The Arizona Department of Revenue has sent notices to various holders (by letter or email) stating that the department “is launching an early review process for the upcoming annual reporting cycle ending November 1, 2026” and that the holder is requested to “submit a preliminary NAUPA II report file no later than July 4, 2026 (120 days prior to the statutory deadline)” via email. The notice goes on to state that remittance of the funds should not be made until the actual report is filed by the November 1 deadline and that the preliminary report submission does not relieve the holder of its obligation to perform due diligence or satisfy the statutory reporting requirements.
Samples of the letter and email notices are available on the department’s website. FAQs on the website indicate that the department has instituted this process “to ensure a smoother final filing process and faster reunification of assets with their rightful owners.”
The two-step reporting process the department is purportedly seeking to implement is similar to the process set forth in California’s Unclaimed Property Law, which does expressly require holders to submit (but not pay) property in an initial report followed by the filing of a remit report 7 1/2 months later. No other state has adopted a two-step process, including Arizona.
Indeed, Arizona’s unclaimed property law does not contain a provision that would authorize or allow the department to request that holders submit a preliminary report. It provides only a single deadline for reporting and remitting unclaimed property, which is before November 1 (or before May 1 for life insurance companies). The department also has not formally adopted regulations that provide for this process, making the request unenforceable under the Arizona Administrative Procedure Act.
Likely recognizing this, the department’s FAQs indicate that compliance with the preliminary reporting request is strictly voluntary. In particular, the department states this is a “highly encouraged voluntary request for early review.”
Any benefit to holders is unclear, and a holder would be taking on additional burdens and risks in providing the preliminary report to the department by the July 4 deadline. Among other things, the department has requested that the data be emailed, which creates data privacy risk and exposure for holders since reporting data would include personal information.
In addition, holders are currently in the midst of performing other statutory escheatment requirements in Arizona and other states, including mailing due diligence letters, tracking due diligence responses, finalizing and submitting the California remit report, and beginning to prepare for the fall 2026 reporting cycle. To provide preliminary data to Arizona at the department’s request in a matter of weeks would appear to be unreasonable, particularly when the data is highly susceptible to changing between July 4 and November 1.
For these reasons and given the lack of statutory or regulatory authority, holders may validly decline to provide Arizona with the requested preliminary report even after receiving a letter or email from the department (unless the holder has been instructed to pre-submit its report to the state for an audit). There should not be a risk to these holders of incurring any penalties or interest or facing other repercussions from the state. We would encourage the department to formally adopt a preliminary reporting requirement through statutory amendment or administrative rulemaking if it would like to require holders to follow this process going forward.
Please contact us if you have any questions or concerns with this administrative announcement or if you received a letter or email from Arizona.
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