Tue, Apr 30, 2019

Scott Regan in Compliance Week on Delaware Revised Unclaimed Property Approach

Scott Regan, Director in the Unclaimed Property and Tax Risk Advisory practice at Duff & Phelps, was quoted in Compliance Week during the firm’s recent unclaimed property compliance webcast on the workings and reasons behind Delaware’s unclaimed property voluntary disclosure and audit programs. In recent months, the Delaware Secretary of State has mailed notices to corporations that are incorporated in Delaware inviting them to join the state’s voluntary disclosure agreement (VDA) program to resolve any outstanding unclaimed property issues. Companies are required by law to respond to the invitations within 60 days, or state officials can commence an audit.

Delaware sent more than 100 such notices in 2018 followed by 200 more in February 2019 with plans to send as many as 800 to 1,000 in the first quarter. Making good on its audit commitment, the state reportedly is identifying companies that did not respond timely to the October invitation and sending them subsequent notices that they will be subject to an unclaimed property audit. Delaware is expected to be “extremely active” with unclaimed property enforcement in 2019. Notices are expected to be sent to companies throughout the year, says Regan.

“Legal challenges to the estimation and contingency-based audit approaches compelled Delaware authorities to come up with a retooled VDA program that the state is now rolling out”, he continues. A company challenged the constitutionality of Delaware’s approach, prompting the state to invite all companies into the VDA program before commencing an audit.

“Compared with the state’s prior approach, the VDA program is preferable. It’s a thorough program. It can be laborious and difficult, but it is a much better program than the audit program. Ending up in Delaware’s audit program also increases the risk of audit inquiries from other states, because of the use of third-party audit firms that have contracts or relationships with other states”, he adds.

“Some companies are failing to answer Delaware’s VDA invitation not because they’ve rejected it but simply because the invitations sometimes get lost in the mail”, said Regan. “There are a lot of ways that these things fall through cracks,” he said. “I’d recommend contacting the CFO’s office or your registered agent to find out if a letter has been received. Put them on notice to be aware.”

The full article is available on the Compliance Week website.

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