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7/14/21 8:48 AM

Unclaimed Property Legislative Alert: A Deep Dive Into DE SB 104

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.
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Topics: Delaware, Compliance, Audit, Best Practices

6/10/21 7:51 AM

UPDATE: Delaware's Next Round of VDA Invitations Scheduled for June 11, 2021

The Delaware Secretary of State (SOS) had previously indicated its intent to mail the latest round of VDA invitations on or about May 28, 2021. However, this date has changed to June 11, 2021.

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 60-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 60-day deadline to prevent an audit.

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Topics: Delaware, Audit, Best Practices, Voluntary Disclosure Agreements

5/27/21 7:51 AM

Target Date for Delaware's Next Round of VDA Invitations: May 28, 2021

Unclaimed property holders need to stay vigilant about checking the mail. The DE Secretary of State (SOS) has indicated its intent to send out the latest round of VDA invitations on or about May 28, 2021. VDA invitations are sent several times per year to companies that are identified by the state as “likely being out of compliance” with Delaware’s unclaimed property law. 

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 60-day notice period set forth in the letter will be referred to the Department of Finance for an unclaimed property audit.

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Topics: Delaware, Audit, Best Practices, Voluntary Disclosure Agreements

4/13/21 10:30 AM

Check Your Mail: Unclaimed Property Outreach From Maine & Massachusetts

We recently posted about the importance of checking the mail for letters inviting holders to participate in the Delaware Secretary of State’s Voluntary Disclosure Agreement (VDA) program. Delaware is scheduled to mail a new round of VDA invitations on May 14th. More states are beginning to join this outreach trend. Maine and Massachusetts appear to be joining states like Nevada and Washington in mailing targeted outreach to holders regarding their compliance with the unclaimed property laws, which can take the form of self-audit questionnaires or invitations to self-audit books and records, and often disclose that they will be assisted by a third-party auditor in the process.

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Topics: Compliance, Audit, Voluntary Disclosure Agreements, Massachusetts

12/15/20 8:17 AM

Dec. 2020 Delaware Mails Unclaimed Property Audit Notices

MarketSphere Unclaimed Property Specialists has learned that the state of Delaware’s Department of Finance recently mailed unclaimed property audit notices to US corporations incorporated in Delaware. The audit notices target those holders who did not enroll in the Delaware Secretary of State’s Voluntary Disclosure Agreement (VDA) Program within the 60 days of receiving an invitation letter to participate. The invitation letters put the holder on notice that the state believes the holder to be out of compliance with Delaware’s unclaimed property law and invites them to participate in the VDA Program to bring them into compliance. If the holder does not enroll in the VDA Program within 60 days, they are referred for audit.

Corporations both large and small, public, or private can receive a VDA invitation. Under Delaware law, the state cannot initiate a new unclaimed property examination (audit) without first notifying the company that it may enter into the VDA Program (12 De. C. Ch. 11, section §1172). The invitations put the company on notice that if the holder does not enroll in the VDA program within 60 days of the date of the letter, the company will be referred for audit. The Secretary of State mailed approximately 200 invitations in August. Companies who did not enroll in the VDA Program within the 60-day period, may already have, or will soon receive audit notices from the Department of Finance.

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Topics: Delaware, Audit, Voluntary Disclosure Agreements

12/1/20 7:52 AM

Unclaimed Property Invitations, Audit Notices, and Self-Audit Letters

States often send official communications to companies regarding unclaimed property. While some of these mailings are mere filing reminders, other types of communications, such as VDA invitations, audit letters, and self-audit letters, urge holders to take affirmative steps to comply or demonstrate compliance with the unclaimed property laws. We will discuss some, but not all of these types of communications, to assist companies in understanding what each one means, and what holders should consider upon receipt of such a communication.  

Delaware – VDA Invitations and Audit Notices:

We recently posted that the Delaware Department of Finance is expected to send new unclaimed property audit notices in the near future to businesses who did not enroll in the state’s Voluntary Disclosure program (VDA program) in response to the Secretary of State’s invitation to participate in the program dated August, 21, 2020. Under Delaware law, businesses who do not enroll within the 60-day notice period in the letter will be referred to the Department of Finance for an unclaimed property audit.

Indiana, Pennsylvania, Utah and Washington: The Self-Audit Letter

Indiana, Pennsylvania, Utah and Washington have recently started mailing holders letters on official state letterhead that advise holders of their obligation to comply with the unclaimed property laws. Further, the letter proclaims that based on the state’s records, the holder “has never” or “only rarely” reported unclaimed property to the state.

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Topics: Compliance, Audit, Best Practices, Voluntary Disclosure Agreements

11/16/20 7:27 AM

Holder Alert: Delaware Expected to Mail Unclaimed Property Audit Notices in the Near Future

MarketSphere Unclaimed Property Specialists has learned that the state of Delaware will soon be mailing unclaimed property audit notices to those companies who did not respond to the latest round of invitations sent by the state on August 21, 2020 to enroll in the Secretary of State’s Unclaimed Property Voluntary Disclosure Program (VDA program). Approximately 200 holders received these letters, which notify the holder that it is “likely out of compliance” with Delaware’s unclaimed property law and inviting them to participate in the VDA program. Any company can receive a VDA invitation, including public or private corporations, large Fortune 500 companies and smaller companies.

In accordance with Delaware law, the state cannot initiate a new unclaimed property examination (audit) without first notifying the company that it may enter into the Secretary of State’s VDA program (12 Del. C. Ch. 11, section §1172).   These letters put the company on notice that if the holder does not enroll in the VDA program, the Secretary of State’s Office will refer the company to the Delaware Department of Finance, who will issue an unclaimed property audit notice upon the expiration of the 60-day notice period.

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Topics: Delaware, Audit, Best Practices, Voluntary Disclosure Agreements

10/6/20 7:42 AM

New York Sends Invitations to Participate in Unclaimed Property Voluntary Compliance Program

New York is increasing its focus on unclaimed property compliance. The New York State Comptroller’s Office of Unclaimed Funds (OUF) recently sent letters to companies regarding participation in the state’s Voluntary Compliance Program (VCP).

 

The correspondence states: 

We are contacting you because your company has conducted business in New York State, but has not filed reports with the New York State Comptroller’s Office of Unclaimed Funds (OUF) pursuant to the Abandoned Property Law (APL). The law can be found on the New York State Legislature’s website at http://public.leginfo.state.ny.us/lawssrch.cgi?NVLWO.

We encourage you to review your records for any unclaimed funds that may be subject to reporting. Unclaimed funds include uncashed checks issued to employees or vendors, outstanding accounts receivable credits and credit balances, and unredeemed gift cards/certificates, among others.

The first step of coming into compliance with the law is completing our Self-Audit Checklist. This online survey will help you to identify if your company is holding any unclaimed funds. Find it online at https://surveymonkey.rNYSVCU and use reference number XXXXXX. Complete the survey even if you find that you have nothing to report.

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Topics: Compliance, Audit, Best Practices, Voluntary Disclosure Agreements, New York

9/24/20 9:06 AM

The Role of Death and Dormancy for Unclaimed Property Holders

Organizations (holders) are not always made aware of the death of the people they do business with. While death plays an important role in the escheatment process, holders of banking and securities property types are not required to proactively search for and confirm death. Similarly, in the securities industry, SEC 17Ad-17 searches for lost shareowners are not required if the holder has received documentation that a shareowner is deceased

Death, however, is a factor in triggering escheatment. For example, death serves as the dormancy trigger for Roth IRA accounts in most states, as a possible trigger date for individual retirement accounts, and in states like Illinois and Maine, decreases the dormancy period for “other tax deferred” accounts.  In states that have adopted certain provisions of the 2016 Revised Uniform Unclaimed Property Act (RUUPA) as they relate to retirement accounts and securities, holders are not required to confirm death unless and until they receive a notice or indication of death (with death to be confirmed within 90 days).

Often, a holder becomes aware of the death of an owner when the next of kin contacts the holder. In other cases, notice of death comes from an SEC 17Ad-17 search of an account that is RPO (Returned by Post Office). There are no statutory requirements that force holders of banking or securities property to proactively determine if owners are deceased. Auditors, however, have been taking a more aggressive approach and assert that holders must proactively bump their records against the death master file (“DMF”) database. If an account owner is found to be deceased and there has been no contact with a beneficiary, the account is considered lost, which triggers escheatment and the property becomes fair game for the auditor. The National Change of Address (NCOA) database is similarly utilized by auditors as an attempt to locate accounts with updated addresses. According to auditors, these updates serve as proof that the holder does not know the location of the account owner, which triggers escheatment for some property types, including securities.

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Topics: Compliance, Reporting, Audit, Best Practices

8/24/20 9:20 AM

August 2020 - Delaware Sends Unclaimed Property VDA Invitations

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations and continues this practice on an on-going basis. 

Based on correspondence that MarketSphere received from the office of Delaware’s Secretary of State, the latest round of VDA invitations were mailed on August 21, 2020 to a number of Delaware incorporated companies identified as “likely being out of compliance” with Delaware’s unclaimed property law. 

The correspondence states: 

Today, August 21, 2020, the Delaware Secretary of State’s Office will be mailing about 200 letters to various companies (individually referred to as “Holder”) that have been identified as likely being out of compliance with Delaware law, 12 Del. C. ch. 11, as it relates to reporting dormant, abandoned, or unclaimed property.  Pursuant to our state laws, Delaware cannot initiate new abandoned or unclaimed property examinations (audits) unless a company has first been notified in writing by the Secretary of State that it may enter into the SOS VDA Program.  The letter serves as such a notice to the Holder and strongly encourages participation in the SOS VDA Program, as an audit notice will be issued by the Delaware Department of Finance 60 days after the date of the mailing. 

As the correspondence notes, if a recipient company fails to respond to the notice within 60 days, the Delaware Department of Finance will issue an unclaimed property audit notice upon the expiration of the 60-day notice period.

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Topics: Delaware, Audit, Voluntary Disclosure Agreements