The State of Delaware Enacts Sweeping Reforms to its Unclaimed Property Program

 
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Authored by: Cathleen Bucholtz, Jim Sadik and Robert Tucci

Changes to the Delaware Statutes
Delaware Senate Bill 141 (the “Bill”) was signed by Governor Jack Markell on July 23, 2015, and included some of the most sweeping changes to Delaware’s unclaimed property program ever proposed by the state’s legislature with an immediate effective date.

What This Means to You
The changes brought about by this legislation represent some of the most significant reforms to Delaware’s unclaimed property program ever enacted. Its provisions, including making the Secretary of State’s Voluntary Disclosure (“VDA”) Program (“VDA Program”) permanent, coupled with the shortening of the look-back periods on VDAs and audits, represent a clear shift forward by Delaware to create a more holder-friendly environment in the State.

Legislation Highlights
Included among the significant changes to Delaware’s unclaimed property audit and enforcement programs are the following:

  • Unclaimed Property Audits. As a result of the Bill’s enactment, the Delaware Division of Revenue no longer has the authority to unilaterally select holders for audits. Effective July 23, 2015, only those companies which received an express written invitation to enter the VDA Program and voluntarily report their unclaimed property liability to Delaware–and decline to participate–will be subject to audit by the Division of Revenue. The new statute specifically provides that if a company does not enter the VDA Program within 60 days after receiving the invitation to participate by the Secretary of State, that company will be referred to the State Escheator for an examination.
  • Secretary of State Voluntary Disclosure Program. While the VDA Program was scheduled to sunset in 2016, the Bill makes the VDA Program a permanent option for holders. However, the Bill excludes: any holder currently participating in the program; those that have already participated in the program, but withdrew before completing the VDA; as well as holders who were removed for failing to work in good faith to complete their VDA.
  • VDA Lookback Periods.
    • Companies that entered the VDA Program on or before September 30, 2014, and make full payment to, or enter into a payment plan with, the state before June 30 2016, will have a look-back period of January 1, 1996.
    • Companies that enter the VDA Program between October 1, 2014, and December 31, 2016, will also have a look-back period to January 1, 1996.
    • Companies that enter into the VDA Program after January 1, 2017, will have a look-back period to January 1 of the year 19 years prior to the year in which the holder enters into the VDA program.
  • Lookback Period for Companies Currently Under Audit.
    • Audits initiated prior to July 1, 2015, will have the look-back period shortened to January 1, 1986 (previous look-back period was January 1, 1981).
    • Audits initiated between July 1, 2015, and December 31, 2016, will have a look-back period to January 1, 1991.
    • Audits beginning after January 1, 2017, will have a look-back period to January 1 of the year 22 years prior to the calendar year in which the holder received an audit notice, three years longer than the corresponding look-back period for a holder initiating a VDA.
  • Reinstatement of Interest on Audit Assessments. 
    The Bill reinstates a provision that allows Delaware to assess interest for unclaimed property that is not reported timely after March 1, 2016. The interest rate will be calculated at 0.5% per month and will be capped at 25% of the total value of the property that was not reported timely.
    • Companies Currently Under Audit - It is unclear at this time how this interest provision will be applied to existing audits that are not completed by March 1, 2016; however, the Bill provides discretion to the State Escheator to waive the application of interest and penalty if the failure to report timely is due to a “reasonable cause” and not “willful neglect”. Note that companies currently under audit may have an argument that the Bill’s interest provision appears to be prospective only and should not apply to existing audits even if property is discovered that was not reported timely.

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Our Expertise

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 can offer your company the best combination of experience, expertise and resources to assist you, regardless of industry. We encourage you to contact one of our professionals to discuss any questions or concerns you may have regarding unclaimed property. 

Greg Majors
Director of Business Development South/Southwest
813.434.4021
Greg.Majors@TPCtax.com

Kristin Mauer
Director of Business Development Northwest
408.625.5069
Kristin.Mauer@TPCtax.com
 

John Shipley
Director of Business Development Northeast
646.356.7214
John.Shipley@TPCtax.com

 
 

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