Delaware Secretary of State’s Unclaimed Property Voluntary Disclosure Program
Companies (also known as “Holders”) with uncertain, incomplete, or non-existent compliance histories with the unclaimed property reporting requirements of the State of Delaware (“State” or “Delaware”), or those who wanted to make sure they wouldn’t be at risk for an audit, have historically considered entering into a voluntary disclosure agreement (“VDA”) with the State. For well over a decade, the State Escheator (“Escheator”) for the Delaware Department of Finance, oversaw the State’s VDA program, requiring the Holder to report and remit property from 1991 forward, the “look-back” period.
On July 11, 2012, a new Delaware Voluntary Self-Disclosure Agreement process was enacted with the passage of Delaware Senate Bill 258, which created an entirely new process overseen by the Delaware Secretary of State (“SOS VDA”). The bill amended Chapter 11, Title 12 of the Delaware Code with the addition of a new Section 1177, providing that Holders who notify the State of their intent to participate in the new SOS VDA program before June 30, 2013, and who complete their VDA, including payment, by June 30, 2014 would receive a reduced look-back period from 1996 to present, a reduction of five years from the terms offered under the Escheator’s VDA program. Holders notifying the State for participation in the SOS VDA program after June 30, 2014, and who completed it, including payment, by June 30, 2015, would receive a reduced look-back period from 1993 to present, representing a two-year reduction from terms offered under the Escheator’s VDA program.
ALERT: New Deadline to Enter and Sunset Date for the SOS VDA Program
Delaware Senate Bill 228 (the “Bill”) was signed into law on July 1, 2014 (the second amendment to the SOS VDA program) with several important benefits to Holders with unclaimed property reportable to Delaware. The most important provision of the new bill may arguably be the extension of the period that a Holder may submit a Notice of Intent to enter into the SOS VDA program from June 30, 2014 to September 30, 2014. Coupled with this was an extension of the date by which the Holder must make payment in full, or enter into a payment plan with the State, to June 30, 2016 (previously June 30, 2015, with no prior provision for a payment plan). In other words, Holders that may have wanted to enter into the SOS VDA program, but that missed the original deadlines, have a renewed window of opportunity to do so now.
The Bill also provides that the Department of Finance and the Secretary of State must hold confidential any financial information obtained during the course of examinations, settlements or VDAs, reduces the penalty for failing to file an abandoned property report, and eliminates the assessment of interest on outstanding unpaid amounts, a clear benefit to any Holder of unclaimed property due to the State of Delaware, whether under a VDA or audit.
An Important Note Regarding the State Escheator’s VDA Program
Barring another legislative intervention, it is expected that any in-process SOS VDAs not completed by June 30, 2016, could be reassigned to the Escheator. In addition, it is presently expected that companies seeking participation in a Delaware VDA after the new September 30, 2014 deadline will be directed to work with the Escheator under the terms of the prior Program.
Holder’s should also be aware that the Escheator is currently offering a look-back period from 1996 to present on VDAs initiated with the Delaware Department of Finance, though it is uncertain how long this look-back period will be offered and is subject to change. Before making a determination which venue may be preferable, all Holders should seek guidance and give full consideration to the benefits and requirements of each program before deciding which one offers the best fit given the company’s specific and unique facts and circumstances.
About Unclaimed Property…
As discussed in earlier True Alerts and True Updates, unclaimed property is any intangible property that is owed by a company and has gone unclaimed for a specific period of time by the rightful owner. Every company is likely to generate unclaimed property and has a legal responsibility to report and remit that property to the appropriate jurisdiction. If a Holder has the name and address of the owner of the property, it reports the property to the state of the owner’s last known address. If no owner information for unclaimed property in its possession, the property is reportable to the holder’s state of incorporation. Generally, there is no statute of limitations on a Holder’s unclaimed property liability. As a result, the Holder’s state of incorporation may estimate a potential unclaimed property liability using an “error” rate derived through a review of a Holder’s available records for periods where complete records are not available.
True Partners Consulting’s Unclaimed Property Management Solutions Team is comprised of a national group of professionals with diverse backgrounds, including industry and government. Our team has assisted our clients by bringing closure to over a third of the VDAs settled by the Delaware SOS to date and can offer your company the best combination of experience, expertise, and resources to assist your company throughout the Program—regardless of your company’s industry. Moreover, our team can also assist with quantifying and negotiating voluntary disclosures or remittances in jurisdictions other than Delaware for which your company may have unreported unclaimed property exposure.
We encourage you to contact one of our professionals to discuss any questions or concerns that you may have regarding unclaimed property or the current Delaware VDA program.
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Cathleen A. Bucholtz
Robert M. Tucci