KeepUP™ Blog

We recently discussed in a previous blog post that DE SB 281, enacted and made effective on June 30, 2022, among other things, expands the state’s enforcement powers by allowing the State Escheator to request a verified report or compliance review from a holder for any reason. Prior law required the State Escheator to have “reason to believe” that the holder failed to file a report, or who the State Escheator believed had filed an inaccurate, incomplete, or false report.

Holders are presently receiving notices requesting verified reports for the prior report year, even if they did not have any unclaimed property to report for that year. Under Delaware law, a negative report, or “zero report” is not required.

The Delaware Secretary of State (SOS) has indicated its intent to mail the latest round of VDA invitations on or around 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.

Enacted and made effective on June 30, 2022, Delaware SB 281 makes significant changes to Delaware’s unclaimed property law. Holders currently under audit or who are participating in a voluntary disclosure program (VDA) with Delaware’s Secretary of State (DE SOS), as well as holders in litigation should take note that many of these new provisions apply retroactively.

Below is a summary of the key provisions:

Enforcement: Verified Reports and Compliance Reviews

• While the Department of Finance is required to notify a holder of the opportunity to participate in the Secretary of State’s VDA program before it can initiate an audit, the new law allows the state to initiate an audit if a holder has not responded to or completed a verified report or compliance review, without requiring such notice.

• The state can request a verified report or initiate a compliance review for any reason, whereas prior to the new law, the state needed reason to believe that the holder had previously filed an inaccurate, incomplete, or false report.

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.