The first deadline – June 30, 2013 – under Delaware’s new unclaimed property Voluntary Disclosure Agreement (VDA) program is fast approaching! This initial deadline offers the maximum program benefits to VDA participants: Prior to the new VDA program, holders were required to report and remit any past due unclaimed property starting in 1981. However, holders who enter into the new VDA program by June 30, 2013 qualify for a limited look-back period through 1996. Holders who sign up by June 30, 2014 qualify for a look-back period through 1993.
For those who may not be aware, Delaware’s new VDA program is an amnesty program primarily aimed at helping non-compliant companies become compliant under the law. The business-friendly program is run by the Department of State, and is designed so companies can “catch up” on their past due unclaimed property obligations, avoid interest and penalties, and significantly reduce their unclaimed property liability. Completion of the program also offers companies a full release of all past due unclaimed property liability in a reasonably short and efficient process.
All 50 states and the District of Columbia have statutes that regulate unclaimed property. Under these statutes, property is presumed abandoned and subject to the custodial taking by a state if it remains unclaimed by its “owner” (i.e., the person or entity to whom the property belongs) after the statutorily set time period has elapsed. Thus, the person or entity that is a “holder” of property presumed abandoned is required to return such property to the applicable state, to be held by the state for the benefit of the owner.
Under Delaware law, holders are required to annually report and remit unclaimed property, which includes, but is not limited to, savings or checking accounts, uncashed checks or refunds, trust distributions, unredeemed money orders, insurance payments, refunds, CDs, customer overpayments, utility security deposits, royalty payments, and gift certificates. Delaware law does not have a business-to-business exemption, nor does it provide for exemptions for de minimus amounts.
Pursuant to the priority rules established by the U.S. Supreme Court, unclaimed property is required to be remitted to the holder’s state of organization in cases where the owner’s name and address is not known. Thus, those with the most to gain under the new VDA program are those companies domiciled in Delaware.
The decision to enter into Delaware’s VDA program warrants careful consideration. Above all, a company’s decision should not only focus on the risks associated with entering into the program, but more importantly the risks of not entering into the program.
More information about the new VDA program may be found here.