States continue to move away from paper reporting in favor of electronic reporting. First, let me describe the true difference between the two types of filings as I know many holders are confused. Paper reporting means you enter all of your owner detail into forms approved by the state. Electronic reporting means you enter your owner detail on a state website or in reporting software, such as UPExchange, that can generate the NAUPA II format as a TXT or HDE file. Don't get this confused with the cover sheet. No matter which method is used, almost every state still requires a hard copy of the coversheet so they can collect the original signatures that are required.
Some states, such as Tennessee, no longer accept the paper forms even if you have only one record to report. Other states will allow a handful of properties to be reported on paper, but require electronic reporting for larger reports. Virginia, for example, will accept paper forms if you have less than 25 records. Even the states who technically allow you to report small numbers of properties on paper forms would still prefer that you submit them electronically.
Why do the states have a preference? Paper reporting used to be the only method available. This required someone at the holder site to fill out state forms, often using a typewriter! The paper forms would be mailed to the state. When the state received the paper forms, someone on the state's staff would have to manually enter the data from the paper forms into the state's reporting system. As you can see, this is very labor intensive on both ends. It also leaves both sides open to clerical errors such as transposing social security numbers.
With the advent of the NAUPA reporting format, the process has become more streamlined. Holders use software to generate the NAUPA II files. The holders deliver the NAUPA II files to the states. The states load the NAUPA II files into their systems which instantly show them which holder is reporting, all of the owner detail, and the totals for number of records reported, dollar amounts, and shares. This cuts down on the time needed to process each report and the number of errors that can be made.
How is electronic reporting easier? Well, you would have to somehow type the information into the paper forms anyway. Why not type it onto the state website (for those that allow this) or into a software system such as UPExchange and let us generate the NAUPA II file for you? Do you already have your data in an Excel spreadsheet or another type of file? Even better! You can import that data into a software system and then generate the NAUPA II file to submit to the state(s).
I would challenge everyone to give electronic reporting a chance for your next round of state reports. I think you'll find it refreshingly simple.
Hopefully I have you thinking about electronic reporting. I'll address different ways of delivering the NAUPA II file to the states and the security advantages of using the NAUPA II format in my next post.