Delaware's New Unclaimed Property Proposed Legislation: The Elephant in the Room

However, while the pending legislation addresses some of the issues identified by the court (a revised period of limitation and the inclusion of a record retention provision), it is silent on one of the seminal issues for which the state was chastised - its methodology used in extrapolations. 

Specifically, in estimating a holder’s liability for years where records are not available, the state uses property deemed unclaimed for ALL states instead of, as the court implied, using only property to which Delaware has jurisdiction to estimate the unclaimed property owed to the State. Failure to address this sleeping giant suggests continued litigation on Delaware’s audit practices despite the changes proposed in S.B 13.

For companies under existing Delaware unclaimed property audit, many of which have been going on for several years, the proposed legislation includes two fast track options to conclude said audits without the imposition of interest or penalties. One track is to opt into the State’s Voluntary Disclosure Program administered by the Delaware Secretary of State, which was not previously available to companies under audit; and the second is a newly created Expedited Examination that must be completed within two years to receive the full waiver of interest and penalties. If the examination is not completed within 2 years, full penalties and interest may be imposed.

There are several unanswered questions that are raised by this proposed legislation and we will continue to share additional information on the implications as they unfold.