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Duff & Phelps’ Unclaimed Property and Tax Risk Advisory team learned that the Delaware Secretary of State sent approximately 100 unclaimed property voluntary disclosure agreement (VDA) notices to Delaware incorporated companies throughout the United States within the last 30 days. By law, recipient companies must respond to these notices within 60 days or they will be referred to the Delaware Department of Finance to commence an unclaimed property audit. Traditionally, Delaware uses third-party, contingently paid, multistate auditors to conduct unclaimed property audits.
Our experience is that notifications from Delaware are often addressed to c-suite executives and do not reach appropriate parties in time to prevent an audit. We believe it is critically important for all senior accounting or tax professionals at companies incorporated in Delaware throughout the United States to make immediate inquiries to both the CFO and mail room staff to determine if such a notification has been received. At the time of publication of this article, there are approximately 30 days left to respond to these notifications.
As we noted previously, Delaware is the most active state in the nation regarding enforcing unclaimed property collection law. The U.S. Supreme Court precedent allows for enhanced unclaimed property collections for states of incorporation. Many companies are incorporated in Delaware, and it has taken an aggressive posture over the years.
Since the inception of the state’s current VDA program in 2012, over 1,000 Delaware incorporated companies have enrolled in the program. In 2017, due to a legal challenge, Delaware re-wrote its law. As part of that change, the state adopted a rule that corporations could not be audited without receiving an invitation to join the VDA program. Companies that do not respond within 60 days must be referred for audit.
Recently, the Delaware Secretary of State, the Honorable Jeffrey W. Bullock, contributed an article to Duff & Phelps’ publication titled, “What is the Future State of Unclaimed Property?”. In his article, Secretary Bullock provides valuable insight into Delaware’s VDA and audit programs.
After retooling their unclaimed property program in 2018, we believe Delaware’s recent action signals a return to an enforcement-oriented posture for 2019 and beyond. At Duff & Phelps, we are deeply experienced with the laws and regulations that drive unclaimed property compliance in Delaware. We encourage all who receive a Delaware unclaimed property VDA letter to contact our Unclaimed Property and Tax Risk Advisory team for a complimentary consultation.