United States

Delaware: Legislature Enacts Significant Changes to Administration of Unclaimed Property

Feb 16, 2015
From KPMG TaxWatch

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Legislation recently enacted in Delaware (Senate Bill 11, signed January 29, 2015) makes certain changes to the administration of Delaware’s unclaimed property laws. The changes, at least in part, implement certain recommendations made by the Unclaimed Property Task Force established to examine, study, and make recommendations for improving the fairness and transparency of Delaware’s unclaimed property program. Under Delaware law, the State Escheator can and does employ external contractors to conduct unclaimed property examinations. Senate Bill 11 provides that no contractor or contract auditing firm may be assigned more than fifty percent of all unclaimed property examinations that take place after January 1, 2015, and the term of any contract for unclaimed property audit or consulting services may not be longer than five years. The bill also prohibits unclaimed property contract auditors from hiring, retaining, or otherwise compensating any employee of the Delaware Division of Revenue or the Department of Finance who functions in a supervisory role with respect to unclaimed property for a period of two years from the time the employee stops working for the state.

Senate Bill 11 also makes changes to unclaimed property administrative procedures regarding the review and protest of audits and determinations. Previously, the Secretary of Finance had the ability to adopt or reject (in whole or in part) the findings made by an independent reviewer and substitute its own determination. Under the revised law, unless an independent reviewer’s determination is appealed by the Secretary or the holder to the chancery court, the determination is final and binding. Thus, if a holder receives a favorable determination by the independent reviewer, the Secretary must appeal to the chancery court and may not reject that determination on his own volition. Senate Bill 11 also clarifies that in the situation where a holder has filed a report, the State Escheator must make a specific finding of fraud before the statute of limitations can be disregarded.

Finally, Senate Bill 11 mandates that the Secretary of Finance must develop a detailed manual containing procedural guidelines for conducting Delaware unclaimed property examinations by December 31, 2015. The Secretary is also directed to update Delaware’s administrative regulations to ensure greater transparency and predictability as to what holders should expect during a Delaware unclaimed property examination. For more information on Senate Bill 11, please contact Dennis Prestia at 212-872-6891, Samantha Petersen at 303-382-7220, Angela Gholson at 212-872-7910, or Nina Renda at 973-912-6528.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.