Are there any state requirements that would identify when an account becomes inactive in which the account would then need to be flagged dormant? I have searched through the Unclaimed Property Act and searched on numerous websites to find something in writing with those requirements but keep coming up short.

Here is the pertinent section of the Uniform Unclaimed Property Act. Basically, no activity in the deposit account for 5 years equals escheatable balance.

How the account moves from active to inactive to dormant is generally determined by either your contract, your system, or both.

Some banks want the inactivity period to begin soon in order to charge inactivity fees - they may set their system at 6, 12, or 24 months. Some banks don't make a distinction between inactive & dormant at all. You have a lot of flexibility if you're starting from scratch. If not, check your deposit agreement & compare it to your system settings.