United States

Delaware: Invitations to Participate in Voluntary Disclosure Program Sent to Unclaimed Property Holders

Feb 29, 2016
From KPMG TaxWatch

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The week of February 15, 2016, approximately 100 to 300 companies were mailed letters inviting them to join the Delaware Secretary of State Office’s (Delaware) Unclaimed Property Voluntary Disclosure Agreement (VDA) program. Since 2012, Delaware has been sending similar letters to unclaimed property holders perceived as non-compliant with the State’s unclaimed property laws. Legislation passed in July 2015 mandated that at least one invitation letter be sent to a holder prior to initiating an audit of that holder.  Under the legislation, the prior invitation letters sent between 2012 and July 2015 make recipients of the original letters immediately eligible for audit by Delaware. However, these final letters are being sent by Delaware to give companies one final opportunity to join the VDA Program.

This latest round of letters follows a similar mailing in September 2015: only approximately 25 percent of those companies joined the VDA Program and the other 75 percent that received a letter were selected for audit by the State using the third party audit firms compensated by the State on a contingency fee basis.

Companies receiving these letters were specifically identified by Delaware as being candidates for the VDA Program because of:

1)    A history of incorporation in Delaware of any of the companies’ legal entities, including subsidiaries and companies acquired through acquisitions; and

2)    Not having completed prior VDA’s with, or audits by, Delaware to cover the historical years of unclaimed property liabilities that would be reportable to Delaware.

Companies receiving these letters only have 60 days from the date of the letter to request participation in the VDA Program before being referred to Delaware’s Division of Finance for audit selection. The letters are not always addressed to company contacts that understand the significance of the unclaimed property audit process and therefore those with responsibility for unclaimed property compliance should inquire within their organizations as to whether an invitation was received. Companies that receive these letters should consider participating in the VDA Program to avoid a potential unclaimed property audit by the State.

Companies that did not receive these letters may nevertheless wish to consider participating in the VDA Program if the company has any legal entities within its organizational structure with a history of incorporation in Delaware. Notably, the VDA Program offers various important benefits:

1)    Limited look back period to 1996, instead of 1986 under an audit;

2)    Waiver of penalties and interest; and

3)    More control over the review and quantification process.

Please contact Nina Renda at 973-912-6528 with questions on Delaware’s Unclaimed Property VDA program.

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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.