Delaware Abandoned and Unclaimed Property Law Voluntary Disclosure ProgramApril 21, 2014 – Alerts Litigation Alert
On June 30, 2014, the Secretary of State will close enrollment in Delaware’s Voluntary Disclosure Program for businesses that may not be in compliance with Delaware’s Abandoned and Unclaimed Property Law. If your company is incorporated in Delaware or has significant operations, vendors, customers and/or investors located in the state, then you should give serious consideration to participating in this program and taking advantage of the opportunity to get into compliance and avoid a potentially costly and time-consuming audit conducted by Delaware’s third-party contingent fee auditors.
What Is Abandoned or Unclaimed Property?
Intangible personal property reflected in the books and records of a company (known as the “holder”) that is legally due and owing to a third party (known as the “owner”) and with respect to which there has been no activity or contact with the third-party owner for a statutorily prescribed period of time (usually five years) (known as the “dormancy period”).
- Examples of unclaimed property include: uncashed payroll or vender checks, customer overpayments, unused customer credits, rebates, refunds, deposits and gift cards/gift certificates.
- All 50 states and the District of Columbia have enacted laws that require companies to report and remit unclaimed property to the appropriate state so that the state may take custody of the unclaimed property and, in theory, attempt to reunite that property with its owner.
Where Do I Report and Remit Unclaimed Property?
- First, to the state of the owner’s last known address as reflected in the holder’s books and records.
- Second, if the owner’s address is unknown, then to the holder’s state of incorporation.
Who Should Enroll in Delaware’s Voluntary Disclosure Agreement (VDA) Program?
- Companies incorporated in Delaware.
- Companies with significant operations, customers, vendors and/or investors located in Delaware.
Why Should My Company Enroll in Delaware’s VDA Program?
- The VDA will be tailored to the facts and circumstances of each participating company.
- The VDA process is more efficient, predictable and cooperative than Delaware’s traditional audit process.
- Reduced look-back period of review – 1993 versus 1981 (if VDA completed by June 30, 2015).
- Waiver of all interest and penalties for past due unclaimed property liability.
- Broad release of historic unclaimed property liability from the beginning of time through the date of the final VDA report.
- Avoid risk of years-long audit conducted by third-party contingent fee auditors.
- No right to audit the VDA except under very limited circumstances.
- Significantly reduced burden on company time and resources.