Delaware’s Secretary of State in February 2019 sent new unclaimed property voluntary disclosure agreement (VDA) invitations.
Companies that received these invitations and that do not enroll within 60 days of receipt of the letters will be immediately eligible for selection for an unclaimed property audit by the state. This is evidenced by the audit examination notices sent by Delaware’s Department of Finance in early January 2019 to companies that did not respond to letters sent last fall.
Companies at risk of receiving this outreach range from middle market companies through Fortune 100 companies—both privately and publicly held. In addition to the industries historically targeted for audits—such as retail, banking, utilities, manufacturing, pharmaceutical, and consumer products industries—there has been a marked increase in the receipt of audit notices by REITs, alternative investment companies, companies that have engaged in significant M&A transactions, newer but faster growing technology companies, and companies with high volumes of transient customer bases such as online marketplaces, online universities, and web-content streaming service providers.
Important to note is that the holder’s state of incorporation / formation (often Delaware) is often able to assess and claim estimated amounts for any periods when complete accounting books and records are not available. For an unclaimed property audit by, or VDA with, Delaware, the lookback period is 10-report years, plus the five-year dormancy period for most property types—equating to a 15-year “lookback.” Most companies are unable to produce complete accounting books and records for the entire lookback period due to system limitations and record retention policies; thus, in most instances, there is risk that estimation will be necessary.
Holders of property that received an invitation letter to participate in Delaware’s VDA program need to consider responding to the invitation by requesting participation in the program within 60 days from the date of the letter. The benefits of enrolling in the VDA program versus being selected for audit include, but are not limited to:
Holders that recently received audit notices from Delaware were either invited to participate in the state’s VDA program and did not respond to the invitation or were already undergoing a multi-state audit (Delaware’s unclaimed property law includes a loophole that allows the state to sign on to audits initiated by other states without sending a VDA invitation first). Listed below are some initial considerations for companies in receipt of any state audit notice:
Companies that receive a VDA invitation letter or an audit notice from Delaware or other states need to consider evaluating what will be their next steps and risk areas related to unclaimed property non-compliance. Companies that are incorporated in Delaware, but are not in compliance and have not yet received an invitation, may want to consider proactively enrolling in Delaware’s unclaimed property VDA program.
For more information, contact one of KPMG’s unclaimed property professionals:
Nina Renda | Short Hills | (973) 912-6528 | akrenda@kpmg.com |
Samantha Petersen | Denver | (303) 382-7220 | samanthapetersen@kpmg.com |
Karen Anderson | Denver | (303) 382-7020 | karenanderson@kpmg.com |
Jamie Aquino | Los Angeles | (213) 817-3261 | jamielynnaquino@kpmg.com |
Pete Billows | New York | (212) 872-2921 | peterbillows@kpmg.com |
Lilliam Cruz | Short Hills (973) 912-4638 | lmcruz@kpmg.com |
Jenna Fenelli | Short Hills | (973) 912-4546 | jfenelli@kpmg.com |
Ryan Hagerty | Philadelphia | (267) 256-3389 | rhagerty@kpmg.com |
Will King | Dallas | (214) 840-6107 | williamking@kpmg.com |
David Phipps | Boston | (617) 988-5741 | dphipps@kpmg.com |
Chris Sray | Pittsburgh | (412) 232-1565 | csray@kpmg.com |
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