There is recent unclaimed property news coming out of Delaware that we believe is important to not only understand, but also be prepared for. Delaware, historically known for its business-friendly environment, is implementing a strategic two-pronged approach to enhance compliance with unclaimed property laws in the state.
Here’s an outline of what you need to know to navigate this initiative and avoid audits, fines, or other adverse consequences.
What is this Delaware unclaimed property news and why is the state pursuing this campaign?
The Delaware Department of Finance, in collaboration with four auditing firms, has initiated a new protocol where approximately 1,000 compliance verification requests will be issued to businesses operating in or have customers registered in the state, on a biannual basis. These notices serve a few purposes:
- To verify whether the business has filed a 2022 unclaimed property report and obtain a copy of the business’s unclaimed property policy and procedures.
- To ascertain if there are any unclaimed properties yet to be reported.
- To allow businesses to opt-in to the state’s Voluntary Disclosure Agreement (VDA) program, a streamlined process for businesses to come into compliance.
How can Delaware launch this unclaimed property initiative?
In June of 2022, Delaware amended its unclaimed property statue to enable the Department of Finance (DOF) the ability to audit unclaimed property holders in the state when they do not pass a compliance review.
What is a compliance review? Basically, the DOF can mandate that a business file a “verified report” of unclaimed property (a minor audit) containing requests for information and documentation. If a business refuses or does not respond to a request by the DOF, the state may then perform a full audit, which could result in fines or penalties to the business.
Why is Delaware launching this unclaimed property campaign?
Delaware is a popular incorporation state, and unclaimed property represents a significant source of revenue. This crackdown aims to:
- Increase compliance: Ensure businesses are properly reporting and remitting unclaimed property.
- Generate revenue: Delaware collects fees associated with unclaimed property reporting and the VDA program.
- Reduce administrative burden: Verification reports are less resource-intensive than full audits.
If you operate in the state of Delaware, what can you expect?
- If your business receives a verification request from the state of Delaware, how long do you have to respond?
- Companies will have 30 days to respond and acknowledge receipt of the request and 180 days to complete the request in order to avoid an audit.
- What will the required items that you will need to provide to respond to this request?
- Most likely, you will need to submit a verified report form, a list of included entities, and an unclaimed property policies & procedures document.
- What should you do if you receive a verification request?
- Stay informed about Delaware’s unclaimed property requirements and deadlines.
- Ensure accurate and complete reporting of unclaimed property.
- If discrepancies are found, the state may request additional information and trigger a full compliance review.
- Implement clear internal procedures for unclaimed property handling.
- Consult with legal or accounting professionals specializing in unclaimed property.
- WARNING: Failure to cooperate or pay outstanding amounts could lead to a formal notice of examination and full audit with penalties.
- If you have not previously filed an unclaimed property report in the state, you will be given the opportunity to join Delaware’s VDA program. What are the benefits to Delaware’s Voluntary Disclosure Agreement (VDA) program?
- A few of the benefits of opting into Delaware’s VDA program include limited look-back periods, faster review, and potential penalty/interest waivers.
- Choosing the VDA bypasses the traditional audit route managed by the Department of Finance and its third-party auditors.
The future of Unclaimed Property Compliance
This heightened focus on unclaimed property compliance in Delaware is expected to persist, with an increase in verification reports and possibly more rigorous enforcement. Proactive measures can safeguard businesses against severe penalties and maintain their compliance status.
Contact our team at UPCR to book a no-cost consultation and let us help you navigate the complicated, evolving world of unclaimed property compliance.