Washington State Looks to Generate Revenue By Selling Others’ Stocks
The Washington State Department of Revenue recently published a proposal to immediately convert securities to cash upon receipt by the DOR. As the proposal indicates, the current law requires DOR to wait at least three years before selling stocks that are reported as unclaimed property. The Department anticipates that it will incur $1.3 million in commissions and fee payments to sell the stocks in connection with this “revenue generating” activity.
Assuming that the stocks are sold at market value, how will this increase revenue (especially in light of the commissions apparently charged by DOR’s stockbrokers)? Well, while unclaimed securities are reported to the custody of the state, the state can’t use those shares as general revenue (you can’t build roads or schools with shares of stock). By selling the stock immediately, the state is hoping to use the money immediately (while paying the sale price — less fees — to the owner).
This is an example of particularly owner-unfriendly regulation. The proposed rule allows the state to immediately sell securities (given the current market, likely at a low price) and forces the holder to pay “administrative costs” to obtain the property. Moreover, it is particularly inconsistent with the state’s role as mere custodian (as opposed to title owner) of the property. While states are (quite understandably) looking to generate more revenue and are aggressively enforcing unclaimed property laws to that end, they should not be changing the rules to the detriment of the rightful owner.