On January 27, 2017, the Delaware House of Representatives passed Delaware Senate Bill 13 (“S.B. 13”), finalizing Delaware’s legislative body’s fast-track effort to overhaul the state’s unclaimed property laws. The bill will now be sent to Governor John Carney, who has indicated he will sign it. The legislature’s approval of S.B. 13 is a much anticipated development in the unclaimed property world, as Delaware attempts to address the scrutiny it has endured over the last few years, which culminated in July 2016 with the critical decision in the Temple-Inland case. Although S.B. 13 addresses many of the areas on which corporations and unclaimed property practitioners have been seeking guidance, a few key issues in the current Delaware act have yet to be addressed. Following are some of the key changes for those areas the Senate Bill has definitively addressed.
Look-Back Periods, Statute of Limitations, and Record Retention
One of the main areas of contention with Delaware’s escheat act has been its audit look-book period and statute of limitation provisions. As Delaware’s act is currently written, a holder may be subject to a reach-back period of 20+ years, which is especially problematic because such a lengthy audit reach-back period typically far exceeds generally accepted corporate document and data retention policies. In recognition of this clear misalignment, S.B. 13 stipulates a 10 year look-back period for ongoing and future audits. The look-back period is based on the calendar year in which the Delaware audit notice was mailed to the holder. Accordingly, the look-book period for holders already subject to a Delaware audit will vary depending on the age of the specific audit. To ensure consistency, the look-back for the Voluntary Disclosure Agreement (“VDA”) program will also be amended to 10 years. We note that this change for VDA’s merely represents a codification of what occurred administratively this past summer following the Temple-Inland decision.
Under S.B. 13, the statute of limitations increases to 10 years from 3 years (or 6 years in cases where a report contained an omission of unclaimed property that was more than 25% of the value disclosed in the report). This 10-year statute is tolled if a holder is placed under audit or if the Delaware State Escheator determines that the report contained a fraudulent or willful misrepresentation.