Assigned to FIN FOR
COMMITTEE
Assigned to FIN FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
unclaimed property; electric cooperatives; credits
Purpose
Allows electric cooperatives to use unclaimed capital credits or fees for purposes specified by their boards of directors.
Background
Statute permits the establishment of electric cooperative nonprofit membership corporations (Cooperatives), which may be organized to provide electricity and related services, as well as to engage in activities designed to promote economic development in rural areas (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).
Cooperatives return their profits to members as capital credits, which may end up abandoned if the Cooperative cannot identify the property's rightful owner. According to a 2016 Private Holder Ruling issued by the Arizona Department of Revenue (DOR), "an electric cooperative is subject to Arizona's unclaimed property laws and may not amend its bylaws to create a private right of escheat" (LR16-006). Under the classification as a dividend, profit, distribution or interest, capital credits are considered abandoned three years after the date of payment and must be given to DOR for custodianship (A.R.S. § 44-302).
There may be a negative fiscal impact to the state General Fund associated with this legislation, due to decreases in deposits to the Unclaimed Property Fund.
Provisions
1. Establishes that an unclaimed capital credit or fee is any patronage capital credit retirement payment or fee payment from a Cooperative to a member that remains unclaimed for two years after the payment was made available to the member or former member.
2. Allows a Cooperative to use all unclaimed capital credits or fees for any lawful purpose that is consistent with the Cooperative's bylaws and authorized by the Cooperative's board of directors.
3. Prohibits an individual, corporation, business association or other organization from diverting personal property to circumvent the unclaimed property process.
4. Requires a Cooperative to maintain a searchable list of unclaimed property dating back to 2002, and to return any unclaimed capital credit or fee to its verifiable owner.
5. Exempts unclaimed capital credits and fees from the Revised Arizona Unclaimed Property Act.
6. Makes technical and conforming changes.
7. Becomes effective on the general effective date.
Prepared by Senate Research
February 5, 2018
FB/AF/lb