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7/30/21 9:36 AM

Unclaimed Property Enforcement Update: Delaware and Elsewhere

by Luke Sims & Heather Gabell

LEGISLATIVE UPDATESUpdates to the Delaware VDA Program and to Audits in Delaware per

DE SB 104

Delaware Senate Bill 104, effective on August 1, 2021 (though some provisions will apply retroactively) significantly modifies the enforcement scheme in Delaware.

  • VDA invitation response time increased. The timing for holders to respond to a VDA invitation is increased from 60 to 90 days. Holders who receive an invitation may choose to either enter the VDA program or request to enter the expedited audit program (see below). As a reminder, a holder who does not enter the VDA program or the expedited audit program will be referred to the State Escheator for a full audit.
  • Permanent expedited audit program.   Entry into the expedited audit program may be granted or denied at the discretion of the State Escheator, who must respond to a holder’s request to enter the expedited audit program within 60 days.
     
    • Holders are eligible to request an expedited audit for:

      • New audits authorized after August 1, 2021
      • Current audits authorized after February 2, 2017, and before August 1, 2021
      • VDA invitations received as of August 1, 2021
    • If the holder provides “sufficient responses” to the auditor’s requests, an audit report will be provided by Delaware to the holder within 2 years of the date of the acceptance into the expedited audit program.
  • Interest assessments. Holders who complete the expedited audit process will be subject to a 1% non-waivable interest assessment on the amount owed, (includes estimated liability). Holders under an audit authorized after August 1, 2021, will be subject to a minimum non-waivable 20% interest assessment.
  • Scope of Authority. The State Escheator is permitted to review the holder’s records to verify the “completeness or accuracy” of such records, even if they do not identify property reportable to Delaware, and without providing a reason or justification to do so, other than that the request is related to the audit. The state may also examine the records of subsidiaries or affiliates of holders under audit.

For a full summary, see our post from 7/14/2021: A Deep Dive Into DE SB 104

Outside Delaware: Third Party Contractor-Assisted Self Examinations

Faegre Drinker Biddle & Reath LLP (FDBR) is now enrolling holders into the Florida Contractor-Assisted Self Examination (CASE) program. Holders may now elect to participate in a self-examination program in any of the following states with which FDBR is contracted:

  • Florida
  • Missouri
  • North Dakota

One benefit to enrolling in such a program is that if you are a holder currently participating in a Delaware VDA (FDBR is also contracted with the state of Delaware), the same records can be used to identify and resolve liabilities owed to any of these three states.

Participation in the various self-examination programs is limited to holders who are not currently under audit. The look-back period, or the period for which holders must review their records, for self-examinations is 10 years, plus dormancy, and interest and penalties will be waived. The expectation is that self-examinations will be completed within a one-year period.

Outside Delaware: Third-Party Auditor-Assisted Self-Reviews (Self-Audits)

Several states are also sending letters encouraging holders to perform a self-review of their books and records, but with the assistance of a third-party auditor, including:

  • Indiana
  • Massachusetts
  • Minnesota
  • New York
  • Pennsylvania
  • Utah
  • Washington

These outreach letters are sent to holders that the state believes may be noncompliant with their unclaimed property law – i.e., holders who have not reported or have only rarely reported unclaimed property to the state. Holders must respond within a certain timeframe (for example, 30 days in Massachusetts and 45 days in Minnesota) or risk being subject to a formal examination, which may include the assessment of penalties and interest. Holders initiate the self-review process by confirming their participation via a link provided by the state. Note that look-back periods for the review of records can often extend as far back as 10 years. Assistance with the process is provided by a third-party auditor, such as Kelmar Associates or Kroll Government Solutions.

Next Steps for Holders

As states continue to enforce their unclaimed property laws, whether by invitation to enter into a formal voluntary disclosure program, request to perform a self-review, compliance reviews and/or formal audit or examination, we recommend that holders review their unclaimed property policies and procedures and perform their own internal review in advance of receiving such an invitation or notice. If you need assistance in performing a risk assessment, or in strengthening your unclaimed property policies and procedures, contact MarketSphere for a consultation.

*Content contained in this article is considered accurate as of the publish date.

Topics: Delaware, Best Practices, Voluntary Disclosure Agreements