If you’ve never filed a Holder Notice Report in California or just received a letter from the State Controller’s Office, there’s a limited-time way to protect your business: the Voluntary Compliance Program (VCP).
This program is a lifeline for startups and founders who want to fix past non-compliance related to unclaimed property without facing harsh penalties. But time is key once an audit starts, you lose your chance.
This blog explains how VCP works, why it’s essential , and what you should do now.
What Is the California VCP?
The Voluntary Compliance Program lets businesses voluntarily report past-due unclaimed property before an audit and avoid California’s 12% annual interest penalty under CCP §1577.
Who Should Apply?
- Startups that never filed a Holder Notice Report
- Delaware C-Corps with California operations
- Companies with uncashed checks, stock payouts, or payroll liabilities
- Founders planning exits, fundraising, or M&A
Real Example
Scenario:
A startup preparing for acquisition finds $18,000 in uncashed vendor checks and payroll from 2021–2023. They apply for VCP, file past-due reports, and avoid thousands in penalties closing their deal without delay.
Benefits of VCP
- No penalties or interest
- Avoid triggering a state audit
- Build clean records for IPO, M&A, or fundraising
- Can be done quietly before red flags arise
Step-by-Step: VCP Process
- Confirm Eligibility
You must:- Not be under audit now
- Not have been audited in last 5 years
- Have actual unreported property
- Apply via SCO Portal
Submit your VCP request and intent to comply. - Complete Mandatory Training
The State Controller requires training to proceed. - File Past-Due Holder Report (UFS-1)
Report all property presumed abandoned. - Submit Remit Report (UFS-2)
After waiting period ends, remit the funds.
Key Forms & Resources
| Form | Purpose |
|---|---|
| UFS-1 | Holder Notice Report |
| UFS-2 | Remit Report |
| SCO-88 | Negative Report (if no property) |
| CA Holder Portal | File online |
Conclusion: Fix the Past. Avoid the Penalties.
The California VCP is a golden opportunity but only if you act before the state knocks. With more audits , this is your chance to get right, stay clean, and move forward especially if your business is scaling, exiting, or raising capital.
Talk to a Startup Tax Expert
Anshul Goyal, CPA EA FCA is a U.S. licensed Certified Public Accountant, Enrolled Agent authorized before the IRS, and startup tax advisor with deep experience handling unclaimed property cases, VCP filings, and California compliance.
Disclaimer
This blog is for educational purposes only and is not tax or legal advice. Always consult a qualified CPA or attorney before making compliance decisions. Information is current as of 2025.
FAQs: California VCP
- What’s the deadline to apply?
There is no fixed deadline, but you must apply before you receive an audit letter. - Will I owe any penalties?
No, if accepted into VCP, California waives 12% annual interest and penalties. - What if I have no unclaimed property?
File a negative report (SCO-88) to maintain compliance. - Does this apply to DE startups in CA?
Yes. If you operate in California, you’re subject to its unclaimed property rules. - Can I re-apply later?
No. VCP is one-time only per entity.
About Our CPA
Anshul Goyal, CPA EA FCA is a U.S.-licensed CPA, IRS Enrolled Agent, and Fellow Chartered Accountant. He supports startups, cross-border businesses, and venture-backed founders with IRS, FTB, and unclaimed property compliance across jurisdictions.