KeepUP™ Blog

The Delaware Secretary of State (SOS) has indicated its intent to mail the latest round of VDA invitations on or about July 22, 2022.  Under Delaware law, the state cannot initiate an unclaimed property examination (audit) unless a company has first been notified in writing by the SOS that it may enter the SOS VDA Program. Holders who do not enroll in the VDA Program within the 90-day notice period set forth in the letter will be referred to the Department of Finance for an unclaimed property audit.

The West Virginia State Treasurer’s Office (WVSTO) recently confirmed that holders will need to follow the changes made to their unclaimed property law as a result of the passage of House Bill 4511, which becomes effective June 10, 2022, for the upcoming Fall reporting cycle.

This short turnaround time for holders to become compliant with the new law highlights the need for holders to actively monitor legislative, regulatory, and administrative activity.

We recently posted about CA AB 466, which became effective on January 1, 2022, authorized the Franchise Tax Board (FTB) to share information with the State Controller’s Office (SCO) related to compliance with California’s unclaimed property law. As a result, businesses must now provide the following information on business tax return forms:

• Has the entity previously filed an unclaimed property report with the SCO?
• If so, what was the date of the most recent report?
• What was the amount last remitted?

On February 16, 2022, a new bill was introduced in California, AB 2280, wherein the Legislature again references the FTB, estimating that since 2020, approximately 1.3 million business that have filed taxes with the FTB have failed to report unclaimed property to the state.

The next scheduled rounds of invitations to enroll in the Delaware Secretary of State’s (SOS) voluntary disclosure program are expected to be sent on February 18, 2022, and then again on May 20, 2022.

 Under Delaware law, the SOS must first notify the holder in writing that it may enter the VDA program prior to initiating an unclaimed property examination (audit). Holders who do not enroll within the 90-day notice period will be referred to the Department of Finance for audit.

If your company is incorporated in Delaware or has significant operations in Delaware, be on the lookout for these letters, or any letters from either the Secretary of State or the Department of Finance.

California AB 466, effective on January 1, 2022, provides the authority for the Franchise Tax Board (FTB) to share information with the State Controller’s Office (SCO) pertaining to a taxpayer’s compliance with California’s unclaimed property laws. To accomplish this, the FTB has added various questions to business tax returns for 2021, including:

• Whether the business entity previously filed an unclaimed property Holder Remit Report with the SCO.

• If so, the date of the most recent report.

• The amount last remitted.

The Delaware Secretary of State (SOS)  indicated its intent to mail the latest round of VDA invitations on or about February, 18, 2022. 

Under Delaware law, the state cannot initiate an unclaimed property examination (audit) unless a company has first been notified in writing by the SOS that it may enter into the SOS VDA Program. Holders who do not enroll in the VDA Program within the 90-day notice period set forth in the letter will be referred to the Department of Finance for an unclaimed property audit.

As VDA invitations may be addressed to senior corporate executives, they often do not reach the person or group responsible for unclaimed property compliance in time to meet the 90-day deadline to prevent an audit.

Record retention refers to how long important information must be retained for future use or reference. Most financial and accounting processes have standards that need to be met because agencies such as the Internal Revenue Service, the Federal Deposit and Insurance Corporation, and the Public Company Accounting Oversight Board all have requirements. You may be familiar with the obligations for these well-known agencies. Do you know what is required for escheat compliance?

Companies generally maintain a schedule or policy for their escheat records that help define what will need to be kept and for how long. This is a worthwhile practice to meet requirements and have supporting documents available if requested or needed in the event of an audit.

Statutory due diligence is required by most states as the final attempt by the holder to reunite the owner with his or her dormant funds before the holder is required by law to report such funds to the state as unclaimed property. Due diligence timeframes, dollar thresholds and methods of delivery vary by state and/or property type. The Revised Uniform Unclaimed Property Act (RUUPA) was introduced by the Uniform Law Commission in 2016 as a model act for the states to utilize when updating their unclaimed property laws. Section 501(b) of the RUUPA contains language that requires holder to send a due diligence notice to the owner via electronic mail as well as by first-class mail, 60 to 180 days before the report date, if the owner has consented to receive electronic mail delivery from the holder.

California AB 466 was enacted on July 16, 2021, and becomes effective on January 1, 2022. The bill allows the Franchise Tax Board (FTB) to share information from business entities’ tax filings, on an annual basis, with the State Controller’s Office (SCO), specifically:

♦The taxpayer's entity status and the date FTB last updated the status.

♦ The taxpayer’s revenue range.

♦ Whether the entity previously filed an unclaimed property report with the Controller, and if applicable, both of the following:

• The filing date of the taxpayer’s last report.
• The amount remitted on the taxpayer’s last report.

According to the FTB’s Bill Analysis dated June 24, 2021, the FTB already provides the SCO with a list of business entity taxpayers that are incorporated or began conducting business in the last three years and have filed a tax return. With the passage of AB 466, the FTB will be permitted to share business entities’ responses to these questions with the SCO, who can use the information to identify and provide outreach, in the form of education and/or audits, to companies that the SCO believes is not in compliance with the unclaimed property law.

Delaware incorporated or domiciled entities should be cognizant of a newly enacted Delaware unclaimed property statute that may significantly impact their unclaimed property situations.

Delaware SB 104, enacted on June 30, 2021, has an effective date of August 1, 2021, though specific provisions related to claims, audits, and pending litigation as of the effective date will apply retroactively. Though the intent of the bill is to provide clarification for holders, confirm current examination practices, and address recent litigation, some of the provisions appear to expand the state’s enforcement capabilities, while others contract the protections afforded to holders under the current law.

A summary of the relevant changes made to the Delaware unclaimed property law as a result of DE S 104 follows:

• Revised VDA and Audit Provisions
  • Response Time to VDA Invite Extended. The timing to respond to a VDA invitation is increased from 60 to 90 days. Holders who receive an invitation may enter the VDA program or request to enter the expedited audit program (see below).
  • Audit Records Scope. The State Escheator can examine the records of the holder or a subsidiary or affiliate of the holder to verify the completeness and accuracy of the records, even if the records may not identify property reportable to Delaware. The state is under no obligation to provide a reason or justification for the examination of records, other than that it relates to determining compliance.