State SealARIZONA HOUSE OF REPRESENTATIVES

 

SB 1412: unclaimed property; electric cooperatives; credits

PRIME SPONSOR: Senator Griffin, LD 14

BILL STATUS: House Engrossed

 

Legend: ADOR – Arizona Department of Revenue Cooperative – Electric Cooperative Nonprofit Membership Corporation Amendments – BOLD and Stricken (Committee)

Abstract

Relating to the use of unclaimed capital credits and fees by a Cooperative.

☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal NoteProvisions

1.       Declares a patronage capital credit retirement payment or fee payment from a Cooperative to its member or former member is an unclaimed capital credit or fee if it remains unclaimed two years after the payment was made available. (Sec. 1)

2.       Exempts unclaimed capital credit or fees from the Revised Arizona Unclaimed Property Act. (Sec. 1)

3.       Permits a Cooperative to retain, use or assign all unclaimed capital credits or fees for any lawful purpose if the purpose is:

a.       consistent with the Cooperative's bylaws; and

b.       specified by the Cooperative's Board of Directors. (Sec. 1)

4.       Requires each Cooperative to:

a.       pay a verifiable unclaimed capital credit or fee claim by a member or former member;

b.       maintain a searchable list on its website that contains the name and last known address of each member or former member with $50 or more of unclaimed capital credit or fees; and

c.        include instructions on how to claim the unclaimed capital credit or fee.

                        i.      Specifies the list must include records dating back to January 1, 2002. (Sec. 1)

5.       Prohibits an individual, corporation, business association or other organization from acting through an amendment of articles of incorporation or bylaws, a private agreement, or another other means to:

a.       take or divert monies or personal property into income;

b.       divide monies or personal property among patrons or stockholders that are able to be located;

c.        divert monies or personal property by any other method for the purpose of circumventing the unclaimed property process. (Sec. 2)

6.       Defines patronage capital. (Sec. 1)

7.       Makes technical and conforming changes. (Sec. 2, 3)

Current Law

Cooperative

Cooperatives may be organized for any of the following purposes: 1) supplying, purchasing, marketing, selling, transmitting or distributing electric energy; 2) providing billing, metering, communications and other services related or incidental to supplying, providing or transmitting electric energy; 3) engaging in activities designed to promote economic development in rural areas; and 4) engaging in activities for any lawful purpose (A.R.S. § 10-2052).

A cooperative must be operated on a nonprofit basis for the mutual benefit of its members and patrons (A.R.S. § 10-2067).

Revised Arizona Unclaimed Property Act

Unclaimed property includes intangible personal property such as traveler’s checks, money orders, stocks or other equity interest, principal on debt, demand or savings deposits, customer credits, insurance settlements, property received or held by a court, wages, retirement accounts, and other types of property that are presumed abandoned according to the schedule set out in statute (A.R.S. § 44-302). Property is presumed abandoned, and therefore unclaimed, after it is held for an extended period of time with no owner contact and a “good faith” effort has been made to locate the owner. Abandoned property is transferred to ADOR from holders such as banks, credit unions, corporations, utilities, insurance companies, governmental entities and retailers.

ADOR acts as custodian of the property and administers a program to locate the owners. Once reported to ADOR, unclaimed property is available for refund to the owners or their heirs indefinitely. Businesses and other organizations are required to review their records each year to determine whether they hold any funds, securities or other property that are unclaimed for the statutory abandonment period. Holders file an annual report and transfer the property to the State. The holding period before property is considered unclaimed varies by type of property. If the properties received by ADOR remain unclaimed within a specified period, the properties are sold by ADOR and the proceeds are distributed to various state funds (JLBC 2016 Tax Handbook).

Any dividend, profit, distribution, interest, redemption, payment on principal or other sum is presumed abandoned three years after the payment date (A.R.S. § 44-302).

ADOR is permitted to issue private holder rulings to unclaimed property holders and potential unclaimed property holders on request. (A.R.S. § 44-336).

Additional Information

ADOR issued a Private Holder Ruling LR16-006 stating that an electric cooperative is subject to Arizona's unclaimed property laws and may not amend its bylaws to create a private right of escheat.

 

 

 

 

 

                                                                                                                                                 

 

 

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Fifty-third Legislature                                                                                                                  SB 1412

Second Regular Session                                                                                                               Version 3: House Engrossed

 

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