Initial Window For Delaware Unclaimed Property VDA Opportunity Closes June 30, 2013

Author:Ms Hollis Hyans, Obrea O. Poindexter and Amy F. Nogid
Profession:Morrison & Foerster LLP

Delaware is offering a voluntary disclosure program, touted by its secretary of state as a "good deal," to businesses that may not be in compliance with all of Delaware's unclaimed property reporting requirements. To obtain advantage of the most generous option under the program, which requires holders of unclaimed property to only report property going back until 1996 - rather than 1981 - holders must file a request to participate by June 30, 2013. Businesses are ineligible if they are already under audit, have received an audit letter or have already entered into a voluntary disclosure agreement (VDA). Businesses entering into the program after June 30, 2013, but prior to June 30, 2014, will be subject to a report look-back period going back to 1993. Participants in the program must complete the process by June 30, 2015.

Unlike Delaware's prior VDA programs, which were administered by the state escheater and often resulted in post-VDA audits by contract auditors and the issuance of large assessments, this program is administered by the secretary of state (with third-party legal and accounting assistance), and promises compliant participants an agreement containing a waiver of the state's right to audit for the look-back period and all proceeding years.

Although the secretary of state has sent correspondence to many businesses "strongly urging" them to consider participating in the program, many businesses may be reluctant to participate given the state escheater's prior practice of using a VDA as an invitation to use the amounts remitted by businesses as mere starting points for greater impositions, often based on aggressive and questionable estimation techniques. However, Delaware has taken pains to...

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