Delaware-incorporated businesses and businesses with activity in Delaware likely have unclaimed property exposure in the state. On July 11, 2012, Delaware established a voluntary disclosure program (VDP) administered by the Secretary of State. The program has been so successful that the state has extended the enrollment deadline to Sept. 30 from June 30. Applications must be postmarked by Sept. 30 in order to obtain acceptance into the program.
Under the VDP, businesses can file delinquent unclaimed property reports and escheat monies owed to the state under certain favorable terms. More specifically, the program offers penalty relief and a limited reporting period for businesses who have not previously been contacted by the Secretary of State. Businesses that do not enter into the VDP are subject to multiple penalties equal to 50 percent of the business’s unclaimed property liability, interest, and a lookback period extending as far back as 1981.
Unclaimed property: An overview
Unclaimed property refers to a liability owed by a business to an individual or entity, which has remained outstanding for a specified period of time. In other words, unclaimed properties are financial assets for which there has been no activity generated by, or contact with, the owner for a fixed period of time, generally between one and five years. Common forms of unclaimed property include refunds, checks, stocks, savings and checking accounts, insurance payments, life insurance benefits, unredeemed money orders, uncashed dividends, certificates of deposit, customer overpayments, security deposits, and contents of safety deposit boxes. Businesses that possess these types of unclaimed properties are called holders. Holders must also file annual unclaimed property reports and escheat property to the state if the owner cannot be contacted.
It is common for holders of unclaimed property to have reporting responsibility in multiple states. The state of the unclaimed property owner’s last known address has primary authority over the owner’s unclaimed property. If the owner’s address is not known or the primary state does not have unclaimed property laws, then the state of the holder’s incorporation obtains authority over the unclaimed property.
Now is the time to act: Voluntary disclosure programs
Delaware is not the only state that currently offers a VDP. In fact, most states have some form of disclosure program, both formal and informal. However, there is no guarantee that these programs will continue to be available to holders. Moreover, a condition for all VDPs is that the holder contacts the state before the state contacts the holder. As such, now is the time to act. Consult with your advisor on the best plan to come into compliance with unclaimed property laws.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.