GEC C.S.H.B. 2986 75(R) BILL ANALYSIS BUSINESS & INDUSTRY C.S.H.B. 2986 By: Smith 4-23-97 Committee Report (Substituted) BACKGROUND Under current law, governmental subdivisions are responsible for delivering unclaimed personal property to the state; and, as well, are responsible for any financial penalties imposed by the state for failing to report or deliver any such property. PURPOSE This bill will allow cities and counties to retain property that is presumed to be abandoned rather than require that they remit the property to the state. It achieves this purpose by exempting cities and counties from Chapter 74 of the Texas Property Code and creating Chapter 76, which has no provision for escheatment to the State. The newly created Chapter 76 mirrors Chapter 74 nearly verbatim. The notice and reporting procedures under the Requirements Section remain essentially the same, with the exception that holders will not have to file reports with the State. The effective date of the bill is September 1, 1998. The current escheat laws remain in effect until that date, but the bill provides that interest and penalties owed by a city or county to the State under Chapter 74 will not be required to be paid. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS Section 1 Makes Chapter 74 inapplicable to holders of property subject to the newly added Chapter 76 (municipalities and counties). Section 2 Creates Chapter 76. Sec. 76.001 Establishes that this chapter applies exclusively to municipalities and counties that are holders of personal property or mineral interests that are presumed abandoned (doesn't include bank accounts, as in Chapter 74). Sec. 76.002 Any reference to term "treasurer" includes person performing those duties. Sec. 76.101 Sets out requirements for filing a property report with the treasurer for the holder of the property (e.g., city treasurer). No mention is made of any need to file a report with the State. The city or county is required to file a report each year. The property report must include the name of the property owner, description of the property, the date the property became payable, the date of the last transaction with the property owner, applicable deductions, and other necessary information. Individual amounts of less than $50 may be reported in the aggregate. Sec. 76.102 Sets out language for use by holder's treasurer to verify the property report. Sec. 76.103 Requires the city or county to prepare and retain property records. Sec. 76.104 Requires that the property records to be confidential with limited exceptions. Sec. 76.201 Sets out requirement for notice by publication and the contents of the notice and authorizes the sale of advertisements in the publication. Sec. 76.202 Provides exception from notice requirements for property not exceeding $50. Sec. 76.203 Provides that treasurer of holder may provide notice by mail to persons who appear to be entitled to property valued at $50 or more. Sec. 76.204 Publication of notice pursuant to this chapter is notice to a property owner that the property is subject to Chapter 76. Sec. 76.205 Treasurer of the holder may charge costs of notice against the property including publication costs and postage. Sec. 76.301 Requires that a holder who has property on June 30 that is presumed abandoned must deliver the property to the treasurer of the holder on or before November 1, accompanied by property report. Sec. 76.302 Sets out requirements for verification by the treasurer of the holder of the delivery of the property, including that the property is a complete and correct remittance; the existence and location of the listed owners are unknown to the holder; and the listed owners have not asserted a claim or exercised ownership. Sec. 76.303 Requires treasurer of the holder to annually compile a list of owners listed in the property reports and the amount credited to each account Sec. 76.304 Exempts actions under this chapter from limitations periods specified by statute or court order. Sec. 76.401 Treasurer of the holder shall sell at public sale all personal property other than money and marketable securities to the highest bidder. If the treasurer determines that the highest bid is insufficient, the treasurer can decline the bid and offer the property for public or private sale. The treasurer is not required to offer the property for sale if the property belongs to a person with an address outside the state or if the probable costs of the sale exceeds the property's value. If the property has insubstantial commercial value, the treasurer may destroy or otherwise dispose of the property at any time. Sec. 76.402 Sets out requirements for notice of the sale of property to be published at least twenty-one days in advance in a newspaper of general circulation in the county where the sale is to be held. Sec. 76,403 The purchasers of property at a public or private sale are to receive title to the purchased property free from all claims. Sec. 76.501 Claims for property delivered to the treasurer of the holder must be filed with the treasurer in accordance with rules and procedures prescribed by the treasurer. Sec. 76.502 Requires that the treasurer consider the validity of claims filed. Sec. 76.503 The treasurer of the holder may hold a hearing and receive evidence for claims filed. Sec. 76.504 If a claim has been approved, the treasurer shall pay the claim. If the claim is for personal property other than money, the treasurer shall promptly deliver the property to the claimant. If the property has been sold, the treasurer shall pay the claimant the proceeds from the sale. The costs of publication and postage shall be deducted from the amount paid for the claim, but deductions for any costs of administration or service charges may not be made. Sec. 76.505 An appeal of claims denied by the treasurer may be filed before the sixty-first day after the date the decision was rendered. If the claim has not been decided before the ninety-first day after the date the claim was filed, the claimant may appeal within the sixty-day period beginning on the ninety-first day after the day of filing. An appeal must be made by filing suit against the holder in a district court in the county in which the claimed property is located. The holder's immunity from suit is waived with respect to a suit under this section. Sec. 76.506 A person who informs a potential claimant that the claimant may be entitled to property reportable to or in the possession of the treasurer of the holder may not contract or receive from the claimant an amount for services that exceeds ten percent of the value of the property recovered. If the property involved is mineral proceeds, the amount for services may not include a portion of the underlying minerals or any production payment, overriding royalty, etc. Sec. 76.507 Another state may recover property if the property was subject to custody by the holder because the records of the holder did not reflect the last known address of the apparent owner when the property was presumed abandoned and the other state establishes that the last known address of the apparent owner was in that state and under the laws of that state the property escheated to or was subject to a claim of abandonment by that state; or the last known address of the apparent owner or other person entitled to the property, as reflected by the records of the holder, are in the other state and under the laws of that state the property has escheated to or become subject to a claim of abandonment by that state. The claim of another state must be presented in a form prescribed by the treasurer of the holder, who shall decide the claim within ninety days. Sec. 76.508 The treasurer of the holder shall charge a handling fee to a person claiming unclaimed property if ownership is reinstated and the value of the property is $50 or more. Sec. 76.601 The treasurer of the holder shall maintain an unclaimed money fund, which shall consist of all funds, including marketable securities, delivered to the treasurer of the holder; all proceeds from the sale of any property; and income from the investment of the fund. The treasurer shall keep a separate record and accounting for delivered unclaimed property, other than money, before its sale. The treasurer shall invest the amount in the fund in investments approved by law for the investment of funds by the holder. The treasurer may sell securities in the fund and use the proceeds to buy, exchange, invest or reinvest in marketable securities. The treasurer must exercise the judgment and care of a prudent person. The treasurer shall keep a separate record and accounting for securities delivered, sold, purchased or exchanged and the proceeds and earnings from the securities. Sec. 76.602 The treasurer of the holder shall use the unclaimed money fund to pay the claims of persons establishing ownership of property in possession of the treasurer. Each fiscal year after deducting funds sufficient to pay anticipated expenses and claims, the treasurer shall transfer the remainder to the general fund of the holder. The treasurer may use the unclaimed money fund generally for the enforcement and administration of this chapter, including the expenses of forms, notices, examinations, travel, court costs, supplies, equipment, employment of necessary personnel, etc. Sec. 76.603 The fund is subject to being audited by the auditor of the holder and is subject to the budgetary procedures of the holder. Sec. 76.701 The treasurer may adopt rules necessary to carry out this chapter. Sec. 76.702 The treasurer may examine the books and records of the holder at any reasonable time. The treasurer or attorney of the holder may not make public any information obtained by an examination made under this section and may not disclose information except in the course of judicial proceedings authorized under this chapter or under an agreement with another state allowing joint audits or the exchange of information. Sec. 76.703 The treasurer and attorney for the holder are authorized to hire additional staff necessary to enforce this chapter. The salary rate may not exceed the rate paid to other employees of the holder for similar services. Sec. 76.704 An offense is committed if a person wilfully does the following: fails to file a report; refuses to permit examination of records; makes a deduction from or a service charge against a dormant account or dormant deposit of funds; or violates any other provision of this chapter. An offense is punishable by a fine of not less than $500 or more than $1,000; confinement in jail for a term not to exceed six months; or both. In addition to criminal penalties, a person who commits an offense is subject a civil penalty not to exceed $100 for each day of the violation. To collect the penalty the holder's attorney shall bring suit in district court of the county in which the holder is located. Section 3 The act takes effect September 1, 1998. Existing law governs until this date. Section 4 Interest, attorney fees, and penalties owed by cities and counties under Chapter 74 are not required to be paid. COMPARISON OF ORIGINAL TO SUBSTITUTE Under the original bill, only municipalities would have been excused from escheating unclaimed property to the state. Any property that fell under Chapters 72, 73 or 75 of the Property Code was included in this exemption. As well, the original bill included a provision which provided for penalties if a person failed to deliver unclaimed property to the municipal treasurer. The committee substitute to HB 2986 proposes three specific changes. First, both counties and municipalities are included in the bill (as opposed to just municipalities) and both would be excused from escheating property to the state. Secondly, counties and municipalities would only be required to escheat property identified in Chapters 72 or 75 of the code (Chapter 73 is excluded). Lastly, the committee substitute removes all penalty provisions for any individual who fails to deliver unclaimed property to the treasurer.