The Chief Deputy Secretary of State for Delaware this week emailed interested parties announcing that a new set of invitation letters were being mailed to invite participation in the state’s unclaimed property voluntary disclosure agreement (VDA) program.
Companies that receive these “invitations” have 60 days from the receipt of the letters to respond or will be immediately eligible for selection for an unclaimed property audit.
Companies at risk of receiving this outreach range from middle-market companies to 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 fast-growing technology companies, and companies with high volumes of transient customer bases such as online marketplaces, online universities, and web-content streaming service providers.
The property 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—that is, 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 a risk that estimation may be necessary.
What does this mean for companies that receive an invitation letter?
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:
What does this mean for businesses that receive an audit notice?
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). 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 | +1 973-912-6528 | firstname.lastname@example.org
Marion Acord | +1 404-222-3053 | email@example.com
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