Unclaimed Property VDAs Are Surging: What Holders Should Do Now

Unclaimed property laws generally require businesses (“holders”) to report and remit certain uncashed checks, credits, refunds, rebates, payroll, securities-related property, and other outstanding obligations that have remained dormant for a prescribed period. While the underlying objective is simple — reuniting owners with their property — the compliance landscape is anything but, particularly for organizations operating across multiple jurisdictions.

What is changing is not the law itself, but the intensity, speed, and visibility of enforcement.  States are increasingly leveraging data-sharing, expanding tax return reporting questions, and issuing time-sensitive invitations to participate in voluntary disclosure agreement (VDA) programs and self-audit initiatives. Those notices often carry firm deadlines, and failure to respond can significantly increase exposure by triggering audits sooner, expanding lookback periods, and reducing or eliminating opportunities for penalty and interest relief.

What a VDA Can Accomplish

A VDA generally allows a holder to come forward proactively; review its books and records under an agreed framework; quantify any past-due reportable property; and remit those amounts, often with reduced penalties and, in some states, without interest. Compared with a statutory audit, which might be conducted by a third-party contract auditor, a VDA typically offers a more controlled, efficient, and predictable path to resolution.

That level of predictability can be especially valuable when an organization is responding to a time-sensitive state outreach notice. In those circumstances, a VDA could provide an opportunity to address possible exposure voluntarily before the matter escalates into a more burdensome or potentially adversarial audit process.

To Enroll or Not to Enroll

If your organization has been compliant with unclaimed property requirements, you should still consider enrolling in a VDA if you receive an invitation. At a minimum, the invitation should be evaluated carefully and not ignored. Even if a holder believes it has been compliant, a VDA invitation might still warrant review because unclaimed property compliance often involves nuanced legal and factual determinations, including property classification, dormancy analysis, due diligence, jurisdictional sourcing, and historical filing completeness. A company’s good-faith belief that it is compliant does not necessarily mean the state will reach the same conclusion. Further, in some states, declining or failing to respond can increase risk by limiting access to penalty or interest relief, narrowing voluntary resolution options, or resulting in audit selection. Accordingly, holders should promptly assess the invitation; validate the basis for their compliance positions; review prior filings and internal processes; and determine whether enrollment is advisable based on the state, scope of potential exposure, and consequences of nonparticipation.

In many cases, it is advisable to evaluate the voluntary disclosure option before a state reaches out. A proactive approach could provide greater control over timing, scope, and remediation strategy, and it can help preserve access to more favorable resolution terms before the matter becomes an enforcement issue. It also allows the holder to assess potential exposure, gather records, and address compliance gaps in a more orderly fashion. 

A VDA invitation is often a time-sensitive opportunity to resolve potential exposure through a more controlled, cooperative process. If a holder does not respond or elects not to participate, the state might treat that as a missed voluntary compliance opportunity and move the matter into a more formal enforcement track. Depending on the jurisdiction, that can mean referral to the state’s audit function or to a third-party contract auditor, loss of access to penalty or interest relief, and a less flexible process for determining liability. Once a matter shifts to audit, the state could apply broader lookback periods, require more extensive document production, and use estimation methodologies if historical records are incomplete.

Lookback Periods

Many states require a holder to review multiple report years, and the review period could extend well beyond standard tax audit windows because unclaimed property is often treated differently for statute-of-limitations purposes, particularly when reports were not filed or were incomplete. The applicable period might also vary depending on whether the holder is entering a formal VDA, participating in a self-review program, or responding in an audit context. In practice, many VDAs and voluntary compliance programs look back roughly 10 to 15 report years, but some states could require more or less depending on property type, the holder’s filing history, and whether the holder has previously reported. 

VDA Eligibility After Prior Filings

In some instances, a holder might still be able to enter a VDA even if it has filed before, although eligibility depends on the state, the nature of the prior filings, and whether the holder is already under audit or has otherwise been contacted by the state. A VDA could still be available if a company wants to correct prior underreporting, expand compliance to additional property types or jurisdictions, or remediate historical issues before they are identified through state outreach or audit activity. That said, some states restrict VDA eligibility if the holder has already received an audit notice, an invitation tied to a different compliance process, or other formal contact covering the same period or property types. Accordingly, prior filing history should be reviewed carefully against the rules of the specific state program before assuming a VDA is or is not available.

State-Specific Issues to Watch

Delaware: VDA Invitations Can Be a Precursor to Audit

Delaware remains a central focus in the unclaimed property enforcement landscape. The state issues formal VDA invitations on a scheduled, multi-wave basis. Under Delaware law, the Department of Finance is generally restricted from initiating a new unclaimed property audit unless the Secretary of State has first offered the holder an opportunity to participate in the VDA program. As a result, the invitations are often far more than informational — they are effectively a pivotal compliance decision point.

For holders that receive a Delaware VDA invitation, the practical choice is usually straightforward: enter the program and pursue a structured voluntary resolution process or decline or ignore the invitation and face the likelihood of a statutory audit. Delaware generally provides a 90-day response window from receipt of the invitation. It also uses other compliance touchpoints — such as verified report notices and compliance reviews — to obtain certifications regarding filing completeness, gather information about policies and procedures, and encourage remediation. Those inquiries are time-sensitive, and while holders are generally expected to acknowledge them promptly, extensions might be available in appropriate circumstances.

Although Delaware’s VDA program is technically voluntary, the invitation is a significant procedural step in the enforcement process. Delaware generally must offer a holder the opportunity to enter the VDA program before initiating a new unclaimed property audit, and the notice itself typically states that failure to respond may result in referral for audit. While the letter does not guarantee that an audit will follow, it is much more than a routine courtesy notice. From a practical unclaimed property perspective, if the notice is ignored or the holder declines to participate, there is a substantial likelihood that the matter will be escalated to audit. So although participation is not mandatory in the strict legal sense, the consequences of nonparticipation can be significant enough that the “voluntary” nature of the process should be assessed realistically.

California: Voluntary Compliance Program + Data-Driven Outreach

California has significantly expanded its unclaimed property compliance toolkit in recent years. A.B. 466 (2021) authorized information sharing between the Franchise Tax Board and the State Controller’s Office, and corporate tax returns were subsequently revised to ask whether the taxpayer has filed unclaimed property reports and, if so, the amount reported. A.B. 2280 (2022) then established a voluntary compliance program (VCP), and California has announced a targeted outreach initiative aimed at increasing awareness and participation, with outreach expected to continue through 2026.

For many holders, the financial implications are substantial. California imposes unclaimed property interest at a rate that can exceed 12% annually, making historical exposure particularly costly if left unaddressed. Participation in the VCP could provide a waiver of that interest, creating a strong incentive for businesses to evaluate potential exposure early and pursue remediation proactively.

New York: Ongoing Enforcement and Audit Readiness

New York continues to be an active unclaimed property jurisdiction, and holders should expect ongoing outreach and audit activity. In practical terms, organizations should be prepared to demonstrate a consistent, repeatable process for identifying dormant property; performing required owner due diligence before reporting; and maintaining clear support for items that were written off, reclassified, voided, or reissued. When considering whether to pursue a voluntary compliance path, businesses should know that New York’s approach differs in meaningful ways from other jurisdictions, including its documentation expectations and treatment of historical record gaps. As in other states, conducting an internal assessment before a notice is received can materially reduce risk, particularly when incomplete records could otherwise result in broader audit scope or unfavorable estimation methodologies.

Texas: Notices Prompting Filing (Including ‘Negative’ Reports)

Texas has been active in contacting businesses for which it has no apparent unclaimed property filing history. Those notices typically identify common categories of reportable property, reference applicable reporting deadlines, and require a response by a specified date — such as confirming that the business expects to file or has no reportable property to report. In some cases, the notices also encourage “negative reporting,” meaning a filing is submitted even when no reportable property is due. Those communications should not be treated as routine or low priority. Failure to respond by the stated deadline could prompt direct follow-up from the Texas Comptroller and increase the likelihood of further enforcement activity.

Multistate Filings

Unclaimed property is governed by state-specific laws, and each state administers its own reporting, dormancy, due diligence, and enforcement rules. A holder’s compliance in one jurisdiction does not eliminate the need to evaluate whether property was also reportable elsewhere under the applicable priority rules nor does it prevent another state from reviewing the holder’s filing history, books and records, or legal basis for nonreporting.

What to Do Before Contacting a State

Before contacting a state, a holder should conduct an internal assessment to understand the scope of its potential exposure and the strength of its compliance position. That typically includes identifying relevant legal entities, determining states of incorporation and operational footprint, reviewing prior unclaimed property filings, and evaluating which property types could be implicated — such as accounts payable checks, payroll, customer credits, refunds, rebates, gift cards, and securities-related items. It is also important to assess the company’s existing policies; dormancy tracking; due diligence procedures; and record retention practices so that any communication with the state is informed, accurate, and strategically considered.

What Companies Should Do Now

• Treat outreach letters as time sensitive. Build internal routing so notices reach tax, treasury, legal, and accounts payable promptly and include calendar response deadlines.
• Assess record availability early. Identify which systems and data sources support historical owner-level detail, check images, void/stop-payment activity, and aging and confirm how long records are retained.
• Perform a risk-based scoping review. Prioritize common property types (e.g., accounts payable checks, payroll, customer credits, rebates) and entities/states with the highest filing gaps.
• Evaluate VDA versus audit posture. If a state offers a VDA or VCP, model potential penalty and interest relief against the effort required and the risk of estimation during an audit.
• Strengthen policies and procedures. Document due diligence mailings, escheat decision rules, and reporting calendars and align the sourcing of owners’ last known addresses with the applicable priority rules.

Unclaimed property should no longer be viewed as a low-visibility compliance obligation. As states continue to expand data-driven enforcement, targeted outreach, and VDA and self-audit initiatives, organizations that are proactive and respond promptly when notices are received will be far better positioned to manage exposure, preserve voluntary resolution options, and avoid unnecessary audit risk.