Best Practices & Preparation Tips for Unclaimed Property Reporting

1. Best Practices & Preparation Tips for Unclaimed Property Reporting Pamela Wentz, Director

2. Agenda • Unclaimed Property Reporting Overview • Holder Duties • Common Reporting Errors • Requirements for Royalties • Best Practices • 1099 Reporting • Questions & Answers CONFIDENTIAL

3. Unclaimed Property 101 • Definition– Financial assets that have had no owner-generated contact after a specified period of time, usually 3-5 years • Roots are in English common law: • Escheat vs. Custodial • Governed and enforced at the state level • Fifty-four (54) reporting jurisdictions including, DC, Puerto Rico, Guam and U.S. Virgin Islands: • No two laws are exactly the same CONFIDENTIAL

4. Rules of Jurisdiction • Texas v. New Jersey 379 U.S. 674 (1965) • State of owner’s last known address • State of holder’s incorporation or domicile if address not known • *State of holder’s incorporation or domicile if address of apparent owner is in a foreign country and if holder is incorporated or domiciled in the U.S. *Provision added in the 1981 Uniform Act Note – after nearly 40 years this remains the law of the land today CONFIDENTIAL

5. Filing a Report Why Should You Care? • It’s the law! • Generally no statute of limitation • Historically an area that has been overlooked • States estimate 70-90% general ledger out of compliance • Increasing audit activity • Potential for significant penalties • Reputational risk • Sarbanes-Oxley Section 302 & 404 CONFIDENTIAL

6. Know the States, Know the Dates CONFIDENTIAL

7. Identifying Applicable Property Types • Un-cashed checks • Deposits • Customer credits • Refunds • Unapplied payments • Dormant accounts • Payroll • Accounts receivable • Accounts payable • Retirement assets • Workers’ Comp CONFIDENTIAL • Mineral proceeds/royalties • Bonus • Delay rentals • Matured bonds • Un-exchanged shares • Unpaid dividends • Underlying stock • Other general ledger items • Tangible property - Safekeeping • Commissions • Rebates • Unidentified cash/credits

8. Quantify the Potential Liability • Identify periods where detailed records are available • Review records and schedule items that are potential unclaimed property • Research items to determine if they represent a fixed and certain obligation • Identify royalties in escheat status • Review suspense accounts for aged items that might not be designated as escheatable CONFIDENTIAL

9. Dormancy Decisions • Date of last activity/contact • Production date • Issue date • Date returned from Post Office (RPO) CONFIDENTIAL

10. Reporting Owner Information • Complete name and last known address • Social Security Number, if known • Account number • Amount • Property type • Description of property • Joint ownership or custodial information CONFIDENTIAL

11. Filing a Report Know the filing requirements by state • Are you required to file electronically? • Is a cover letter required? • Must the cover letter be notarized? • How should the funds/shares be delivered? • Can you upload via the state Web site? Is there a cost? • Do you need to send a paper copy of the report? • Who in your company must sign the report? CEO? CFO? • Does the state require a negative report if there is no reportable unclaimed property this year? 20 CONFIDENTIAL

12. Holder Responsibilities • Duty to file a timely report • Duty to perform due diligence timely • Duty to file in state mandated format • Duty to maintain copies of the reports and supporting documentation • Duty to protect the funds until reported and transferred to the state CONFIDENTIAL

13. Holder Responsibilities It is imperative for holders to ensure they are not • Under reporting • Over reporting • Failing to report entirely CONFIDENTIAL

14. Holder Responsibilities • Holder is required to report and remit every applicable property type generated by the organization and adhere to the unclaimed property laws and requirements for the appropriate reporting jurisdictions. • Unless otherwise identified by contract, the legal obligation to file the report remains with the holder. • If a holder fails to reunite the dormant asset with the owner, heir or beneficiary, the holder is required to file an unclaimed property report with complete details of all reportable property. CONFIDENTIAL

15. Common Problems Organizations Face When Filing Reports • Making incorrect dormancy decisions • Formatting names incorrectly • Using incorrect property codes • Failing to submit complete owner information • Placing data in incorrect fields • Creating multiple payments for a single report • Sending reports without payments • Sending payments without reports • Aggregating property incorrectly • Failing to identify joint owners • Reporting only to the state of incorporation CONFIDENTIAL

16. 1995 Uniform Act • Section 1(8) defines “mineral” • Section 1(9) defines “mineral proceeds” • Section 25(c) prohibits finders from claiming a portion of the underlying minerals or mineral proceeds not yet abandoned • Section 2(b) – current balance rule CONFIDENTIAL

17. Organizational Structure • Identifying which entities have the legal obligation or are the holders of the unclaimed property • Partnerships and joint ventures CONFIDENTIAL

18. Suspense Accounts • Aging items held in suspense • Date of last contact v. production date • Classifications • Unsigned division orders • Title disputes • Deceased Owner • Bad Address • Miscellaneous CONFIDENTIAL

19. Current Pay • Definition of current pay • Discussion of “rollup” concept • Discussion of “pay to current” • Current pay states • New Texas rules CONFIDENTIAL

20. Current Pay? At the time that an interest is presumed abandoned under subsection 1, any other property right accrued or accruing to the owner as a result of the interest, and not previously presumed abandoned, is also presumed abandoned. CONFIDENTIAL

21. Forced Pooling • Oklahoma • Applies to mineral owners whose mineral interest was forced pooled on a well located in Oklahoma • Within year of pooling, the Holder must report and remit funds to Oklahoma Corporation Commission • Funds are transferred to the Unclaimed Property Division after the dormancy period has passed CONFIDENTIAL

22. Texas – Mineral Proceeds • Do not aggregate • Do not include owners with a net negative balance • Do not report owners if you have had contact in the last three years • Current pay • Each owner listed once – combined total • Report continuing production payments with property type code MI10 CONFIDENTIAL

23. Best Practices – Create a Timeline Fall Begins in Spring • May/June – File delivery • July – Due diligence • August/September – Process due diligence returns • September – Prepare preliminary reports and confirm totals • October – Prepare final reports and transfer assets 15 CONFIDENTIAL

24. Best Practices - Gather Relevant Data • Corporate Structure • Owner unknown property to the state of formation • General Ledger / Chart of Accounts • Bank Reconciliations / Outstanding Check Lists • Journal Entries • Accounts Receivable & Payable Aging Reports • De-Minimis / Automatic system write-offs • Contracts w/applicable service providers CONFIDENTIAL

25. Best Practices – Review Suspense • Review suspense codes • Which codes quality for escheat? • Does status need to be changed to escheat? • Are codes used properly? • Are any codes problematic? • Review aged items • Pull a report by production date • Minimum Suspense • Identify amounts not released CONFIDENTIAL

26. Best Practices - Perform a Self Review • Analyze corporate structure • Understand and document the current and historical policies and procedures • Document and review historical unclaimed property reporting history • Identify potential types of unclaimed property your company may generate • Quantify the potential liability for each property type • Research items to verify that they are unclaimed and pay owner where possible CONFIDENTIAL

27. Best Practices – Stay Current • Be aware of legislative changes that impact your industry • Participate in industry associations that represent your interests • Review state filing instructions annually • Update your policies and procedures • Include new lines of business in procedures and reporting • Include unclaimed property compliance in due diligence of acquisitions CONFIDENTIAL

28. Best Practices – 1099s PROCESSING IRS NOTICE CP-2100A FOR MISSING OR INCORRECT NAME/TINS • CP-2100A received from IRS • Review accounts to determine if resolution is possible • Prepare and mail 1st “B” Notices with W-9 to owners, when applicable • Prepare 2nd “B” Notices for owners previously placed on backup withholding due to prior notification • Owners accounts noted in computer system as to type of notice issued • Update accounts as owners provide documentation to correct discrepancies • After applicable waiting period for 1st “B” Notices, unresolved accounts are placed on backup withholding CONFIDENTIAL

29. Best Practices – 1099s PROCESSING IRS PENALTY NOTICE • Penalty Notice 972CG received from IRS • Review accounts to determine if accounts have been resolved • Issue 2nd “B” Notices to owners previously placed on backup withholding • Owner’s accounts noted that 2nd “B” Notice has been issued • Correct any accounts for which a SSN printout or IRS Letter 147C is received • Corporate office drafts letter to IRS to request waiver of proposed penalties CONFIDENTIAL

30. Best Practices – 1099s MONTHLY TIN MATCHING TO REDUCE IRS PENALTY EXPOSURE • IT department provides listing of owners who received a payment during current month • Upload file to IRS website for processing • IRS returns file indicating the accounts with TIN/Name discrepancies • Review the list to determine if any accounts can be resolved immediately • Contact owners whose TIN discrepancy remains unresolved to request W-9 or name verification • Update accounts as owners provide documentation to correct discrepancies CONFIDENTIAL

31. Best Practices – 1099s ANNUAL TIN MATCHING TO REDUCED IRS PENALTY EXPOSURE • IT department provides listing of owners who will receive Form 1099-Misc. • Upload file to IRS website for processing • IRS returns file indicating the accounts with TIN/Name discrepancies • Review the list to determine if any accounts can be resolved immediately • Contact owners whose TIN discrepancy remains unresolved to request W-9 or name verification • Update accounts as owners provide documentation to correct discrepancies • Issue corrected Form 1099-Misc. to owners who provide updated TIN information CONFIDENTIAL

32. Question and Answers CONFIDENTIAL

33. Contact Information Pamela Wentz Director pwentz@KeaneUP.com 701-222-0134 CONFIDENTIAL