INSIGHT

California’s Unclaimed Property Voluntary Compliance Push: What You Need to Know Before Year-End 

Jen Coyne, Sue P. Leighton • December 11, 2025

Services: State and Local Taxes

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If your business has significant California operations, maintained a presence in the state over the past decade, or acquired a California-based company, you may soon receive a letter from the California State Controller’s Office (SCO) that demands immediate attention.  

Starting in mid-to-late November 2025, the SCO will begin mailing outreach letters to approximately 4,000 businesses identified as potentially holding unreported unclaimed property—and this represents just the first wave of a multi-year compliance initiative extending throughout 2026. 

What You Need to Know 

California is launching an aggressive outreach campaign targeting businesses with potential unreported unclaimed property. The state’s Voluntary Compliance Program (VCP) offers a complete waiver of interest (which accrues at 12% annually) for businesses that proactively address past compliance gaps.  

While the program requires substantial effort—including a 10-year records review, mandatory training, and due diligence—the financial benefits can be significant, often eliminating six or seven-figure interest liabilities. Businesses should also remember that they may have unclaimed property due to them from the state, which could help offset compliance costs.  

Organizations with California operations, especially those with inconsistent filing histories or recent acquisitions, should assess their exposure now, whether or not they receive an outreach letter. 

Understanding the Financial Stakes and Opportunities 

This isn’t a typical regulatory notice you can file away. For many businesses, the financial stakes are substantial, with potential interest liabilities reaching six or seven figures. But California’s Voluntary Compliance Program offers a strategic path forward that can eliminate these exposures entirely while bringing your organization into full compliance with state unclaimed property laws. 

It’s also worth noting that while you may owe unclaimed property to California, your business may simultaneously have unclaimed property held by the state that belongs to you. Conducting a search for unclaimed property due to your organization could help offset some of the costs associated with achieving compliance. 

Understanding California’s Heightened Focus on Unclaimed Property 

California has steadily increased its enforcement posture around unclaimed property reporting over the past several years. Since 2021, the state has required businesses to answer specific questions about unclaimed property filings directly on their California income tax returns (Forms 100, 100W, and others). These questions ask whether your business has filed unclaimed property reports and how much property was remitted. 

The SCO now has direct access to this tax return information, creating a powerful data-matching capability to identify businesses that may have reporting obligations but haven’t filed. This November mailing represents the SCO’s most aggressive outreach effort to date, targeting the largest potential holders first before expanding to additional business segments in subsequent waves. 

The Financial Case for Voluntary Compliance 

California law imposes interest on unreported unclaimed property at 12 percent per year—a rate that can quickly transform a manageable compliance gap into a significant financial liability. For a business with $500,000 in unreported property dating back five years, the accumulated interest alone could exceed $300,000. 

The Voluntary Compliance Program was specifically designed to incentivize businesses to come forward proactively. Holders who successfully complete the VCP receive a full waiver of all accrued interest on past-due property. This single benefit can eliminate years of accumulated liability, making the program one of the most valuable compliance opportunities available to California businesses. 

Who Should Be Paying Attention 

While the SCO’s outreach targets businesses across various industries and sizes, certain organizations face higher risk profiles: 

• California-domiciled businesses that may have accumulated reportable property over multiple years without establishing formal compliance processes 
• Companies with substantial California operations that maintain payroll, vendor relationships, or customer accounts in the state 
• Businesses that acquired California-based entities within the past 10 years, potentially inheriting unclaimed property obligations along with assets 
• Organizations with inconsistent filing histories or those that have never filed California unclaimed property reports despite having state nexus 

If your business falls into any of these categories, now is the time to conduct a proactive review—whether or not you receive an SCO outreach letter. 

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Navigating the VCP Process: Key Requirements and Timelines 

The California VCP follows a structured process with specific deadlines and obligations. Understanding these requirements upfront will help you assess whether the program makes sense for your organization. 

Eligibility Criteria 

Before applying, confirm your business meets the basic eligibility requirements. You cannot participate in the VCP if your organization: 

• Is currently under SCO audit or has received notice of an impending audit 
• Is subject to civil or criminal prosecution related to unclaimed property compliance 
• Has received an interest assessment within the past five years that remains unpaid
• Has previously participated in the VCP and received an interest waiver within the past five years 

One important exception: businesses seeking to resolve unclaimed property liabilities related to a recent acquisition or merger may still qualify for the program under certain circumstances, even if they’ve previously participated. 

The VCP Timeline 

Once your application is approved, California requires strict adherence to program deadlines: 

1. Complete Mandatory Training: All participating staff must complete the SCO’s two-hour online training session, which covers California’s unclaimed property requirements and reporting obligations. 

2. Conduct a Comprehensive Records Review: Your business must examine its books and records for at least the past 10 years to identify any unclaimed property. This lookback period means you’ll need to gather and analyze a substantial volume of historical data. 

3. Perform Due Diligence: If you identify unclaimed property, you must send due diligence notices to the property owners, giving them the opportunity to reclaim their assets before the state takes custody. 

4. File Your Notice Report: After allowing at least 30 days for owner responses, submit a “notice” report to the SCO listing all unresolved property. Importantly, no remittance is required at this stage. 

5. File Your Remit Report: Between seven and seven-and-a-half months after submitting your notice report, you must file your final “remit” report and transfer the identified property to the state. 

Strategic Considerations: Beyond Immediate Compliance 

While the interest waiver represents the most tangible benefit of California’s VCP, participating in the program offers broader strategic advantages that shouldn’t be overlooked. 

Building Sustainable Compliance Infrastructure 

Successfully completing the VCP requires developing robust processes for identifying, tracking, and reporting unclaimed property. These systems don’t just satisfy California’s requirements—they create a foundation for managing unclaimed property obligations in the dozens of other states where your business may have reporting responsibilities. Many organizations discover that the investment in VCP compliance pays dividends by preventing future non-compliance issues across multiple jurisdictions. 

Managing Audit Risk Proactively 

The SCO retains audit authority even after VCP completion, and any property discovered during a subsequent audit that wasn’t disclosed through the program may still be subject to interest and penalties. This reality underscores the importance of conducting a thorough, accurate records review during your VCP participation. A half-hearted compliance effort can actually increase your risk rather than reduce it. 

Protecting Transaction Value 

For businesses contemplating mergers, acquisitions, or other strategic transactions, unaddressed unclaimed property liabilities can emerge as unexpected complications during due diligence. Buyers increasingly scrutinize unclaimed property compliance as part of their risk assessment, and material exposures can affect transaction valuations or deal terms. Resolving California obligations through the VCP can eliminate these concerns before they impact transaction discussions. 

If You Receive an Outreach Letter: Immediate Action Steps 

The arrival of an SCO outreach letter should trigger a prompt, structured response: 

Assess Your Actual Obligations  

Not every business that receives a letter will ultimately have reportable property, but the letter itself signals that California has identified your organization as a potential holder. Conduct an initial assessment to determine whether you’ve maintained the types of accounts, payments, or relationships that typically generate unclaimed property. 

Evaluate VCP Eligibility 

Review your organization’s current status against the eligibility criteria. If you’re already under audit or investigation, the VCP isn’t available, but if you’re eligible, moving quickly can preserve your access to the program’s benefits. 

Consider Your Compliance History Businesses that have never filed California unclaimed property reports or have filed inconsistently should treat the outreach letter as a priority. The combination of potential back-year liability and 12 percent annual interest creates significant exposure that the VCP can resolve. 

Document Your Decision Process 

Whether you decide to participate in the VCP or conclude that your business doesn’t have California reporting obligations, document your analysis and the basis for your determination. This documentation becomes important if the SCO follows up with additional inquiries or initiates an audit in the future. 

The Broader Unclaimed Property Landscape 

While California’s current outreach initiative focuses specifically on VCP enrollment, it’s part of a national trend of states intensifying their unclaimed property enforcement efforts. According to the National Association of Unclaimed Property Administrators, states collectively hold more than $70 billion in unclaimed property, and they’re increasingly sophisticated in their efforts to identify non-compliant holders. 

Many states have established their own voluntary compliance programs, often modeled after California’s approach but with varying benefits and requirements. Additionally, states are collaborating more effectively through information-sharing initiatives and coordinated audit programs. A compliance gap in California may indicate potential issues in other jurisdictions where your business operates. 

Taking Action: Your Next Steps 

Whether your organization receives an SCO outreach letter or not, California’s intensified focus on unclaimed property should prompt a proactive response. Consider these strategic steps: 

1. Conduct a compliance health check to assess your current unclaimed property processes and identify potential gaps 

2. Review your California nexus and operations to determine your level of exposure to state reporting requirements 

3. Evaluate recent acquisitions to understand whether you’ve assumed unclaimed property obligations through business combinations 

4. Assess your readiness to respond quickly if you do receive an outreach letter in the coming months 

The November 2025 outreach represents California’s opening move in what promises to be a sustained, multi-year compliance initiative. Organizations that respond proactively—establishing robust processes, resolving past-year obligations, and positioning themselves for ongoing compliance—will be better positioned to manage both the immediate requirements and the evolving regulatory landscape ahead. 

Get Strategic Guidance on California Unclaimed Property Compliance 

BPM’s State and Local Tax professionals work closely with businesses navigating California’s unclaimed property requirements, from initial compliance assessments through VCP participation and ongoing reporting obligations. We can help you evaluate your exposure, understand your options, and develop a strategic response that protects your organization while taking advantage of available programs and benefits. 

Contact us today to discuss how California’s Voluntary Compliance Program might apply to your business and what steps you should take before year-end to position your organization for successful compliance in 2026 and beyond.