The Future of Unclaimed Property A Glance into the Crystal Ball White Paper

"The Future of Unclaimed Property: A Glance into the Crystal Ball"

Duff & Phelps Robert Peters and Sonia Walwyn of the Unclaimed Property practice co-authored this white paper on the impact of the June 2016 court decision in Temple-Inland and other pending cases on unclaimed property reporting.

Over the past 15 years, Corporate America has faced an onslaught of aggressive audit practices by many state and local governments and their third-party auditors in the pursuit of unclaimed property collections. Many of these audit practices have required companies to retain detailed books and records dating back 20-30 years, or face estimated liabilities in the millions based on techniques that stretch the imagination of even the most sophisticated statistician. As a consequence, several companies that were under audit have fought back and initiated a series of suits in an effort to blunt the state’s authority to apply these audit practices on several grounds, including challenging the constitutionality of such practices.

In June 2016, the Federal District court in Temple-Inland v. Cook et al rendered the first in what is expected to be a series of decisions, which is likely to alter the unclaimed property landscape not only for companies currently under audit and/or in the midst of a voluntary compliance process, but for all entities into the foreseeable future. While the Temple-Inland decision is the first corporate favorable decision in quite some time, there are indications of troubled waters ahead for corporations as the states reconfigure the puzzle pieces to maintain a revenue stream that has proved to be quite lucrative in shoring up budget deficits over the years.

This comprehensive white paper provides valuable insights for corporate finance, tax and treasury officers on what all companies should do to prepare themselves for meeting their unclaimed property reporting requirements.

Update as of August 5, 2016: Delaware and Temple-Inland have reached a settlement resulting in a motion to dismiss Temple-Inland’s complaint. As a result, there will be no "remedy" as to the constitutional violation of due process provided to the Court as required by Judge Sleet. The ultimate implications of this settlement are yet to be determined. That said, Delaware is expected to provide some much-awaited guidance on its application of estimation methodology to those holders who are under audit as early as next week. However, as of today, we can advise that Delaware has not indicated one way or another whether the decision rendered by the Federal District Judge in Temple-Inland, will alter its approach in other pending matters. Click here for more information.