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Unclaimed property laws exist to protect property owners, ensuring the ability to claim what is rightfully theirs. State laws dictate the procedures property holders must take to notify property owners that property of value (uncashed checks, inactive financial accounts, general ledger credits, etc.) is considered dormant and subsequently transfer the property to the state. These laws are especially important for consumers, who may have no knowledge or record of property they legally own.
Because credit managers work closely with accounts receivable and current customer accounts, they have the ability to effectively minimize unclaimed property risk in the credit department or perhaps even company wide, depending on the scope of their position. One significant area of interest to help minimize unclaimed property risk is the business-to-business (B2B) exemption that may be available.
Several states have exempted businesses from these protections under the premise that they don't require the same protection as consumers because they have the resources and knowledge necessary to protect and recover their property from another business. While many states agree on this premise, they differ in their execution of the exemption.
Exemption Basics
As with other unclaimed property rules, not all businessto-business (B2B) exemptions were created equally. States offering the exemption can be grouped into one of four categories:
* Substantial exemption: Kansas, Maryland, Ohio and Virginia offer the most favorable rules, exempting most B2B transactions and property types.
* Partial exemption: Some states provide mostly favorable statutes but may apply some thresholds or property type limitations. These states include Indiana, Iowa, Massachusetts, Michigan, North Carolina and Wisconsin.
* Limited exemption: A few states appear to exempt B2B property but require an ongoing business relationship. In practice, this exemption is actually a deferral. When the relationship ends, the dormancy period begins. States with a limited exemption include Arizona, Missouri, Nevada and Tennessee. The definition of an "ongoing business relationship" differs by state,...