Unclaimed Property - Delaware Changes in Compliance

Holders that have filed unclaimed property compliance returns in Delaware in prior years, have been audited, or filed and completed VDA with Delaware must account for annual compliance best practices with the state. See this redacted Delaware Department of Finance Compliance Letter. As the letter indicates, the state requires two things, (a) an annual return filing (e.g., $0 returns are accepted) and (b) a copy of the Holder’s written unclaimed property policy and procedures.

Effective March 1, 2018, Delaware enacted a new compliance review program which seeks to review the annual compliance reports for reasonableness, based on company size, industry, and filing history. The reviews are expected to be completed by a combination of state employees and outside 3rd party auditing firms (reviewers). If the reviewers feel the report is inaccurate, under-reported, missing property types, etc., the reviewers can contact the company to ask questions and request records for that filing period. If deficiencies are found, this could lead to other adverse consequences.

For Holders that have entered into the Delaware VDA program, it should be noted that a minimum three-year consecutive annual report filing obligation is required as part of that agreement in order to maintain benefits obtained in the VDA agreement (e.g., waiver of audit, abatement of penalty and interest, etc.)  Presumably these notices will be sent to this category of holder who has not met those post VDA filing requirements as well.

BDO Insights

It is more vital now than ever that companies have written policy and procedures in place and an ongoing compliance process. Most Delaware unclaimed property returns are due March 1, 2019, so time is running out to address this year’s compliance requirement. If your business is incorporated in Delaware, or you have high state income tax apportionment percentages in the state based on property, payroll and sales, it is imperative to carefully review your records and develop a strategy to mitigate risk.

BDO’s team of over 20 unclaimed property professionals across the country are seasoned veterans in escheatment space with strong working relationships with various state escheatment offices. We help clients with compliance, policy and procedures, voluntary disclosure filings, audit defense, global mapping, refund reviews and escheat consulting. Contact us should you have questions or want further thought leadership specific to your corporate facts and circumstances.