats. 2012); SB 87 (Leno, Ch. 33, Stats. 2011); SB 870 (Ducheny, Ch. 712, Stats. 2010.) Additionally, the SCO is required to send an individualized notice to each apparent owner using their last known address to let them know SCO may be holding their property. To remedy this issue, this bill, sponsored by the State Controller, would instead provide the Controller with the ability to cause a notice to be published in a manner that the Controller determines to be reasonable.

CHANGES TO EXISTING LAW

Existing law, the Unclaimed Property Law (UPL), requires property held or owing by a business association that is unclaimed for more than three years, as specified, to file a report with the State Controller and turn over that property to the state. (Code Civ. Proc. Secs. 1513, 1513.5, 1530-1532.)

Existing law authorizes the Controller to bring an action to enforce provisions of the UPL and provides for the imposition of penalties and interest against holders who willfully fail to comply with its provisions. (Code Civ. Proc. Sec. 1576.)

Existing law authorizes any person, except another state, who claims an interest in property paid or delivered to the Controller to file a claim to the property. (Code Civ. Proc. Sec. 1540(a).)

Existing law provides that within one year after payment or delivery of escheated property, the Controller shall give notice to be published in a newspaper of general circulation which the Controller determines is most likely to give notice to the apparent owner of the property. (Code of Civ. Proc. Sec. 1531(a).)

Existing law provides that each published notice shall be entitled “notice to owners of unclaimed property” and shall contain a statement that information concerning the amount or description of the property may be obtained by any persons possessing an interest in the property by addressing any inquiry to the Controller. (Code of Civ. Proc. Sec. 1531(b)-(c).)

Existing law provides that within 165 days after the final date for filing the report required, the Controller shall mail a notice to each person having an address listed in the report who appears to be entitled to property of the value of $50. If the report filed includes a social security number, the Controller shall request the Franchise Tax Board provide a current address for the apparent owner on the basis of that number. (Code of Civ. Proc. Sec. 1531(d).)

Existing law provides that the mailed notice shall contain all of the following:

• a statement that, according to a report filed with the Controller, property is being held to which the addressee appears entitled;
• the name and address of the person holding the property and any necessary information regarding changes of name and address of the holder;
• a statement that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the notice, the property will be placed in the custody of the Controller and may be sold or destroyed pursuant to this chapter, and all further claims concerning the property or, if sold, the net proceeds of its sale, must be directed to the Controller. (Code Civ. Proc. Sec. 1531(e).)

This bill would provide that the Controller shall cause a notice to be published in a manner that the Controller determines to be reasonable, which may include, but not be limited to, newspapers, Internet Web sites, radio, television, or other media.

This bill would provide that the Controller shall not use any of the following while providing notice:

• money appropriated for the Controller’s audit programs;
• more money than the Legislature appropriates for this subdivision’s purpose;
• a photograph in a notice; or
• an elected official’s name in a notice.

COMMENT

1. Stated need for this bill

According to the Author:

The State Controller’s Office has a limited budget in which to perform the required advertisement for the Unclaimed Property Program, and the permanent flexibility sought by this bill has been granted over the course of numerous budget cycles. The State Controller believes that the public is better served by a statute that clearly lays out how the program operates.

1. Causing notice to be published

Existing law requires the Controller cause a notice to be published in a newspaper of general circulation which is most likely to give notice to the apparent owner of the property. (Code Civ. Proc. Sec. 1531(a).) However, for the past ten years, language voted on in the Senate Budget Committee has stated that “notwithstanding subdivision (b) of Section 1531 of the Code of Civil Procedure, the Controller may publish notice in any manner that the controller determines reasonable, provided that (1) none of the moneys used for this purpose is redirected from funding for the Controller’s audit activities, (2) no photograph is used in the publication of notice, and (3) no elected official’s name is used in the publication of notice.” (SB 286, Leno, Ch. 23, Stats. 2016, Item 0840-001-0903.) This bill would amend Code of Civil Procedure Section 1531(a) to reflect the language included in the Senate Budget Bill.

According to the SCO the language included in the Senate Budget Bill:

Allows SCO to publish a more general notice in any manner it deems reasonable and, limits the amount SCO can spend on informational notices. Additionally, SCO is required to send an individualized notice to each apparent owner using their last known address to let them know SCO may be safeguarding their lost property.

Communications and outreach have changed substantially since 1959, and the people receive their news and information through many sources. Having the ongoing flexibility to advertise this program across different media platforms will give SCO the ability to alert more people to the property being held on their behalf.

In working with the California Newspaper Publishers Association (CNPA), who were formerly opposed to this bill, amendments were taken which moved this bill from mirroring the language utilized in the Senate Budget Bill. Instead of providing that the notice may be published in any manner that the Controller determines to be reasonable, this bill now provides that the Controller may cause notice to be published in a manner the Controller determines to be reasonable, which may include, but not be limited to, newspapers, Internet Web sites, radio, television, or other media. This would allow the Controller to utilize more than just a newspaper of general circulation, but highlights the options the Controller may utilize, including the continued use of newspapers.

Support: California Association of County Treasurers and Tax Collectors

Opposition: None Known

HISTORY

Source: The California State Controller, Betty Yee

Related Pending Legislation: None Known

Prior Legislation:

AB 212 (Lowenthal, Ch. 362, Stats. 2013), sponsored by the State Controller, required a person holding escheated property to include in his or her report to the Controller that name and last known address of the apparent owner of any escheated property worth at least $25. The Unclaimed Property Law requires a person holding escheated property include in his or her annual report to the State Controller the name and last known address of the owner of any escheated property. AB 212 also clarified that banks and financial organizations may impose a service charge of up to $2 to cover the cost of providing required notices to owners only if the unclaimed property at issue has a value greater than $2.

AB 1275 (Chau, Ch. 128, Stats. 2013) revised the Unclaimed Property Law to only allow an owner of, instead of a person with an interest in, property to file a claim with the State Controller’s Office for recovery of property that has escheated to the state. This bill also revised the definition of “owner” to remove a personal representative and include an estate representative, conservator, or guardian.

AB 2642 (Niello, 2008) would have provided that when an owner of an account or other intangible property has not received a tax report or regular statement of the account or intangible property for a period of three years, the account or other intangible property is inactive and would escheat to the state. The bill also would have created a presumption that a tax report or regular statement of an account or other intangible property that was mailed first class to the owner of the account or intangible property by the holder of the property and that was not returned was received by the owner of the property. This bill was held in the Senate Judiciary Committee.

Prior Vote:

Assembly Floor (Ayes 76, Noes 0)

Assembly Appropriations Committee (Ayes 17, Noes 0)

Assembly Judiciary Committee (Ayes 10, Noes 0)

**************

ASSEMBLY THIRD READING

ATR Bill Id:AB 772

Author:(Daly)

As Introduced Ver:

Majority vote

SUMMARY: Permits the State Controller to publish a specified notice regarding unclaimed property in any manner that the Controller determines to be reasonable, instead of in a newspaper of general circulation. Specifically, this bill:

1. Repeals a mandate that the Controller publish the notice in a newspaper of general circulation which the Controller determines is most likely to give notice to the apparent owner of the unclaimed property.
2. Repeals the requirement that the notice contain a statement that information concerning the amount or description of the property may be obtained by any persons possessing an interest in the property by addressing any inquiry to the Controller, and be entitled "notice to owners of unclaimed property."
3. Establishes that the Controller may publish the notice in a manner that the Controller determines to be reasonable.
4. Prohibits the Controller, in carrying out this duty, from using any of the following:
   1. Money appropriated for audit programs.
   2. More money than was appropriated by the Legislature for this purpose.
   3. A photograph in a notice.
   4. An elected official's name in a notice.

FISCAL EFFECT: According to the Assembly Appropriations Committee, no fiscal effect as the provisions of this bill are generally already in effect and did not appear to result in a fiscal effect when initially enacted through the state budget act.

COMMENTS: This bill, sponsored by the State Controller's Office (SCO), seeks to provide the SCO with greater flexibility in the methods it may use to inform owners about their unclaimed property. Specifically, the bill allows the SCO to publish a specific notice to owners of unclaimed property in any manner the Controller determines to be reasonable, instead of only being allowed to publish the notice in a newspaper of general circulation. According to the author, "The SCO has a limited budget in which to perform the required advertisement for the Unclaimed Property Program, and the permanent flexibility sought by this bill has been granted over the course of numerous budget cycles. The State Controller believes that the public is better served by a statute that clearly lays out how the program operates."

Background of the Unclaimed Property Law (UPL): The UPL, enacted in 1958, establishes procedures for the escheat of unclaimed personal property to the state. Once escheated to the state, the property is in state custody in perpetuity, until the owner claims the property. Under the UPL, there are three significant parties: the owner, the holder, and the state. The "owner" is the person with the legal right to own the property. The "holder" is the person or entity who has possession of the property (such as a bank or other money depositary), or a business that has issued a check to an individual or other business, or a company that holds the proceeds of a life insurance policy or annuity. Holders of unclaimed property have no ownership interest in the unclaimed property. (Bank of America v. Cory (1985) 164 Cal.App.3d 66, 74.) A holder is simply a trustee of the property until it is reclaimed by its owner. However, while the property is in the custody of the holder, the holder generally has the right to use the funds or property as an asset. The state, through the Controller, acts as the protector of the rights of the true owner. (Bank of America v. Cory, supra, at 74.) A person with an interest in escheated property may file a claim to recover the property from the state. The Controller maintains a Web site (http://www.sco.ca.gov) where members of the public may search a database to discover if the state holds any of their property, and may submit claims to recover the funds or property.

The UPL establishes the procedures which must be followed once property goes unclaimed, generally for a period of three years, and then—as a consequence—escheats to the state. Under existing law, the holder must annually report on unclaimed property and turn the property over to the Controller. In turn, the Controller is required to mail a notice to each person who appears to be entitled to the unclaimed property, according to the report filed by a holder, as well as to publish a notice about the property in a newspaper of general circulation. Since at least 2001, however, the requirement to publish the notice in a newspaper of general circulation has been preempted by language in the SCO's budget, which authorizes the Controller to publish the notice in any manner determined by the SCO to be reasonable.

This bill essentially codifies, in the CCP, Legislative authorization provided to the SCO through the annual Budget Act for over 15 years. Existing law, established through the Budget Act of 2016, allows the SCO to publish notices in a manner the Controller determines to be reasonable. (Budget Act of 2016, 0840-001-0970.) The provisions of this bill mirror the language that has been incorporated in every Budget Act since at least 2001, and thus this bill essentially codifies SCO policy. In addition to seeking increased efficiency in the operations of the SCO, the purpose of codifying this process is to make the policy permanent. This bill will provide a clear articulation of the law and reduce any confusion and ambiguity that exists in current law.

This bill codifies the SCO's ability to establish alternative methods for publishing public notices relating to unclaimed property. Originally, the policy articulated in this bill was adopted due to fiscal concerns that the SCO's limited funds would stifle its outreach efforts. For example, according to the SCO, its budget for public notifications in 2016 was approximately $61,000, while historically costing $50,000 to $60,000 in previous years. According to the SCO, its budget only allows the SCO to publish one notice each year, for one day, in 40 California newspapers. This one-time publishing event accounts for the SCO's entire annual budget for publishing notices, and presents a severe limitation in outreach efforts of the SCO.

Despite already having the ability to explore alternative methods for providing notice of unclaimed property to the public, the SCO has continued to publish notices in newspapers of general circulation. According to the SCO, it has continued to do so and may continue to do so in the future, if such notice is determined to be reasonable. It is apparent that the SCO has determined, despite the discretion to use other methods that was previously granted to the SCO, that newspaper publications remains an effective method of providing notification of unclaimed property to the public. Nevertheless, newspaper publication may not be the only effective potential method of public notification. Under this bill, the SCO would have the flexibility to implement other methods of publishing public notices and explore new options for providing notice to the public which may be more effective or efficient.

This bill seeks to provide the SCO with greater flexibility to utilize methods of informing owners about possible unclaimed property other than newspaper publication. According to the SCO, the need for flexibility in publishing notifications is a response to the statutory limitation requiring publication in newspapers. The SCO would like to expand outreach efforts with innovative, and potentially more effective, methods to provide notice. Since the emergence of the internet and other electronic means of communication and information sharing, newspaper publication is not the only method of communication with the general public. Indeed, newspapers are of similar opinion, as shown through their adoption of other methods of providing access to their content, including online platforms, an increasingly popular medium for dissemination of the news.

This bill would allow the SCO to adopt similar methods to notify the public about unclaimed property. These methods may be necessary to address the growing inventory of unclaimed property under the control of the SCO. According to the SCO, it has more than 32 million items of property—worth more than $8 billion—that remain unclaimed by their owners. Proponents contend that alternative outreach methods should therefore be used to increase the likelihood that owners will claim their property.

Arguments in opposition. Publishing notices in newspapers has benefits that are relatively well-established, as opposed to new untested methods that may not be tested. The California Newspaper Publishers Association (CNPA) asserts that publishing public notifications in a newspaper is a well-established tradition in the community, and as such, is a known source of public notices, which also have the benefit of being well-archived. Newspapers have traditionally been the best source for disseminating information to the general public, which is the reason they have been used as the main means of providing notice. Additionally, CNPA contends that publishing notices in a newspaper informs individuals who may not be seeking information by creating a 'stumbling effect,' where the reader accidentally comes across the public notice by virtue of reading other parts of the newspaper. This effect may be bypassed using electronic sources, because online users often access direct links to articles that do not take them to public notice sections of the online publication.

CNPA also argues that publishing notices in the newspaper promotes the goal of making the government accountable to the public at large, regarding its assumption of the right to hold property of an individual. CNPA asserts that requiring the government to publish notices through an independent entity protects against the government's potentially arbitrary and clandestine exercise of its power.

Conclusion. The SCO faces real challenges in attempting to inform the public about escheated property while using cost effective methods to provide notice. There are millions of items of escheated property that remain unclaimed, and the statutory requirement for the SCO to notify owners of such property via newspaper publication may not be as effective as it potentially could be. The flexibility that SCO seeks in this bill for how to fulfill her duty to provide notice to the public about escheated property would codify what the SCO has been able to do for years. In short, as the Legislature has determined in budget trailer language time and again, the Controller would have the authority to determine the best method for notifying the public about escheated property. This bill will codify that principle and clarify that the Controller may use her existing authority to determine the most reasonable method of providing notice about escheated property to the public, including, but not limited to, notice by newspaper publication.

Analysis Prepared by: Anthony Lew / JUD. / (916) 319-2334 FN: 0000132

Date of Hearing: April 5, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 772

Author:(Daly) – As Introduced Ver:February 15, 2017

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill permits the State Controller’s Office (SCO) to publish a notice regarding unclaimed property in any manner that the Controller determines to be reasonable, instead of limiting the notice to only a general circulation newspaper. In addition, it repeals an existing requirement that the notice of unclaimed property contain a statement that information concerning the amount or description of the property may be obtained by any persons possessing an interest in the property by addressing any inquiry to the SCO, and be entitled “notice to owners of unclaimed property.”

FISCAL EFFECT:

No fiscal effect as the provisions of this bill are generally already in effect and did not appear to result in a fiscal effect when initially enacted through the state budget act.

COMMENTS:

Background and Purpose. The SCO is charged with reuniting owners with their unclaimed property, and utilizes direct mail and public notification methods in order to attempt to locate and notify owners of unclaimed property. Under Section 1531 of the Code of Civil Procedure, the SCO publishes notices in a newspaper of general circulation because it was traditionally the only means of effectively attempting to provide notice to owners. According to the author, however, allowing the SCO to adopt other methods for publishing notice may improve its ability to locate owners of unclaimed property, especially in light of the costs and limitations of printed newspapers in today's internet age. As such, the annual state budget has exempted SCO from the requirement under Section 1531 of the Code of Civil Procedure and instead allows SCO to provide notices of unclaimed property in a manner the SCO thinks is reasonable.

This bill, sponsored by the SCO, makes permanent the flexibility in utilizing other methods of informing owners about possible unclaimed property that has been provided in the annual state budget act for a number of years. In addition, this bill eliminates a requirement that SCO include a specific statement in a notice of unclaimed property.

Analysis Prepared by: Jessica Peters / APPR. / (916) 319-2081

Date of Hearing: March 21, 2017

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 772

Author:(Daly) – As Introduced Ver:February 15, 2017

SUBJECT: UNCLAIMED PROPERTY: PUBLICATION OF NOTICE

KEY ISSUE: should the authority to bypass newspaper publication requirements and publish notices regarding unclaimed property by other means—which has BEEN GRANTED TO THE state CONTROLLER THROUGH THE BUDGET PROCESS since at least 2001-- BE CODIFIED INTO STATUTE?

SYNOPSIS

The State Controller's Office (SCO) is charged with reuniting owners with their unclaimed property, and utilizes direct mail and public notification methods in order to attempt to locate and notify owners of unclaimed property. Under Section 1531 of the Code of Civil Procedure, the SCO publishes notices in a newspaper of general circulation because it was traditionally the only means of effectively attempting to provide notice to owners. According to the author, however, allowing the SCO to adopt other methods for publishing notice may improve its ability to locate owners of unclaimed property, especially in light of the costs and limitations of printed newspapers in today's internet age.

This bill, sponsored by the SCO, seeks to provide that office with greater flexibility in utilizing effective methods of informing owners about possible unclaimed property. The bill allows the SCO to publish a specified notice to owners of unclaimed property in any manner the Controller determines to be reasonable, instead of only in a newspaper of general circulation. The bill is opposed by the California Newspaper Publishers Association (CNPA), who asserts that publishing public notices in a newspaper is still the most effective way of disseminating information to the public and should be preserved in statute. CNPA contends that newspaper publication has the potential to inform unaware individuals about their property by creating a beneficial "stumbling effect" (i.e. when a reader accidentally comes across the public notice by virtue of reading other parts of the newspaper) that can't be duplicated with an electronic notice because online users typically access direct links to articles that will not take them to public notice sections of online publications.

Although this bill would seem to establish unprecedented new authority to the SCO by bypassing newspaper publication requirements, in fact this bill mirrors language that has been incorporated into every SCO budget since at least 2001. In other words, this bill essentially codifies SCO policy that has been approved by the Legislature annually for more than 16 years. During that time, despite having the authority to bypass newspaper publication requirements, the SCO has continued to publish notice about unclaimed property in newspapers while exploring implementation of other methods of providing notice. Should this bill be enacted by the Legislature through the regular policy committee process, the new rule would be codified, and would no longer be subject to inclusion in the SCO’s budget language, via the annual Budget Act.

SUMMARY: Permits the State Controller to publish a specified notice regarding unclaimed property in any manner that the Controller determines to be reasonable, instead of in a newspaper of general circulation. Specifically, this bill:

1. Repeals a mandate that the Controller publish the notice in a newspaper of general circulation which the Controller determines is most likely to give notice to the apparent owner of the unclaimed property.
2. Repeals the requirement that the notice contain a statement that information concerning the amount or description of the property may be obtained by any persons possessing an interest in the property by addressing any inquiry to the Controller, and be entitled “notice to owners of unclaimed property.”
3. Establishes that the Controller may publish the notice in a manner that the Controller determines to be reasonable.
4. Prohibits the Controller, in carrying out this duty, from using any of the following:
   1. Money appropriated for audit programs.
   2. More money than was appropriated by the Legislature for this purpose.
   3. A photograph in a notice.
   4. An elected official’s name in a notice.

EXISTING LAW:

1. Provides that the Legislature intends that property owners be reunited with their property and adopt an expansive notification program that will provide all of the following:
   1. Notification by the state to all owners of unclaimed property.
   2. A more expansive post-escheatment policy that takes action to identify those owners of unclaimed property.
   3. A waiting period of not less than seven years from delivery of property to the state prior to disposal of any unclaimed property deemed to have no commercial value. (Code of Civil Procedure Section 1501.5 (c). All further references are to this code unless otherwise stated.)
2. Requires the Controller to publish a notice in a newspaper of general circulation which the Controller determines is the most likely to give notice to the apparent owner of the property. (Section 1531 (a).)
3. Notwithstanding 2) above, authorizes the State Controller, for the Fiscal Year beginning July 1, 2016, to publish notice in any manner that the Controller determines reasonable, provided that:
   1. The money used for notice is not redirected from funding for auditing activities;
   2. No photograph is used in the publication of notice; and
   3. No elected officials name is used in the publication notice. (Budget Act of 2016, Item 0840-001-0970 (2) (a).)
4. Requires the notice published in the newspaper notice to be entitled “notice to owners of unclaimed property” and to contain a statement that information concerning the amount or description of the property may be obtained by any persons possessing an interest in the property by addressing any inquiry to the Controller. (Section 1531 (b) and (c).)
5. Requires the Controller to mail a notice, containing a statement of potential rights to the property, location and name of the holder, and a statement regarding failure to claim by a stated date, to each person who appears to be entitled to unclaimed property within 165 days after receiving a report of unclaimed property by a holder of that property. (Section 1531 (d) and (e).)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: This bill, sponsored by the State Controller’s Office (SCO), seeks to provide the SCO with greater flexibility in the methods it may use to inform owners about their unclaimed property. Specifically, the bill allows the SCO to publish a specific notice to owners of unclaimed property in any manner the Controller determines to be reasonable, instead of only being allowed to publish the notice in a newspaper of general circulation. According to the author, "The SCO has a limited budget in which to perform the required advertisement for the Unclaimed Property Program, and the permanent flexibility sought by this bill has been granted over the course of numerous budget cycles. The State Controller believes that the public is better served by a statute that clearly lays out how the program operates."

Background of the UPL: The Unclaimed Property Law, enacted in 1958, establishes procedures for the escheat of unclaimed personal property to the state. Once escheated to the state, the property is in state custody in perpetuity, until the owner claims the property. Under the UPL, there are three significant parties: the owner, the holder, and the state. The "owner" is the person with the legal right to own the property. The "holder" is the person or entity who has possession of the property (such as a bank or other money depositary), or a business that has issued a check to an individual or other business, or a company that holds the proceeds of a life insurance policy or annuity. Holders of unclaimed property have no ownership interest in the unclaimed property. (Bank of America v. Cory (1985) 164 Cal.App.3d 66, 74.) A holder is simply a trustee of the property until it is reclaimed by its owner. However, while the property is in the custody of the holder, the holder generally has the right to use the funds or property as an asset. Once the property is turned over to the state, the state is entitled to keep any interest earned on the property.

The UPL has dual objectives: (1) to protect unknown owners by locating them and restoring their property to them; and (2) to give the state, rather than the holders of unclaimed property, the benefit of its retention, since experience shows that most abandoned property will never be claimed. (State v. Pacific Far East Line, Inc. (1962) 261 Cal.App.2d 609, 611; Douglas Aircraft Co. v. Cranston (1962) 58 Cal.2d 462, 463.) The state, through the Controller, acts as the protector of the rights of the true owner. (Bank of America v. Cory, supra, at 74.) A person with an interest in escheated property may file a claim to recover the property from the state. (Sections 1540 to 1542.) The Controller maintains a web site (http://www.sco.ca.gov) where members of the public may search a database to discover if the state holds any of their property, and may submit claims to recover the funds or property.

The UPL establishes the procedures which must be followed once property goes unclaimed, generally for a period of three years, and then—as a consequence—escheats to the state. Under existing law, the holder must annually report on unclaimed property and turn the property over to the Controller. (Sections 1530 and 1532.) In turn, the Controller is required to mail a notice to each person who appears to be entitled to the unclaimed property, according to the report filed by a holder, as well as to publish a notice about the property in a newspaper of general circulation. (Sections 1531 and 1531.5.) Since at least 2001, however, the requirement to publish the notice in a newspaper of general circulation has been preempted by language in the SCO's budget, which authorizes the Controller to publish the notice in any manner determined by the SCO to be reasonable.

This bill essentially codifies, in the CCP, Legislative authorization provided to the SCO through the annual Budget Act for over 15 years. Existing law, established through the Budget Act of 2016, allows the SCO to publish notices in a manner the Controller determines to be reasonable. (Budget Act of 2016, 0840-001-0970.) The provisions of this bill mirror the language that has been incorporated in every Budget Act since at least 2001, and thus this bill essentially codifies SCO policy. In addition to seeking increased efficiency in the operations of the SCO, the purpose of codifying this process is to make the policy permanent. This bill will provide a clear articulation of the law and reduce any confusion and ambiguity that exists in current law.

This bill codifies the SCO’s ability to establish alternative methods for publishing public notices relating to unclaimed property. Originally, the policy articulated in this bill was adopted due to fiscal concerns that the SCO’s limited funds would stifle its outreach efforts. For example, according to the SCO, its budget for public notifications in 2016 was approximately $61,000, while historically costing $50,000 to $60,000 in previous years. According to the SCO, its budget only allows the SCO to publish one notice each year, for one day, in 40 California newspapers. This one-time publishing event accounts for the SCO’s entire annual budget for publishing notices, and presents a severe limitation in outreach efforts of the SCO.

Despite already having the ability to explore alternative methods for providing notice of unclaimed property to the public, the SCO has continued to publish notices in newspapers of general circulation. According to the SCO, it has continued to do so and may continue to do so in the future, if such notice is determined to be reasonable. It is apparent that the SCO has determined, despite the discretion to use other methods that was previously granted to the SCO, that newspaper publications remains an effective method of providing notification of unclaimed property to the public. Nevertheless, newspaper publication may not be the only effective potential method of public notification. Under this bill, the SCO would have the flexibility to implement other methods of publishing public notices and explore new options for providing notice to the public which may be more effective or efficient.

This bill seeks to provide the SCO with greater flexibility to utilize methods of informing owners about possible unclaimed property other than newspaper publication. According to the SCO, the need for flexibility in publishing notifications is a response to the statutory limitation requiring publication in newspapers. The SCO would like to expand outreach efforts with innovative, and potentially more effective, methods to provide notice. Since the emergence of the internet and other electronic means of communication and information sharing, newspaper publication is not the only method of communication with the general public. Indeed, newspapers are of similar opinion, as shown through their adoption of other methods of providing access to their content, including online platforms, an increasingly popular medium for dissemination of the news.

This bill would allow the SCO to adopt similar methods to notify the public about unclaimed property. These methods may be necessary to address the growing inventory of unclaimed property under the control of the SCO. According to the SCO, it has more than 32 million items of property—worth more than $8 billion—that remain unclaimed by their owners. Proponents contend that alternative outreach methods should therefore be used to increase the likelihood that owners will claim their property.

Arguments of opposition. Publishing notices in newspapers has benefits that are relatively well-established, as opposed to new untested methods that may not be tested. The California Newspaper Publishers Association (CNPA) asserts that publishing public notifications in a newspaper is a well-established tradition in the community, and as such, is a known source of public notices, which also have the benefit of being well-archived. Newspapers have traditionally been the best source for disseminating information to the general public, which is the reason they have been used as the main means of providing notice. Additionally, CNPA contends that publishing notices in a newspaper informs individuals who may not be seeking information by creating a ‘stumbling effect,’ where the reader accidentally comes across the public notice by virtue of reading other parts of the newspaper. This effect may be bypassed using electronic sources, because online users often access direct links to articles that do not take them to public notice sections of the online publication.

CNPA also argues that publishing notices in the newspaper promotes the goal of making the government accountable to the public at large, regarding its assumption of the right to hold property of an individual. CNPA asserts that requiring the government to publish notices through an independent entity protects against the government’s potentially arbitrary and clandestine exercise of its power.

Conclusion. The SCO faces real challenges in attempting to inform the public about escheated property while using cost effective methods to provide notice. There are millions of items of escheated property that remain unclaimed, and the statutory requirement for the SCO to notify owners of such property via newspaper publication may not be as effective as it potentially could be. The flexibility that SCO seeks in this bill for how to fulfill her duty to provide notice to the public about escheated property would codify what the SCO has been able to do for years. In short, as the Legislature has determined in budget trailer language time and again, the Controller would have the authority to determine the best method for notifying the public about escheated property. This bill will codify that principle and clarify that the Controller may use her existing authority to determine the most reasonable method of providing notice about escheated property to the public, including but not limited to notice by newspaper publication.

REGISTERED SUPPORT / OPPOSITION:

Support

State Controller's Office

Opposition

California Newspaper Publishers Association

Analysis Prepared by: Karim Troost and Anthony Lew / JUD. / (916) 319-2334