July 30, 2021

Sent Via Email

The Honorable , Chairman [email protected] Council of the District of Columbia 1350 Pennsylvania Avenue NW, Suite 504 Washington, DC 20004

The Honorable Kenyan R. McDuffie [email protected] Chair Pro Tempore and Ward 5 Council Member Council of the District of Columbia 1350 Pennsylvania Avenue NW, Suite 506 Washington, DC 20004

The Honorable Muriel Bowser, Mayor [email protected] John A. Wilson Building 1350 Pennsylvania Avenue NW, Suite 300 Washington, DC 20004

The Honorable Eleanor Holmes Norton, Delegate, U.S. Congress [email protected] 1300 Pennsylvania Avenue NW, Suite M-1000 Washington, DC 20004

Re: Comments on Washington D.C. Budget Bill 24-0285

Dear Chairman Mendelson, Chair Pro Tempore McDuffie, Mayor Bowser, and Delegate Holmes Norton:

The Unclaimed Property Professionals Organization (“UPPO”) is the national trade association of unclaimed property holders and service providers. We represent over 400 unclaimed property holders and service providers and 1,450 unclaimed property professionals of diverse industries and employer size. UPPO advocates for consumer and compliance friendly unclaimed property laws and regulations.

We write to express our concerns with respect to five provisions of Washington D.C.’s Title VIII, Subsection A of Budget Bill 24-0285. As discussed below, these provisions, as drafted, present confusion, uncertainty, and compliance difficulties. We request your review and reconsideration of the proposed language contained in Title VII, Subsection A of Bill 24-0285:

1. REQUIRED MINIMUM DISTRIBUTION AGE: The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, Public Law 116-94, increased the age after which owners must take required distributions from age 70.5 to age 72, effective January 1, 2020 and applicable to owners who were not yet age 70.5 as of that date. Furthermore, the actual required minimum distribution (“RMD”) date is not the date the owner turns age 72, but April 1 of the following calendar year.

In Section 7006 of the proposed legislation, the RMD age described is 70.5 years of age, consistent with the pre-2020 IRS rules of required distributions. At minimum, this should now be changed to age 72. However, since it is possible that the Internal Revenue Code could be further amended in the future to increase the RMD age again, we recommend language that incorporates the Internal Revenue Code rule, but that does not articulate a specific age, such as, “the date by which distribution is required to be made from the account in order to avoid a tax penalty.”

2. LINKAGE PROVISION: Budget Bill 24-0285 eliminates the “linkage” provisions in section 41-106 of the existing law related to “indication of interest” which protects consumers from the early escheatment of their bank accounts. Section 7014(b) of the proposed legislation would define “an indication of an apparent owner’s interest in property,” which triggers the dormancy period for escheatment, to refer only to various activity in “the account in which the property is held.” Those provisions fail to take into consideration that owners often maintain more than one account at the same or affiliated bank or other financial institutions—such as a checking account and a savings account. When an owner maintains two or more accounts at the same or affiliated holder, activity in any one of those accounts should be treated as an indication of interest in all of the accounts of the same owner at the same or affiliated holder. For example, if an owner maintains a checking account and a savings account, used the checking account on a regular basis but makes neither deposits nor withdrawals from the savings account (the balance of which might be shown on regular statements for the related accounts), it makes no sense to treat the savings account as having been abandoned. The activity in the checking account should be treated as an indication of interest in the savings account.

Current law (section 41-106) recognizes this point by providing that property will not be presumed abandoned if the owner:

(4) owned other property held by the banking or financial organization for which paragraph (1), (2), or (3) of this subsection are applicable; provided, that the banking or financial organization communicates in writing with regard to the property that would otherwise be presumed abandoned under this subsection to the owner at the address to which communications regarding the other property are regularly sent; or

(5) had another relationship with the banking or financial organization concerning which the owner has: (A) communicated in writing with the banking or financial organization; or (B) otherwise indicated an interest as evidenced by a memorandum on file prepared by an employee of the banking or financial organization; provided, that the banking or financial organization communicates in writing with regard to the property that would otherwise be

abandoned under this subsection to the owner at the address to which communications regarding the other relationship are regularly sent.

Accordingly, we would request that this “linkage” language (or similar language) be inserted into the proposed legislation to prevent property from being presumed abandoned if the owner is in communications with the bank or financial institution regarding other accounts or property.

3. PERIODS OF LIMITATION AND REPOSE: Most laws have a statute of limitations (“SOL”) provision—i.e., a running clock that sets a time limit by which a legal proceeding or action must be initiated in order to enforce a law or statute. The Revised Uniform Unclaimed Property Act (“RUUPA”) generally provides that “The administrator may not commence an action or proceeding to enforce this [act] with respect to the reporting, payment, or delivery of property more than five years after the holder filed a non-fraudulent report under Section 401 with the administrator.” Furthermore, in the case of holders that do not file a report, RUUPA provides: “The administrator may not commence an action, proceeding, or examination with respect to a duty of a holder under this [act] more than 10 years after the duty arose.”

Budget Bill 24-0285 generally follows RUUPA but Section 7042(b) inexplicably changes the five- year SOL for holders that file non-fraudulent reports to ten years. At the same time, Section 7042(c) keeps the same ten-year SOL for holders that do not file reports.

We recommend that Section 7042(b) be revised, consistent with RUUPA, to apply a five-year SOL to holders that file a non-fraudulent report under section 7024 with the Administrator. RUUPA expressly included a shorter SOL to encourage holders to file reports. The same rationale applies here. Otherwise, holders will be subject to a ten-year SOL regardless of whether a report is filed, which may discourage compliance.

4. DISPOSAL OF SECURITIES: Section 7044 of the proposed legislation indicates the “Administrator may not sell or otherwise liquidate a security until 60 days after the Administrator receives the security…” Section 7045 references 60 days as well. Liquidation of the security just 60 days after receipt will deprive the owner of all future appreciation with respect to the securities.

We recommend prohibiting the district from liquidating securities until at least three years after the securities were escheated, which is the RUUPA rule. This language guarantees that owners will have at least three years to learn that their securities have been escheated and recover them before they are liquidated. The district is holding the securities as custodian on behalf of the owner and therefore has a duty to act in the owner’s best interest, not the district’s. Indeed, states have been sued by owners for liquidation of their securities on the basis that such liquidations constitute illegal takings or violate the owner’s due process rights, particularly if the state did not adequately warn the owner that the securities may be liquidated. Such lawsuits have resulted in substantial settlement payments by states to owners. The three-year bar on liquidation does not eliminate these potential owner claims, but it does attempt to reduce the risk of such claims by guaranteeing the owner a minimum amount of time to recover his or her securities. By contrast, a 60-day waiting

period is almost certainly insufficient to safeguard the owner’s rights and thus is constitutionally deficient.

5. TRANSITIONAL PROVISION: The transition provision described in Section 7092 of the proposed legislation imposes retroactive escheatment requirements that raise serious practical and due process concerns. This provision would require that the initial report filed under the proposed law include property that is not required to be reported under current law but would be required to be reported under the new law. The scope of such property that must be reported under this provision would be property presumed abandoned 10 years preceding the effective date. Because the abandonment period is typically three years, this generally would require escheat of property that is 13 years old. This raises serious practical and legal problems. First, many businesses simply would not have records of transactions dating back 13 years. Accordingly, as a practical matter, it may be impossible for a business to comply with this transitional provision. Second, the statute of limitations on the owner’s right to claim the property would have long since expired for most property types. The District of Columbia, which stands in the shoes of the absent owner, cannot escheat property where the owner’s rights have lapsed. Third, a 13-year retroactivity period substantially disrupts the settled expectations of the parties regarding the property in question, thus raising additional due process concerns.

Thank you for your time in reviewing our concerns and for your reconsideration of the provisions described above. We welcome the opportunity to meet with your team to discuss these concerns. Please contact me at [email protected] or 763-253-4344 with any questions or to schedule a meeting.

Respectfully,

Toni J. Nuernberg, CAE, CBF, CGA Executive Director

Cc: Interim Chief Financial Officer Dr. Fitzroy Lee Email: [email protected]

At-Large Council members Robert C. White, Jr. Email: [email protected] Email: [email protected]

Elissa Silverman Christina Henderson Email: [email protected] Email: [email protected]

Council Members Ward 1 Ward 6 Brianne K. Nadeau Charles Allen Email: [email protected] Email: [email protected]

Ward 2 Ward 7 Brooke Pinto Vincent Gray Email: [email protected] Email: [email protected]

Ward 3 Ward 8 , Sr. Email: [email protected] Email: [email protected]

Ward 4 Email: [email protected]

UPPO Board of Directors UPPO Government Relations and Advocacy Committee