Unclaimed Property and the Delaware Unclaimed Property Voluntary Disclosure Agreement (VDA) Program 


    This page includes:

    • Limited Time Opportunity for Delaware Businesses and Business Clients
    • Background on Unclaimed Property
    • Background on Delaware Audits
    • Background on the Delaware New VDA
    • Recent Outreach by the DE Secretary of State to Businesses
    • DE State VDA Program Resources
    • AICPA Resources/Webinar on the New Delaware VDA
    • Other Resources on the New Delaware VDA
    • Resources on All States (for searching/claiming and holders reporting) Unclaimed Property Programs 
    • Resources on Unclaimed Property in General

    Limited Time Opportunity for Delaware Businesses and Business Clients

    Companies may have significant unclaimed property exposure in Delaware (DE) because holders of property with an unknown owner address generally must remit such property to the state of incorporation, which often is Delaware (due to Delaware's well established corporate laws, its separate business court, and appealing tax rates).  Since businesses have potential exposure to report all unclaimed, abandoned property back to 1981, the new Delaware voluntary disclosure agreement (VDA) program may offer companies an opportunity to decrease their unclaimed property exposure by limiting their lookback of liability (to 1996, or 1993).

    CPAs in business or with business clients in, or incorporated in, Delaware may want to act quickly and consider advising and evaluating whether any businesses might benefit from applying to this VDA.  Businesses with potential unclaimed property due to Delaware should carefully evaluate their compliance with the Delaware unclaimed property laws and assess their exposure against the potential benefits of the VDA program for their various types of reportable property.  Property holders should exercise caution and perform their own due diligence and possibly seek legal counsel prior to participating in the VDA program.  Applications for the full benefits of the VDA program are due by the June 30, 2013, so this is a time sensitive opportunity for businesses to possibly benefit from this program.
     
    Businesses considering approaching states (such as Delaware) to enter unclaimed property VDAs should consider undertaking their own self-audit prior to approaching the state. The company should:

    • Assess areas of exposure,
    • Review available records (e.g., payroll, accounts receivable, accounts payable, general ledgers, bank statements and reconciliations, equity and transfer agent reports),
    • Evaluate unclaimed property reporting to other states, and
    • Mitigate exposure by identifying applicable exemptions and possibly returning abandoned property to known owners prior to instituting the VDA process.

    This effort will better prepare the business to negotiate the VDA and respond to the state in what may end up seeming like a voluntary unclaimed property audit.

    Businesses should be aware that the process could take a long time because part of the compliance process includes due diligence mailings, which can take a period of months.  While the new VDA periods seem generous, more time may be required to fully complete the process than might be otherwise anticipated.

    Background on Unclaimed Property

    Unclaimed property generally is tangible or intangible property that has gone unclaimed by its rightful owner for a specific period of time (the "dormancy period").  For example, under Delaware law, an uncashed payroll check is deemed unclaimed after its 5-year dormancy period.  A holder of unclaimed property is required to report and remit the unclaimed property to the state of the lost owner's last known address (as shown on the books and records of the holder), and to the state of the holder's incorporation (i.e., Delaware, for entities incorporated there) if the address of the owner is unknown, is in a foreign country, or is in a state that does not provide for the remittance of the property type being reported. 

    There are two categories of unclaimed property that Delaware requires to be reported, "general ledger-type" properties and "investment-type" properties.  5 years is the dormancy period for "general ledger-type" properties (i.e., uncashed checks, rebates, credit balances, overpayments, refunds, unused gift card or pre-paid card balances, layaways and security deposits), and 3 years is the dormancy period for "investment-type" properties (i.e., shares of stock, bonds, and other securities including dividends and interest paid thereon, and any payments or distributions made with respect to such property).

    Background on Delaware Audits

    Under current law, companies domiciled, or with related entities domiciled, in Delaware are required to report and remit unaddressed or foreign-addressed abandoned and unclaimed property annually to the state.  Companies that fail to annually report and remit unclaimed property to Delaware may be subject to interest and penalties (up to a maximum of 125%) for failure to comply with Delaware's abandoned and unclaimed property laws.  Historically, Delaware has enforced its right to collect this property through audits performed by the Delaware Division of Revenue. 

    Because there is no statute of limitations on a company’s legal obligation to report and remit past due unclaimed property, these audits examined the books and records of a company beginning in 1981, and could also have included significant statutory penalties and interest.  Delaware's position has consistently been that the statute of limitations does not bar it from applying a 1981 audit "reach-back" period where unclaimed property reports have not been filed.  In addition, Delaware law specifically allows the state to use estimation techniques for periods where the available records of the holder are insufficient to determine the actual amount of unclaimed property due and owing to the state.  Many businesses are unlikely to have records dating back that far, so such estimation techniques can lead to unreasonably high unclaimed property exposure, especially when applied to numerous years dating as far back as calendar year 1981. 

    Background on the Delaware New VDA

    Delaware (DE) recently enacted (July 11, 2012) a "business friendly" unclaimed property voluntary disclosure agreement (VDA) program.  The Secretary of State is authorized by the recent passage of Senate Bill 258 to resolve claims for abandoned and unclaimed property, provided that holders of such property voluntarily disclose information related to the property within the required timeframes.  The new three-year voluntary disclosure agreement (“VDA”) program for holders of unclaimed property offers a shortened unclaimed property audit look-back periods (to 1996 and 1993) and is being administered by the DE Secretary of State office.  The new VDA program is independent of the prior VDA program (that had look-back periods to 1991) supervised/administered by the State Escheator in the Department of Finance.  Any businesses currently under audit, that have already received an audit notice, or that entered into a VDA with the State Escheator as of June 30, 2012, are not eligible to participate in this new VDA program.

    A business participating in the new VDA program with the Secretary of State will be able to fully resolve all claims for any past due unclaimed property by voluntarily disclosing and remitting property related to transaction years 1996 or 1993 to the present, depending on when the holder enters the program and completes its submission.  This VDA program provides a time sensitive opportunity for businesses to:

    • “Catch-up on their past due unclaimed property obligations,

    • Avoid an audit,

    • Avoid interest and penalties,

    • Significantly reduce their liability, and
    • Obtain a shortened look-back period of company books and records to 1996 - if enrolled by June 30, 2013 and completed (with full payment or entered a payment plan) by June 30, 2015 (according to the Jan. 2013 new law) (or to 1993 - if enrolled before June 30, 2014 and completed by June 30, 2015) (instead of 1991 - if in the prior VDA program, or 1981 - if not in any VDA program). 

    Instead of a multi-year audit, the new VDA program is designed so that companies can receive a full release of all past due unclaimed property liability in nine months.  Companies who successfully participate in the new VDA program receive a release of all past due unclaimed property liability for all prior report years.  In return, companies agree to continue to fulfill their ongoing responsibility to report and remit annually their Delaware abandoned or unclaimed property. 

    The Secretary of State will not conduct audits or investigations of holders, outside of resolving claims brought pursuant to the new VDA program.  In addition, eligible holders, who have submitted written notice of their intent to participate in the new VDA program by June 30, 2014, will have no exposure to audit by the State Escheator until after July 1, 2015.

    To take advantage of the full benefits of the VDA program (i.e., limited "reach-back" period to 1996), interested companies must enroll by June 30, 2013.  All companies enrolling after June 30, 2013, but before June 30, 2014, will be allowed to enroll in the program but will have a longer review period back to 1993.  Companies cannot enroll in the new voluntary compliance program after June 30, 2014.

    To enroll, businesses should go to www.DelawareVDA.com to begin Step One of the compliance program’s process.

    Recent Outreach by the DE Secretary of State to Businesses

    Delaware’s  Secretary of State has engaged in a targeted outreach campaign, sending two sets of letters to more than 500 companies which their databases indicate have a likelihood of noncompliance with Delaware's unclaimed property laws.  In November 2012, Secretary of State Jeffrey Bullock first informed the recipients of these letters that the new VDA Program exists, and that the “door is open” to all companies that wish to register and participate. 

    In mid- January 2013, the Secretary of State sent a follow-up letter to the same group of companies (with the exception of those that had already applied to participate in the new VDA Program) that reinforces the potential risk of not responding to the Secretary's invitation, noting that although the Division of Revenue stopped issuing unclaimed property audit notices in July 2012 (when the new VDA Program law was passed), the Division of Revenue is authorized to re-commence issuance of such audit notices after Feb. 1, 2013. 

    It appears that a new batch of audit notices will likely be sent out by the State Escheator/Division of Revenue in early February 2013, providing an additional incentive for Delaware-incorporated companies that are not currently in full compliance to consider whether the new VDA Program presents an opportunity to come into compliance with the law on a more favorable basis than options that previously were available (and certainly on a more favorable basis than will be the case if the company is selected for audit).

    DE State VDA Program Resources

    DE VDA Program website (includes, how it works, law and guidelines, forms, FAQs, webinar)

    DE Secretary of State abandoned property website

    DE Dept. of Finance - Instructions on searching and claiming abandoned property

    DE Holder Reporting Requirements

    News alert on VDA website

    Senate Bill 258 (Creating a Voluntary Disclosure Program)

    Delaware Code, Title 12, Chapter 11 (Statute governing escheat)

    DE VDA Regulations

    Reporting Forms:

    Notice of Intent (Form VDA-1) (updated 1/24/13)

    Voluntary Self Disclosure Agreement (Form VDA-2)

    VDA Program Contact Information:

    Through the RFP process, the Secretary of State has selected the firm of Drinker Biddle & Reath LLP to administer the Voluntary Disclosure Program.

    Email: VDAAdministratorSOS@delawarevda.com

    Phone:
    855-232-3898 (within U.S.)
    302-467-4298 (toll outside of U.S.)

    Regular Mail:
    Secretary of State, State of Delaware
    Delaware Voluntary Disclosure Program
    c/o Peg Broadwater
    PO Box 26166
    Wilmington, DE 19899-6166

    Express Mail:
    Secretary of State, State of Delaware
    Delaware Voluntary Disclosure Program
    c/o Peg Broadwater
    1100 North Market Street
    Suite 1000
    Wilmington, DE 19801-1254

    AICPA Resources/Webinar on the New Delaware VDA

    AICPA State and Local Tax Technical Resource Panel hosted an archived webinar on Delaware Opportunity Until June 30, 2013 - Delaware Unclaimed Property Voluntary Disclosure Program on May 1, 2013 at 3-4 pm EST, featuring the Delaware Secretary of State and Administrator of the DE VDA and Chris Hopkins. 

    Other Resources on the New Delaware VDA

    Articles on Judge Stark Approves the Select Medical/Delaware Unclaimed Property Litigation Settlement and on Pregaming the Select Medical Hearing

    Blog on Delaware Settles with Select Medical unclaimed property case (Jan. 2014)

    Blog on Delaware’s New Unclaimed Property VDA Program Targets Noncompliant Companies (Jan. 25, 2013)

    Bloomberg BNA Weekly State Tax Article on Unclaimed Property (Jan. 25, 2013)

    Article on Delaware Launches new VDA website (Dec. 4, 2012)

    Article on Delaware Opens Dramatic Voluntary Disclosure Program Aimed at Businesses Holding Unclaimed Property Payable to the State of Delaware (Dec. 2012)

    Article on Delaware Secretary of State Promulgates Important Unclaimed Property VDA Guidance (Nov. 30, 2012)

    Article on New VDA Guidance (Nov. 29, 2012)

    Blog on Delaware Strives to Increase Unclaimed Property Compliance by Launching new VDA Program (Nov. 28, 2012)

    Article on New VDA Program Opportunity (Nov. 12, 2012)

    Article on Delaware State Escheator  Issues New Regulations that Could Shorten Audits (Nov. 4, 2012)

    Article on Staples Settles Delaware Unclaimed Property Case for $8.9 Million (Sept. 17, 2012)

    Alert on Unclaimed and Abandoned Property (July 2012)

    Article on Delaware Enacts Statute Changing its Voluntary Disclosure Program (July 2012)

    Briefing on the New VDA Law (July 30, 2012)

    Advisory Alert on the New Legislation  on Unclaimed Property (July 2, 2012)

    Article on Delaware Secretary of States Issues RFP to Help Administer new VDA Program (July 2, 2012)

    Article on Delaware Voluntary Disclosure (July 2012)

    Article on Delaware and Staples Inc. Settle Litigation (June 29, 2012)

    Article on Delaware Unclaimed Property Estimates Revised Upward (June 6, 2012)

    Article on Two Major Securities Transfer Organizations (STA and SIFMA) Send Letters to the Delaware Governor (April 30, 2012) 

    Article on How Does Delaware Raise That Much Revenue Through Escheat? (April 20, 2012)

    Article on Delaware Revenue Projections are Up (April 19, 2012)

    Article on Delaware Chancery Rules Against Staples in Escheat Case Regarding Unclaimed Rebates (February 8, 2012)

    Article on Delaware Announces New Proposed Regulations (Jan. 13, 2012)

    Article on Businesses Nationwide Watch as Staples Challenges Delaware's Aggressive Escheat Policies (June 2010)

    Article on Exercising Diligence when Seeking Voluntary Disclosure and Settlement of Unclaimed Property Liabilities (June 2010)

    Staples v. Thomas Cook (April 2010)

    Article on Delaware Abandoned Property Law: What Every Company should Know about an Emerging Area of State Law (April 2010)


    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    Resources on All States' Unclaimed Property Programs (Links for Searching/Claiming and Holders Reporting) 

     

    USA Federal government unclaimed money website

    All States - National Association of Unclaimed Property Administrators

    All States - Unclaimed Property Compliance and Reporting Requirements in All States and DC and Puerto Rico (including links to each state's applicable unclaimed property main page, law, legislation, regulations, holder reporting requirements, holder FAQs, filing deadlines and extensions, compliance disclosure agreement, re

    All States - Unclaimed property search information

    Alabama unclaimed property website and Baldwin County unclaimed property website

    Alaska unclaimed property website

    Arizona unclaimed property website

    Arkansas unclaimed property search website

    California unclaimed property website

    Colorado unclaimed property website

    Connecticut unclaimed property website

    Delaware unclaimed property/escheat website

    Florida unclaimed property website

    Georgia unclaimed property website

    Hawaii unclaimed property website and search website

    Idaho unclaimed property website

    Illinois unclaimed property website

    Indiana unclaimed property website

    Iowa unclaimed property website

    Kansas unclaimed property website

    Kentucky unclaimed property website

    Louisiana unclaimed property website

    Maine unclaimed property website

    Maryland unclaimed property website and search website and Tips

    Massachusetts unclaimed property website

    Michigan unclaimed property website

    Minnesota unclaimed property website

    Missippi unclaimed property website

    Missouri unclaimed property website

    Montana unclaimed property website

    Nebraska unclaimed property website

    Nevada unclaimed property website

    New Hampshire unclaimed property website

    New Jersey unclaimed property website

    New Mexico unclaimed property website

    New York unclaimed property website

    North Carolina unclaimed property website

    North Dakota unclaimed property website

    Ohio unclaimed property website

    Oklahoma unclaimed property website

    Oregon unclaimed property search website

    Pennsylvania unclaimed property website

    Puerto Rico unclaimed property website

    Rhode Island unclaimed property website

    South Carolina unclaimed property website

    South Dakota unclaimed property website

    Tennessee unclaimed property website and Compliance Disclosure Agreement

    Texas unclaimed property website

    Utah unclaimed property website

    Vermont unclaimed property website

    Virginia unclaimed property website

    Washington, DC unclaimed property website

    Washington State unclaimed property website

    West Virginia unclaimed property website

    Wisconsin unclaimed property website

    Wyoming unclaimed property website

    Resources on Unclaimed Property in General


    National Association of Unclaimed Property Administrators, including What is Unclaimed Property

    Missing Money unclaimed property search website

    Conoco Phillips unclaimed property info. and due diligence letters

    Article on States Increase Enforcement of Unclaimed Property Laws (Oct. 2013)

    Article on $58 billion Unclaimed:  Some of it Yours? (Jan. 27, 2013)

    Article on unclaimed property in general

    Paper on Expanded Liability in Unclaimed Property: Are States Going Too Far? (2011)

    Article on Unclaimed Property: A Panacea for State Budget Woes? (April 2010)

    Paper on Unclaimed Property Audits: Why was My Company Targeted and What Can We Do about It? (2009)

    Overview on Unclaimed Property

    UPPO - Unclaimed Property Professionals Organization (with news and blog)




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