Are you a holder of abandoned property escheatable by the State of Delaware, and are you delinquent in your reporting to the State? Have you notified the state that you want to enter into a voluntary disclosure agreement? If you are such a holder but have not notified the State, then you should consider whether to get with the program—enrollment in Delaware’s wide-reaching unclaimed property amnesty program closes in just a few months.
In July 2012, the Delaware legislature authorized the Secretary of State to resolve claims for unclaimed property owing to the State Escheator should holders of such property voluntarily disclose the property to the Secretary of State. The authority granted to the Secretary of State included waiving interest and penalties, and the look-back period for unclaimed property—for those making voluntary disclosures to the State—was reduced by up to 15 years. The savings could be substantial for a holder of unclaimed property taking part in the program, but enrollment would end on June 30, 2013, for those seeking the full benefit of the program, or a year later, for those unable to enroll by the first deadline but still interested in some amnesty benefit. Final payments under the amnesty program had to be made (or a payment plan arranged) by June 30, 2014.
Early in 2013, the state legislature sweetened the deal, expanding the period by which payments had to be made (or payment plans arranged) by one year to June 30, 2015. And the legislature expanded the program so that companies that had entered into voluntary disclosure with the State previously were now allowed to bring in related parties that were not covered in the original disclosure.
For some time, Delaware has received much criticism for its unclaimed property approach. Its look-back period as far back as 1981, employment of contingency fee auditors discovering novel manners of assessing escheat liabilities, and the fact that so many companies have Delaware as their corporate domicile all have combined to catapult unclaimed property to a spot among the State’s top revenue sources. The amnesty program appears to have been an effort both to raise more revenue and to win back some of the goodwill of corporate society.
The amnesty program might assist the State in raising more revenue, but it certainly provides advantages to companies holding property to report. Ordinarily, under Delaware law, the state may look as far back as 1981 or the inception of the holder’s business, whichever is later, for property that should have been reported. A holder enrolling in the amnesty program by June 30, 2013 earns the right to have the look-back cut off at 1996, or 1993 if enrollment occurs after that date but by June 30, 2014. Moreover, assessments of unclaimed property liability ordinarily can be accompanied by steep interest and penalties, but enrollees in the program can have such charges waived. Savings in unclaimed property liabilities, interest, and penalties, along with the peace of mind that comes with becoming compliant with unclaimed property reporting requirements, certainly make enrollment in the program worthy of serious consideration.
Companies have a few months left to assess whether they have fallen out of compliance with reporting requirements in Delaware and take full advantage of the program. If you hold property for apparent owners with last known addresses in Delaware, or if your corporate domicile is in Delaware, this opportunity should receive your attention. States offering amnesty historically have increased audit efforts following amnesty periods. Instead of risking audit, it might be time to get with the program.