The Delaware Secretary of State will send approximately 200 unclaimed property voluntary disclosure agreement (VDA) invitations to Delaware incorporated companies throughout the United States within the next few days.
By law, recipient companies must respond to these notices within 60 days, or they will be referred to the Delaware Department of Finance to commence an unclaimed property audit. Traditionally, Delaware uses third-party, contingently paid, multistate auditors to conduct unclaimed property audits.
It has been Duff & Phelps' experience that notifications from Delaware are addressed to C-Suite executives and often do not reach appropriate parties in time to prevent an audit. We believe it is critically important for all senior accounting or tax professionals at U.S. companies incorporated in Delaware to make immediate inquiries to the CFO and mail room staff to determine if such a notification has been received.
Delaware’s latest enforcement initiative began in October 2018 when unclaimed property voluntary disclosure agreement (VDA) were mailed to over 100 U.S. corporations. We further reported that Delaware intended to send up to 800 to 1,000 invitations in 2019, beginning in the first quarter.
Unclaimed property audit notices were sent by the Delaware Department of Finance on January 3, 2019. These notices were sent to corporations that received, but did not respond to, the October 2018 Delaware unclaimed property VDA invitations.
A second round of VDA invitations were mailed on February 15, 2019 to approximately 200 U.S Corporations. The deadline to respond passed on April 15, 2019.
Any corporation that receives a notice from either the Delaware Department of State or the Delaware Department of Finance is encouraged to contact the Duff & Phelps Unclaimed Property and Tax Risk Advisory team for a free consultation. Both events are highly sensitive and may have a material P&L impact.
The Duff & Phelps Unclaimed Property and Tax Risk Advisory team has learned that the response rate to Delaware’s unclaimed property VDA invitations has increased from less than 10% from the October 2018 mailing to just under 50% for the February 2019 mailing. It is presumed that increase is attributable to enhanced awareness among U.S. Corporations to this issue and that the response rate will continue to rise throughout 2019 and beyond. Simply stated, U.S. Corporations will find the Delaware Unclaimed Property Voluntary Disclosure Program far more advantageous to the Delaware Unclaimed Property Audit Program.
Our team is highly experienced at guiding our clients through both the Delaware Unclaimed Property Voluntary Disclosure and Audit Programs.