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Auditor warns against change to unclaimed-property rules for nonprofits; committee approves amended bill
Summary
Senate Bill 283 (as amended) would shorten the time nonprofits must hold certain unclaimed property before reporting it and create a two-step return process; the auditor’s office opposed parts of the amendment that could transfer ownership absent judicial process, but the committee approved the amended bill after debate and technical fixes.
Senate Bill 283, amended in committee, revises procedures for unclaimed property held by nonprofit organizations. The sponsor and proponents said the change would give nonprofits a way to resolve longstanding unclaimed-account balances (for example, initiation deposits or membership fees) that can stretch back decades and for which nonprofits have difficulty locating owners.
Steve Lutz (Hot Springs Village) described an example: membership initiation deposits from the mid-1990s for which the nonprofit has been unable to locate owners. Under the amendment adopted in committee, nonprofits with less than $5 million in revenue would have one year to attempt to locate the apparent owner; if unsuccessful, they would remit the property to the state auditor’s unclaimed-property administrator, who would have two years to locate the owner. If the auditor’s office still could not find the owner, the amendment provided a mechanism (as drafted) to transfer the unclaimed property back to the nonprofit.
TJ Fowler, legal counsel for the Auditor of State, strongly objected to the ownership-reversion language. Fowler said Arkansas’s unclaimed-property program exists to protect private property rights and that current law treats abandonment and dormancy by property type rather than by holder status. He warned that the amendment would be the shortest dormancy period in the nation and could change the foundational definition of abandoned property. Fowler said the proposed reversion — returning property to the nonprofit if the auditor fails to find the owner within two years — would risk creating a legal claim against the state and could deprive rightful owners of property without judicial notice or due process.
Committee debate focused on balancing the nonprofits’ administrative burden with owners’ property rights. Senator Tucker and other members pressed for assurance that property would remain available for rightful claimants and would not be treated as nonprofit property without due process. Fowler and others explained that the auditor’s office uses robust tracing tools and has a Cold Case initiative to find older owners; the office also processes tens of thousands of claims and pays millions of dollars annually to rightful owners.
After discussion, the committee approved the amended bill by voice vote but asked that statutory language be clarified to avoid constitutional and property-law issues identified by the auditor’s office. The sponsor and auditor agreed to further technical edits to ensure the measure preserves owners’ rights while addressing nonprofit record burdens.
